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Crypto scammers under microscope with new Calgary police investigations centre

Addressing the tens of millions in losses that Calgarians face each year from cryptocurrency-related crimes is top of mind of the Calgary Police Service.

In 2022 alone, Calgarians reported more than $13.9 million in losses, with a further $3.2 million this year-to-date.

Those amounts under-represent the true losses that people have faced due to the under-reporting of losses and the investigative limitations that surround these complex crimes.

CPS announced on April 12 that they will be partnering with blockchain data firm Chainalysis to form the Western Canada Cryptocurrency Investigations Centre.

“Cyber is quickly becoming a component of criminal activity, and often requires collaboration between law enforcement and other expert industries,” said Calgary Police Chief Constable Mark Neufeld.

“We are thrilled to be part of an innovative partnership with Chainalysis where cybersecurity expertise is shared amongst the Calgary Police Service and private enterprise.”

The centre will be a hub for training and investigations, connecting police with Chainalysis’ cryptocurrency experts and tracking software.

“The entire CPS team has been fantastic partners in our work to build trust in digital assets, and this expanded structure allows them to better protect more Canadians from crypto crime,” said Gurvais Grigg, Chainalysis Public Sector Chief Technology Officer and former FBI Agent.

Superintendent Ryan Ayliffe said that interest amongst service members has been high, with several dozen applicants thus far from CPS to be trained on cryptocurrency investigations.

“Approximately 30 applicants for something that we consider a pilot at this stage is very exciting, and it’s zero cost,” he said.

He said that the genesis for the partnership began several years ago after recognizing the need to partner for expertise that is available in private industry.

“This is not an exclusive thing because as a police service, we are willing to partner with anybody that’s going to make Calgary safer,” Supt. Ayliffe said.

“We want to create a cyber centre… where we can bring all of these people together and work as a team to help keep Calgarians and Southern Albertans safe. And the only way we can do that is to partner with people in private organizations.”

Faster, better investigations

Supt. Ayliffe said that the partnership with private industry would lead to faster and more effective investigations.

He said that an investigation like Operation GoldDust, which required substantial technical expertise within the service and years to complete, would have been made easier with industry partners.

“I guess the long and short of it is, something that might take us 30 hours before, if we’re partners with somebody it’s going to take us 30 seconds,” he said.

Grigg said what Chainalysis can do for investigators is help them navigate the publicly accessible information of the crypto-ledger system.

“Because the blockchain is a publicly-available ledger, those transactions can be monitored and looked at in real-time, and so that ability to follow that money as it moves and hops is greatly compressed if you know what you’re doing, and you have the right data,” Grigg said.

“That’s what this partnership brings to that. So the average Calgarian, who has or becomes a victim of this fraud can come forward now with greater confidence, realizing that the CPS and their partners are going to be able to operate at greater speed.”

He said that the greater speed at which the police can investigate financial crimes, the faster they can get compliance from financial institutions and crypto companies, which by in large do not want bad actors using their services.

“In the last two years alone, federal authorities in the United States have seized over $11 billion in illicit crypto. That’s a significant statistic, and we’re seeing that replicated around the world,” Grigg said.

Safeguards for public, privacy remain the same as other investigations

Chief Neufeld said that crypto investigations, because they rely on information that has already been publicly shared voluntarily, would not have the same sort of investigative issues that led to the creation of the police technology ethics committee.

“It probably isn’t going to be the same type of issue, because most of the data that we look at as far as crypto is publicly available data, open source anyway,” he said.

“Anything that’s not open source for investigative purposes, we would get judicial authorizations, the same way we went for, do physical spaces as well.”

He said that when privacy issues come into play, judicial authorization would be sought in the same way it would be for physical searches.

Chief Neufeld said that as an organization, CPS is cautious about who they partner with and the fact that Chainalysis operates in 70 countries, and is recognized globally was a factor in making that partnership decision.

“The foundation of investigations has to be reliable, and these folks have gone to court and they’ve testified on things, and so that’s a good trusted partner and a good place to start,” he said.

Grigg said that the partnership announcement and the creation of the Western Canada Cryptocurrency Investigations Centre should give victims of crime the confidence to come forward.

“I would encourage Calgarians, and those in Western Canada, to have confidence in their police services. They are leaning forward and embracing how 21st-Century finance works,” Grigg said.

“They should come forward, and realizing if they will come forward they may prevent their neighbor and the person down the street from falling victim to the same type of scam.”