NCA Officer Misconduct and Chainalysis Analysis of Seized Crypto Assets

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Summary

A member of the UK law enforcement agency stole approximately 50 BTC from assets seized during the Silk Road 2.0 investigation. Although the perpetrator used Bitcoin Fog mixing service, Chainalysis's top-tier data and professional investigation services were able to track the transaction traces. After approximately 5 years of dormancy, authorities have ultimately recovered bitcoins worth 1.3 million dollars.

This case demonstrates that even sophisticated financial crimes can be revealed by combining immutable records on the blockchain with advanced blockchain analysis technology.

In 2019, UK authorities made a significant achievement by arresting Thomas White, the administrator of the dark net market "Silk Road 2.0". During the investigation, authorities seized devices owned by White. However, this seemingly routine investigation took a shocking turn. An NCA investigator discovered the secret key from the seized device and illegally stole approximately 50 BTC from White's wallet.
In 2017, during the intensification of the investigation, investigators discovered that approximately 50 bitcoins were illegally transferred from White's wallet. This bitcoin movement was initially overlooked, but an indelible record remained on the blockchain. It was also revealed that the stolen funds were fragmented and systematically withdrawn through the famous mixing service "Bitcoin Fog" to avoid detection. These methods were intended to make fund tracking difficult.

Unraveling the scheme: Investigation and evidence

In 2022, Merseyside Police began an investigation into the 50 BTC belonging to White. Despite using Bitcoin Fog, long known as an advanced fund obfuscation service in the cryptocurrency underground, specialized cybercrime investigators successfully tracked the funds.

As the investigation progressed, evidence pointed to Chowles, an NCA investigator involved in the initial 2017 investigation, rather than White. Investigative authorities used Chainalysis software and services to identify that some funds were converted to cash through cryptocurrency exchanges. As a result, Merseyside Police investigators obtained identification documents and other evidence, revealing that Chowles, an NCA investigator from the initial investigation team, was behind the series of transactions.

Screenshot from Chainalysis's blockchain visualization tool, Reactor, showing the flow of funds through five key stages

Process from Cryptocurrency Detection to Recovery

After going through the illicit fund laundering process, Chowles consolidated approximately 30 BTC into a wallet investigators called a "default wallet". This wallet had been dormant for about 5 years, but during a police search of Chowles' home, a device storing its secret key was discovered.

After Chowles' arrest, Chainalysis Global Services submitted definitive evidence fully documenting the fund flow based on expertise, contributing to securing a guilty plea from the former UK National Crime Agency (NCA) employee. By combining the blockchain's immutable records with Chainalysis data and expert analysis, crucial evidence linking transactions and seized assets was revealed. As a result, the seized assets, worth over 1.3 million dollars at the time, were recovered by Merseyside Police.

This case highlighted three key principles in modern financial investigations. First, blockchain records' persistence allows evidence access even after time has passed. Second, advanced analytical capabilities can reveal the truth despite complex fund concealment attempts. Third, the inherent transparency of cryptocurrencies that makes every transaction leave an indelible digital footprint, even revealing internal misconduct.
Additionally, the presence of skilled investigators was proven extremely important. Without the expertise of Merseyside Police's trained cybercrime investigators, these transactions might have remained buried in the blockchain's vast ledger.

Blockchain Remembers Everything

Blockchain records are permanent and highly transparent, with their value determined by investigators' interpretation capabilities. Through immutable transaction records, Chainalysis's advanced analysis capabilities, and collaboration with experienced law enforcement, cryptocurrencies are transforming from "opaque tools" to new investigative opportunities.

Even if years have passed since the initial theft, blockchain characteristics can reveal the truth. This was made possible by experienced investigators collaborating with Chainalysis tools and services. This case proves that in the cryptocurrency world, every action leaves a permanent trace, and the truth can be uncovered by those with the expertise to discover it.

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Disclaimer: The content above is only the author's opinion which does not represent any position of Followin, and is not intended as, and shall not be understood or construed as, investment advice from Followin.
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