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Crypto Investment Scams: Why They’re Winning and How We Fight Back , A conversation with Ari Redbord, Global Head of Policy and Government Affairs at TRM Labs
0 Playsin 17 hours
In this episode of Scam Rangers, Ayelet speaks with Ari Redbord, Global Head of Policy at TRM Labs and former U.S. Department of Justice prosecutor, about the rise of crypto investment scams and the global infrastructure behind them.
They break down why these scams are growing so quickly, how financial grooming works in the crypto era, and what makes these schemes so effective at scale. Ari shares insights into blockchain intelligence, how investigators trace illicit funds, and why recovery remains so difficult once money moves.
The conversation expands to the broader ecosystem—organized criminal networks, human trafficking, and the increasing role of AI in supercharging scams. They also explore what governments, law enforcement, and the private sector are doing to respond—and where gaps still exist.
Key Topics
- Why crypto investment scams are accelerating globally
- Financial grooming and the evolution of scam tactics
- How blockchain tracing works—and its limitations
- The scale of the global scam economy
- Organized crime, scam compounds, and human trafficking
- AI’s role in making scams more sophisticated
- Real-time disruption and public-private collaboration
- Challenges in fund recovery and victim restitutionhttps://www.justice.gov/usao-edny/pr/chairman-prince-group-indicted-operating-cambodian-forced-labor-scam-compounds-engaged
Ari Redbord is the Global Head of Policy at TRM Labs, a blockchain intelligence company working with law enforcement, regulators, and financial institutions to detect and prevent illicit activity in crypto. He previously served as a prosecutor at the U.S. Department of Justice and held roles at the U.S. Treasury focused on financial crime and national security.
https://www.linkedin.com/in/ari-redbord/
Resources:
Beacon Network (public-private collaboration initiative) - https://www.trmlabs.com/beacon-network
TRM Talks - https://www.trmlabs.com/resources/trm-talks/tracing-a-romance-scam-a-survivors-story-and-the-investigation-behind-it
Chairman of Prince Group Indicted for Operating Cambodian Forced Labor Scam Compounds Engaged in Cryptocurrency Fraud Schemes: https://www.justice.gov/usao-edny/pr/chairman-prince-group-indicted-operating-cambodian-forced-labor-scam-compounds-engaged
About the Host
Ayelet Biger-Levin is the Founder and CEO of RangersAI and the host of Scam Rangers, a podcast exploring the human side of scams and the people working to protect consumers from financial and emotional harm.
Through her work at RangersAI and her leadership within the Global Anti-Scam Alliance, Ayelet partners with financial institutions, policymakers, and advocates to elevate scam prevention beyond controls and technology toward trust-based, customer-centric protection.
Be sure to follow her on LinkedIn and reach out to learn about her additional activities in this space:
https://www.linkedin.com/in/ayelet-biger-levin/
RangersAI: https://www.rangersai.com/
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Transcript
The Dual Nature of Cryptocurrency: Speed and Transparency
00:00:01
Speaker
The promise of cryptocurrency is cross-border value transfer at the speed of the internet. We can now move funds faster across borders than ever before. So think for remittances, right? For humanitarian aid, we can now send funds to dissidents at the speed of the internet outside of the US financial system, outside of necessarily sort sort of like, you know, surveillance.
00:00:24
Speaker
We're seeing payments at scale. We put out a report just this week that said we saw about $4 trillion in stablecoin volume last year. There were some months that it was $1 trillion dollars a month. So, you know, we're seeing the growth of this ecosystem at really unprecedented speed and scale. However, bad actors also want to move funds across border at the speed of the internet.
00:00:48
Speaker
The difference, though, between crypto and traditional finance is that we can track and trace those funds in real time on an immutable public ledger, meaning every transaction is trackable, traceable and immutable forever on a blockchain.
00:01:05
Speaker
Crypto scams are now one of the fastest growing forms of financial crime in the world. But the same technology criminals use to move money faster also gives investigators new tools to trace and disrupt them.
00:01:16
Speaker
In this episode of Scam Rangers, I sit down with Ari Redbird from TRM Labs to break down the global crypto scam economy. How these scams work, why
Introduction to Scam Rangers
00:01:26
Speaker
they're so lucrative to criminals, and what governments, financial institutions, and technology companies can actually do to stop them.
00:01:36
Speaker
to scam rangers a podcast about the human side of fraud and the people who are on a mission to protect us. I'm your host Ayelet Bigger Levine and I'm passionate about driving awareness and solving this problem.
00:01:55
Speaker
Today's Scam Ranger brings a unique point of view into the scam detection ecosystem. I'm so excited to have eri Redbird on Scam Rangers, a new Scam Ranger that joins the crew. Hi, Ari. Great to have you on. Hi, thank you so much for having me. I love the podcast and really excited for the
Ari Redbird's Journey: From DOJ to TRM Labs
00:02:13
Speaker
conversation.
00:02:13
Speaker
Great. So before we dive into the topic of cryptocurrency investment scams and what you do at TRM Labs, I would love for you to share your background because I think it's really, really interesting to hear your journey and understand how you got to where you are and what you're doing today with TRM Labs. No, thank you so much. that That means a lot. I am a prosecutor by training. I spent about 11 years at the U.S. Department of Justice, really interestingly sort of cutting my teeth on, you know, things like domestic violence cases, child abuse, eventually child exploitation, ah sexual assault. Then when I had kids, I kind of decided enough of those cases and I ended up going to the national security section at the U.S. Attorney's Office in D.C. where I really did cases at that intersection of money laundering and national security, what I call threat finance, essentially stopping bad actors from getting the money they need to do bad things.
00:03:04
Speaker
and it's just incredibly meaningful work i then left the u.s attorney's office after about 11 years and went to the u.s treasury department where i worked in the office of terrorism and financial intelligence that really oversees the national security apparatus at the u.s treasury department so think ofac which is the u.s sanctions regulator fincen which is the financial intelligence unit for the united states the anti-money laundering regulator and a number of other really critical components So really, you know, always on this mission to stop bad actors and build a safer financial system.
The Role of TRM Labs in Crypto Security
00:03:34
Speaker
And when the opportunity arose to join what was a really, you know, a really cool startup of about eight people that was aligned to that mission, building a safer financial system, I joined TRM about five and a half years ago or so. And it has been the adventure of a lifetime. So tell me a little bit about your role at TRM and what TRM does. I think that's really important to inform our the rest of our conversation. Terrific. Yeah, no, thank you so much.
00:03:59
Speaker
So we're a blockchain intelligence company, and that means we work with a number of different verticals. First, we work really closely with global law enforcement agencies. think every US federal law enforcement agency, but also UK and the EU and across Asia and Australia and beyond. And we provide software that allows law enforcement to track and trace the flow of funds in cryptocurrency to build investigations, prosecutions, seizure, forfeiture of illicit proceeds and digital assets. I think of it as sort of like the sexiest use case of our tool, because that's where you see all the cool graphs and the investigations and the cases. We also work with regulators globally, and they want to understand what are the risks within their regulated ecosystem. Are they providing a license to a VASP or virtual asset service provider or crypto exchange? are they supervising that virtual asset service provider? They use our tool to sort of understand what is the risk profile of their regulated ecosystem. And finally, we're a compliance solution, which probably so many of your listeners relate to, where their crypto compliance stack.
The Evolution of Crypto Scams
00:05:04
Speaker
They do transaction monitoring, they screen wallet addresses, they make sure that bad actors are not engaging with their platforms. If they're a cryptocurrency business, if they're a financial institution, if they're a DeFi protocol, you know, anyone who's sort of really engaging in this space, offering crypto assets to customers, custody and crypto assets, they want to make sure that their platforms are safe. And we provide that software for compliance professionals to do just that.
00:05:27
Speaker
And that's really interesting because I think some of the listeners do offer crypto assets to their customers, but some don't yet and are on the journey. So one, it's good to know about you know these tools and that they exist and they can support that journey in a secure manner. But also maybe we can start breaking down a little bit. the criminal ecosystem around crypto. I think this is the the big hairy thing. What is this thing? We know about pig butchering scams or financial grooming scams, to use a ah different word, that are growing significantly when we look at cryptocurrency investments, scam losses.
00:06:02
Speaker
when From the lens of of scams, they're growing. And I know the lens is larger, the illicit funds around cryptocurrency, there's there's a whole ecosystem there. So i wanted to ask, maybe let's start by breaking down why is cryptocurrency different from traditional scams and fraud? and And what is the ecosystem of illicit funds? Let's start with the first and then we get to the second one. Yeah, no, absolutely. Look, the promise of cryptocurrency is cross-border value transfer at the speed of the internet. We can now move funds faster across borders than ever before.
00:06:36
Speaker
So think for remittances, right, for humanitarian aid. We can now send funds to dissidents at the speed of the internet outside of the U.S. financial system, outside of necessarily sort sort of like, you know, surveillance.
00:06:49
Speaker
We're seeing payments at scale. We put out a report just this week that said we saw about $4 trillion in stablecoin volume last year. There were some months that it was $1 trillion dollars a month. So you know we're seeing the growth of this ecosystem at really unprecedented speed and scale. However, bad actors also want to move funds across border at the speed of the internet.
00:07:13
Speaker
The difference, though, between crypto and traditional finance is that we can track and trace those funds in real time on an immutable public ledger, meaning every transaction is trackable, traceable and immutable forever on a blockchain. So it's just really interesting. When I was a prosecutor, i prosecuted cases involving bulk cash smuggling and networks of hawalas and shell companies and high value art and diamonds and real estate. I can go on and on. There was no TRM um labs to trace and track those things on an open public ledger. and I think that's where the paradox is, right? Bad guys can move faster and at scale than ever before, but we can track them. And it becomes this cat and mouse game that has really always existed between bad actors. So I think that's the why a bad actors are looking to cryptocurrency.
00:07:58
Speaker
In terms of the scale, we're a data provider. So this is like what we're best at. So I'll kind of throw some numbers at you. You know, I mentioned the $4 trillion in stablecoin activity last year. We just put out a report that said in 2025, about $141 billion of that $4 trillion or so was illicit. So about $141 billion in stablecoin activity that was illicit last year. There was more illicit activity in stablecoins than any other asset within the crypto ecosystem.
00:08:25
Speaker
Overall, we saw about $158 billion in illicit activity. That was a record year, 2025, for illicit crypto activity. It still amounts to just over 1% of overall activity within the crypto ecosystem. So what we're seeing is really a couple things. We're seeing that we're seeing the crypto economy grow and scale. And I think we kind of see that in the narrative. We see that with institutional adoption. All of a sudden, you see all these banks and ETFs and people engage the $4 trillion in stablecoin activity. But we're also seeing bad actors, but it's still a tiny percent of sort of overall illicit activity.
00:09:02
Speaker
So when you talk about illicit activity, let's break that down. What percentage of that is online scams, stealing money from individuals? And what percentage of that is other types of illicit? And what if we know what types they are? I would love for you to break that down.
00:09:16
Speaker
Yeah, look, the the biggest driver in 2025, and it's not just true this past year or so, is sanctions activity. Sanctions activity is the largest driver of overall illicit activity. We see terrorist financing. We see ransomware activity. We see child sexual abuse materials sold using cryptocurrency. Scams, your focus, as it should be, accounts for about $30 billion of that $150 billion or so, a really significant number.
00:09:42
Speaker
And much of that is sort of the pig butchering crypto investment scam slash romance scams that you're really you're focused on here. And we've seen it, you know, really continue to grow. I think that 30 billion today is in 2025 is very similar to what the 30 billion was around 30 billion in 2024. But one thing that's really, really important for people to understand is that 30 billion really represents a tiny piece of the fraud and scam activity that's actually going on. out there because very few victims still report. I think it's sort of conventional wisdom is that only about 15% of victims of these types of scams report. I see that in the FBI reporting. I see that AARP has put out some good reports with that number in there. That means that 85% of victims are not reporting.
00:10:26
Speaker
That means TRM's 30 billion number is likely 85% higher. And to me, that means this is not a law enforcement issue. This is a global security issue when you're talking about that amount of money as wealth transfer from lawful citizens in the United States and in Europe and the UK and Singapore and and and Japan to criminal networks. in Southeast Asia and really beyond now. You know, I think a lot of us see this as like, we think of Myanmar and Cambodia and Laos and Vietnam and Thailand. this is this This is throughout Africa and the Middle East and all kinds of other places too. But this is a massive epidemic globally, and we need to use every tool in our toolbox to solve it.
00:11:12
Speaker
So that's a ah really great point. I wanted to ask. Well, so mean so much to unpack there. One is the size of the problem. and And as you said, there's a huge difference between reported numbers. And there are a lot of stats thrown out there and a lot of research. And I think that there's research by the FBI and the FTC that talks about reported amounts. And then there's the estimates. given exactly what you said, the amount of reports being around 10 to 15%. The Global Anti-Scam Alliance launched a report about $400 billion lost globally. And that's trying to kind of ask consumers what they're experiencing and extrapolate
Geographical Spread and AI in Crypto Scams
00:11:46
Speaker
from that. Yeah. So that's not outrageous when you think I'm really primarily talking about crypto, you know, only what we're seeing on chain. And our data comes from a combination of addresses that we've attributed, as we know, involves scam activity.
00:11:58
Speaker
We run this thing called Chain Abuse, which is the largest reporting site for crypto fraud and scams. I think it's the largest reporting site now for scams, period. We get a lot of our data from there and a number of other sources, but it's still crypto driven. So if you take our 30 billion, you increase it by the 85% in terms of for the underreporting, right? You're starting to get close to those those types of estimates that And then you put sort of the non-crypto activity in there and I can see us easily getting to 400 plus billion. Yeah. And I think it's estimated that it's 195 billion in the US s alone. So there are a lot of numbers out there, but definitely a big problem. And it's definitely interesting to see how the cryptocurrency investment scams are are growing, i would say, sharper than others. And yes, they're only a portion of it. You mentioned the shift from
00:12:49
Speaker
Southeast Asia to globally. And i wanted to maybe double click into that a little more because you can trace the wallets. What can you tell about patterns in general on ah patterns around the evolution of the cryptocurrency investment scams in the past few years, geographically or or other um points of information that you think would be valuable? Yeah, no, it's interesting. I spend a lot of time with our blockchain intelligence team who focuses 100% of their time on this issue. have entire team dedicated to just scams, you know, pig butchering, Ponzi schemes, some of these new kind of gig economy scams that we're seeing more and more of. A lot of the same people are involved in them, scam compound type of activity. We are seeing patterns of activity that we sort of identify with the
00:13:35
Speaker
This, these, these types of scams we see, you know, obviously we we see networks, we see the same wallets being used in a number of these different types of types of scams, we're seeing certain assets use certain platforms use. So we are that that's what we're really doing is we're trying to build a picture of this through our through our user interface, building these graphs. to show the type of activity that's occurring that we can associate with not just scam activity. We can say, hey, we believe this is specifically related to a scam compound in Southeast Asia. Why? Because these scammers are using these types of typologies. They're using these specific services to try to off-ramp the funds. They're using these specific blockchains, these specific assets. So there are definitely ways to identify this activity through patterns on-chain.
00:14:21
Speaker
Yeah. And it's interesting you mentioned the growth beyond the borders of Southeast Asia going into Africa, Latin America. Is that something that you can also kind of track and trace? Are there other trends besides the geo spread, also incoming transactions or geos that are more scammed than others? Yeah, it's interesting. You know, location is always tricky when it comes to sort of on-chain activity in it for a number of different reasons. One, you know, bad actors are using VPNs and other types of obfuscation techniques in terms of location. I think we do a pretty good job. We put out a um a sort of crypto geography, crypto adoption report every year that has information about lawful and illicit. where we're using data in order to sort of really understand geographic risk and location.
00:15:04
Speaker
But it is tricky. But I would say that like, you know, you you can certainly see different patterns when it comes to sort of where certain activity is occurring. A scam compound in in Nigeria may be acting differently than a scam compound in Southeast Asia. One thing that I think is sort of you know, I think an important point, and we're really starting to see, is the use of AI by these threat actors to really supercharge their activity, right? I mean, part of the story of scam compounds has always been the human trafficking element, which to me is
National Security and Regulatory Responses
00:15:33
Speaker
one of the most tragic pieces of this story, right? People are being, you know, tricked into taking a job at one of these places and forced into a human trafficking environment where they can't leave, where they're beaten. You know, do you need humans anymore to conduct this type of activity at all?
00:15:48
Speaker
You can have AI agents that are scamming 24-7 without eating, without sleeping, ah that can do this in a way that no human can can ever do it. And I think we're starting to see, you know, professionalized phishing attacks, right? It's no longer broken English in your email. Right. Absolutely. It's now potentially a deep fake video or the voice of your child in a hospital asking you to send money. Like this has gotten so professional and so targeted. We're only going to see AI sort of supercharge this type of activity. And that's what really scares me. And I would use scared to describe this, right? If we saw 35 billion stolen in these types of scams in 2025, and we believe that number is 85% larger in fact,
00:16:31
Speaker
And we now are going to see that supercharged 10x, 100x. This is a civilization level threat ah when you think about that type of number, that type of velocity in terms of the scams.
00:16:44
Speaker
And I think that's why we're building technology at TRM to really focus on that, the speed, the use of AI. How do we go how do we move as fast as these bad guys do? And that's really been sort of just a huge focus, I'd say 24-7 for the last year at least. I couldn't agree more. and that's, you know, speaking from our lens, that's exactly what we're looking at, how to prevent the scams before the social engineering happens, because that's what they're using, right? They're grooming individuals, spending time with them and with AI supercharging it. And, um you know, AI is able to start the grooming and texting and then with the deep fakes, create the video. So you still need maybe some people to react in real time at this point, but that's probably going to change in the future as well. Yeah.
00:17:32
Speaker
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00:17:55
Speaker
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00:18:05
Speaker
So tell me a little bit, you mentioned a few times the the size of the problem and the magnitude and the acceleration. You also mentioned that you advise to regulators. So let's shift a little bit to what are governments doing about it? What is going to happen? Because it is very scary. I've heard many stories over the last few days. It's not like a future thing. It's happening right now where AI is scamming banks or individuals using voice cloning or scamming financial institutions, trying to open your accounts, move money, grooming individuals to convince them to transfer money. It's happening on all levels. So how are, in your conversations with regulators, I know they're focused mostly on crypto, but do you feel like they understand the magnitude of the problem? They understand the national security threat of this problem? I think they do.
00:18:50
Speaker
spent a lot of time with you know folks in the US Treasury Department and the White House and the Department of Justice. And I think that over the last year, a lot of the work that, quite frankly, folks like you and Aaron West and others in this space who have just you know been beating the drum for a long time, i think that policymakers really do understand the issue and the scope of it ah more than they ever had before.
00:19:12
Speaker
I think something kind of clicked about a year year plus ago. I think this administration in the US is actually pretty good on this issue. And that is, this is not like a law enforcement issue. This is not someone scam me. i go to my local law enforcement. If it's in crypto, they trace and track a couple hops and maybe can seize it back. Maybe you're just out of luck because the the funds are gone. Too late. now that is That was the old paradigm.
00:19:34
Speaker
The new paradigm is we have professional industrial networks of criminal actors that have decided this is better than so many of the criminal schemes we've done in the past, whether it's narcotics, whether it's human trafficking, that scams, you know, i would encourage your listeners to read the pleadings in the Prince Group case, the largest takedown so far of one of these types of compounds. It was a case in which The U.S. Department of the Treasury issued sanctions. FinCEN also took action against a payment processor that was being used by these scam compounds called WeWon. The U.S. Department of Justice indicted Shenzi, who was running it, an individual who is at had connections at the highest levels of the Cambodian government and likely Chinese national security agencies, and also the largest ever forfeiture in the history of the world, $15 billion. dollars That is 3x what has ever happened before, maybe four x But if you read those pleadings, you read about just how organized this type of activity is. They were making $30 million dollars a day at one point.
00:20:39
Speaker
$30 million dollars a day. I mean, it is really hard to combat that with limited resources. Just to reiterate, they are making $30 million dollars a day means $30 million dollars a day are stolen from individuals. Absolutely. So we have to fight firepower with firepower. And that means leveraging every resource. And look, I work for a blockchain tracing company that I'm very proud to work for. This is not a blockchain tracing issue. We're not going to trace our way out of this. I would love to tell you we could, believe me.
00:21:10
Speaker
We have to use every tool in our national security toolbox. That means offensive cyber. we If they're going to steal our funds, we need to steal them back. Okay, we need to attack them. We may you need to use kinetic type of activity, you know, a military response to these compounds. We need to use our diplomatic channels. The State Department should be putting intense pressure on the Cambodian government and Laos and Myanmar and and and beyond. We need to put pressure on China to crack down on this. All the laundering of the funds is being done by Chinese money laundering organizations that basically act with impunity. We need to expand the use of what what we call in this country Patriot Act subpoenas on Chinese banks to get records in cases like this. So I can go on and on, but there are, we need to use every tool we have. The crypto tracing is a big piece of it because it actually allows us to involve get involved with seizure and ultimately forfeiture like the Prince Group 15 billion, but we need to use every tool at our disposal. And what I'm excited about
00:22:13
Speaker
is the conversations that I'm having today, I'm really thinking that that's where so many of our policymakers are. It's also a really compelling issue for lawmakers. The conversations I have on Capitol Hill about this issue, I feel like are always very positive. Oftentimes, like if you think about the the national security landscape within crypto, the North Korean hacks, the you know terrorist financing even...
00:22:33
Speaker
You know, individual Congress members, it doesn't they don't relate to those issues. They're just too far away. But when you talk about, you know, the elderly population of your district in Iowa or New Hampshire or Nevada, you know, being robbed on a daily basis by scammers, you you want to help those constituents. They're your voters. So I think this issue has also been very ah been a very powerful one on the Hill. So. I'm very positive on sort of the U.S. and and global partners, right? The U.K. is in this on every one of these with us in in some capacity, including Prince Group, travel bans and sanctions and other types of activity. I think the U.K. government was the first ever to sanction one of these types of operations. So I'm excited about the possibility. I'm also impatient. So I think it's like we got to move fast. These guys are moving fast.
00:23:20
Speaker
We've definitely come a long way. Just like you said, I think a year or two ago it was ah go to your police officer and hopefully they know. And if they don't know, maybe they hear, ah you know, one of the education sessions that Aaron and and some others in the industry are talking about. But this was like a whack-a-mole or a needle in a haystack type situation.
00:23:39
Speaker
ah So it's great to see this level of awareness. And I hope to see the opportunity. actual everything that you talked about, right? We I often talk about the scam lifecycle. And how does the scam start? It starts with a color text, and then there's a manipulation, and then there's the money movement. And then, you know, there's the reporting to the financial institution, potentially in 15%, and then trying to recover the funds and then this whole consumer facing lifecycle, but then there's the back end, the criminal infrastructure that goes into this. And I think really mapping out everything is critical. Yeah, no, I think you nailed it. There's so many different pieces to this. There's the supply side, the demand side. We've got to attack it at every possible place. This is sort of a shameless plug, but it's it's fun to be going on with you today. Tomorrow, we're going to release our podcast. I do a podcast called TRM um Talks, where I sit down with various leaders in the crypto space. But I have a cool one tomorrow, a really wonderful woman named Jackie Crenshaw, who's from Connecticut, who was a victim of one of these types of scams, joined the podcast with Matt Hogan, who is a Connecticut state police detective who investigated the case for her.
00:24:43
Speaker
And we sort of walk through the what is possible and quite frankly, sadly, like the what is not possible in so many of these cases. But there's the victim side, the public awareness side, we should be spending a lot more resources on public awareness. I think AARP does a good job. Banks, I think, are getting better at this. But we need to talk about this like we do the um in Nigerian Prince,
00:25:03
Speaker
No one ever responds to an email but from a Nigerian prince anymore. You would have hoped
Beacon Network: A United Front Against Crypto Crime
00:25:08
Speaker
so. I think we did a pretty good job at getting the word out that this is a scam. This is BS. We need to do that on any time someone reaches out to you via text, to via social media, via WhatsApp, via any type of thing with any type of anything that you don't know the person. The stuff I get is crazy. I'm sure you do too. Want to play golf today?
00:25:26
Speaker
Hey, who's this? My appointment to the vet. Yeah. All these crazy and wrong number. so yeah. If you put a shameless plug, I will too, too. That's what we do. it. All right. Yeah.
00:25:42
Speaker
I wanted to transition and talk a little bit about real-time disruption. And many of our listeners are financial institution fraud fighters. And i wanted to ask if you can talk a little bit about the Beacon Network and what it is and how could they potentially participate? I love it. Thank you for asking that.
00:25:58
Speaker
um I love you for that. That's that's wonderful. Look, I think that probably of the work that we've done over the last you know five or six years at TRM, Beacon is something that I'm ah most proud of. ah Basically, I'd say a year, maybe 18 months ago, our team really sat down and we looked at the the problem.
00:26:15
Speaker
And honestly, it was really this problem, the the scam problem. We were seeing these things proliferate at just unprecedented speed. And then we were seeing professional money launderers launder the funds faster than we had ever seen funds move before.
00:26:27
Speaker
And we said, this is not the job for just a compliance solution. Like you can't do transaction monitoring and file a SAR, you know, based on a certain activity like that doesn't solve the problem.
00:26:37
Speaker
What we need is what we call public private disruption. I don't talk about public private partnerships because I think it is very trite. And whenever anyone needs a recommendation, when they can't think of one, they say public private partnership.
00:26:50
Speaker
That, to me, is just like invokes people sitting around a conference table pontificating about global standards and best practices. To me, it needs to be real-time information sharing, interdiction, seizure, and disruption. So So because of this issue, we we had this one of what one of like these what if you could moments.
00:27:11
Speaker
And we reached out to the two largest cryptocurrency exchanges in the world, Binance and Coinbase. And we said, what do you think about building something like this together? And they were both on board. And then we reached out to the broader ecosystem. Think Kraken, OKX, HTX, Poloniex, Blockchain.com, Crypto.com, Ripple, everyone within the crypto economy. But then we're like, well, there is a new generation now that's building crypto tools, the fintechs. So we reached out to PayPal and Robinhood and Stripe. We then brought DeFi protocols on board like Rhinify and OneInch. And we married them with about 70 global law enforcement agencies. And those law enforcement investigators are flaggers. They are flagging illicit proceeds as they move in real time. And we are sending out automatic alerts.
00:27:58
Speaker
Think Beacon, think Lighthouse, right? Sending out that alert. Thinking Batman signal. To these exchanges, the bat signal. You nailed it. Exactly, exactly. And those exchanges get those alerts in real time and block the funds.
00:28:12
Speaker
There's two requirements to be a Beacon member, and none of it is commercial. We have TRM um clients, we have non-TRM um clients. It is not a commercial relationship. The requirement is, are if you're a law enforcement flagger, and each of them is vetted by my colleague, Chris Wong, who's one of the most extraordinary crypto tracers when he was in the FBI, you have to then, if you flag an address,
00:28:32
Speaker
you have to work with that exchange to seize the funds. And if you're an exchange and you want to be a member of the Beacon Network, you know, whether it's ah a VASP, whether it's financial institution, DeFi, you have to agree to work with law enforcement to seize. This isn't just blocking. This isn't just filing a report. This is seizure and hopefully getting funds back to victims.
00:28:51
Speaker
So I can go on and on about Beacon, but I really i appreciate the question because it is something we're really proud of. Beacon accounts for about 85% of all centralized crypto volume today, which is crazy. Okay. But what we want to do is we want to build a perimeter. And that's why like I appreciate the way you asked your question in terms of like, hey, you know tell my listeners about this in terms of joining. I want everyone in this, right?
00:29:12
Speaker
I want folks that people associate with better compliance. I want the folks that people associate with worse compliance. I just want everyone in there because what we want to do is really build that perimeter and and make it really strong because I want it to be 90%, 95%, 100% of all centralized crypto transaction volumes so we can wall off that ability of bad actors to cash out.
00:29:33
Speaker
So let me ask you a follow-up question. It's kind of like almost rhetorical, but not necessarily. What's in it for the crypto and um exchanges to join this network? Besides credibility maybe, but why would they do that?
00:29:46
Speaker
Yeah, I think certainly credibility because it goes so beyond that. Right. Like, I think that what I have found over the years, and it it it varies, is that crypto builders, they want to keep North Korea off their platform. They want to keep terrorist financiers off their platform. Right. They might not want the expense of what it takes to build a robust compliance program. i just want to say social media companies take note of what I'm saying right now.
00:30:07
Speaker
But they really want to stop bad actors. And what's so interesting is like you talk to the FBI agents and you talk about like subpoena requests and this type of activity. Crypto firms have been very good over the years with this. And it's not true across the board. Don't get me wrong. i I get some of these issues. But the reality is that most crypto firms want bad actors off their platforms. And this is true of financial institutions, too, right? Like there are better compliance programs than others. um so So I think so part of it is protecting the ecosystem. You know, it's interesting. you know I get an opportunity to speak to all kinds of different people within our space. And a couple years ago, I went to this really cool event in New York City. It was in Brooklyn. It was called Solana Hacker House. They do these kind of like really cool hacker houses all over the world. And I i spoke to, i don't know, a thousand developers or something there, 800 developers. And this was a very different presentation than anyone else had given that day. But I think, and I talked about North Korea. i talked about, you know,
00:31:00
Speaker
And I think the reality is that everyone in that room and everyone in our space realizes that none of this works. If North Korea can continue to steal, you know, five, eight, ten billion dollars over a short period of time, a couple of years from the ecosystem, you know, none of it works. And we all want this ecosystem to grow and thrive. And I think a lot of it is just like, hey, we need to stop these bad guys if the ecosystem is going to to grow. There's no world in which North Korea should be able to steal 1.5 billion from Bybit and us not be able to go after it, stop it from being off ramped, and then maybe even hack it back. And I think that's what we're really trying to enable through the beacon piece, but also sort of that offensive piece that I'm also suggesting we really employ.
00:31:40
Speaker
not going to ask you questions about the offensive piece because I don't think we should speak about it out loud, but any thoughts that of what should be that you can share with us would be interesting. Yeah, no, no. I think we're in this really interesting moment in human history where all of the data exists in the private sector and all of the authorities exist in the public sector.
00:32:02
Speaker
And what we need to do is really empower the private sector to have more authorities. There is, you know, in the days of pirates, the U.S. s government would get out give out these letters of mark to be able to go after pirates on the high seas as a privateer.
00:32:19
Speaker
I believe that we are living in that age today, but it's in cyberspace across blockchains in the digital world. I believe that we should empower the private sector to bring back letters of mark to go after the pirates of this sort of modern age.
00:32:34
Speaker
I also think we need to ensure that the government has the data from the private sector that it needs. So when I go when I think about Beacon and I sort of mentioned, you know, public private partnerships, this isn't just like the government sitting down with private sector. This is like working hand in glove on disruptions and taking action.
00:32:50
Speaker
So, yeah, no, happy to talk about like, you know, from an offensive standpoint, happy to talk about that. I think the government should be doing it. I think the private sector should be doing it. But it's like a really true collaboration as opposed to something else. Yeah, it's really granting permission to the capabilities that already exist in the private sector to act on behalf of the government or in support of the government. and and we have you know I think one of the one of the fallacies I've always pushed back against the crypto industry on is somehow that the regulators don't know anything. There are some of the sharpest people on crypto at the US Treasury Department, at MAS in Singapore, at the JFSA in Japan, at the FCA and NCA and Met Police in the UK. We need to take those people and make sure they have all the data they need from the private sector. But we also need to empower some of these really extraordinary people in the private sector. You know, we have some of the best investigators in the world on our team at TRM, many who spent their careers, as I did, in in government, who should and could be empowered to do some of these things.
00:33:50
Speaker
So I think
The Challenges of Recovery and Urgent Solutions
00:33:51
Speaker
I wanted to cover one last point, maybe for clarity, for avoidance of confusion, and that is recovery of cryptocurrency lost funds. So what and and I think when we talked in prep for this conversation, you mentioned we don't do a recovery. We do tracing for all the purposes that you've shared with us for really going after. Tell me a little bit about the recovery aspects, if at all, what to expect and what absolutely not to do as financial institutions, as consumers. Yeah, no, I think the recovery thing is obviously really interesting and really important, right? At the end of the day, we don't just seize assets, we need to get them back to victims who were, who those funds were stolen from. I did mention to you in our conversation that TRM um does not do asset recovery for individuals. It's interesting, you know, you make a decision what to put at the very top of your website in the world. and The hero section. The hero section. We put at the very top of our website that the first thing you see is a warning.
00:34:49
Speaker
It says, please be vigilant about TRM impersonation scams, especially those claiming to assist with fund recovery. And then you click on a button that talks about the fact that we don't do recovery, but we are oftentimes impersonated. I'd say that the saddest parts of my five years in this job is when I'll get an email, someone will send me an email that has my name on it or my colleague Christian Chesky's offering.
00:35:11
Speaker
to do asset recovery for a victim and charging them $5,000, $10,000, $20,000 to do it. It's just awful stuff. That said, there are some firms that do it, that do it well. It's really hard.
00:35:22
Speaker
And there are a couple things that that victims can do to give themselves a better shot. And the biggest one is reporting as fast as you can to law enforcement. And I know they'll say, well, law enforcement doesn't take every case and no one responds to our outreach or messages. Well, you know, sometimes that small case can actually be connected to much larger cases that could be already being investigated or could be investigated by law enforcement.
00:35:43
Speaker
It is a huge challenge. Asset recovery in these cases is a huge challenge because they do move so fast. They are moving to off ramps. They are getting cashed out. And they also understand that law enforcement is doing tracing. So now they are moving many faster because I think in the past that was not the case, but they they started to move faster because we do that arms race. It's exactly right. It's the cat and mouse game that has really always existed between law enforcement and and illicit actors. And it's become this race to the off ramps. So I would see say that it happens, certainly in some cases, cryptocurrency exchanges, stablecoin issuers are in many cases working with government in order to freeze, seize, burn, reissue funds. But it becomes a huge challenge for sure. I also think that that we are just starting to understand what potentially restitution could look like in these types of cases. What should we do as a government, as a society in order to build the mechanisms where we can turn that seizure into an asset forfeiture? and ultimately into restitution. But it's a process. It's really hard to connect that end user, that victim, with exactly the funds that were seized from that scam compound, right? You know, we know that Prince Group was responsible for the 15 billion, although that's being litigated in court, so we'll see how that plays out. But now, like, assuming that that is forfeited, Now we'll have to see how do we connect victims to that $15 billion to get their restitution? What do you have to show? A specific address that you sent to?
00:37:05
Speaker
you know, where the funds moved? We know they're a victim, but is it that exact $15 billion? Or is it some other $30 million a day, that Prince group? was making that we didn't seize in the $15 billion. And I think that's when things become really interesting from a legal perspective. I think there are things we can do. we can create a restitution fund, a victim restitution fund. But I think there's going to be some interesting legal challenges, but we're going to design a regime for that.
00:37:28
Speaker
Well, that's really interesting. So we can see that a victim has transferred money to a wallet associated with a Prince group. We just don't know that that 30 or from that 15 billion was the money that was transferred from the individual. But so so it's kind of proving that you transferred money to a ah wallet that's associated with them. But that's not enough because it's not this 15 billion that we know necessarily is part of it. I think that's an interesting legal issue, to be sure. We've tried to solve this in other ways over the years with other things, right? We don't know that we could tie your illness to this specific, you know, tobacco company, asbestos company, whatever it is, but we know you got sick and we were going to set up a restit victim restitution fund that you could petition and pay out to. That's just one idea that I know has been circulating that i've I've had conversations about. But I think we're just in the beginning of this conversation as much as, again, like we're impatient and want to supercharge it. I wanted to say we need to act fast. There are horrendous consequences of these crimes, starting from people losing their life savings and all the way to, unfortunately, suicide. So we need to put our foot on the gas and in being creative around solving these problems. Could not agree more. Yeah.
00:38:42
Speaker
So last question I wanted to ask you, um and I think you alluded a little bit to this, but what gives you hope in everything that you're seeing in the last year or two years in this evolving ecosystem?
00:38:55
Speaker
Yeah, I think it's a combination of things. I definitely think it's the that the focus um I have really seen, certainly my perspective in the US is I've seen the government really start to focus on this. on The scam center task force, which was created by DOJ, the conversations we're having with the White House where I've heard this just brought up time and time again as a national security issue, Prince Group.
00:39:17
Speaker
So I think that like we've turned the corner from sort of like yelling into a void as so many really great practitioners in this space have been doing for such a long time to really starting to treat this as as an issue. We've seen UK, US, s EU sanctions all in this area. So I think that gives me hope.
00:39:32
Speaker
I think we're seeing a light shined on this. Andy Greenberg wrote an excellent piece on Red Bull, this human trafficking victim who's in one of these scam compounds, which I think really broke broke it down. I would encourage folks to read that piece for Wired. We'll put links to everything. Yeah, that's a good one. um I think a lot of people are, so I think the light is being shined on it, but I'm worried about AI supercharging this even further. i'm worried about more and more money being lost. And I think we really need to like hit both sides at the same time. Public service announcements everywhere, but also sort of really using every tool we have to go after the bad actors.
00:40:11
Speaker
Thank you so much. It was a conversation that touched so many things and I really wanted to thank you for taking the time and breaking things so clearly for us where we don't always live in the crypto and the blockchain world. But it was super interesting and would love to see how things evolve. And thanks. Thank you so much for having