Utica College senior Daniel Wilcox is prepared to join the cutting edge of law enforcement after he graduates this spring.
No, there’s no RoboCop-like cyborg technology involved, not even cool new weapons. Just investigators sitting at computers following the money trail of cryptocurrency through cyberspace.
Wilcox, who is majoring in fraud and financial crimes investigation with minors in accounting and criminal justice, already has earned a C.T.C.E. credential, which stands for CipherTrace certified examiner. CipherTrace is a cryptocurrency intelligence company.
The designation means that Wilcox has taken an eight-hour training course — offered at Utica College for the first time last fall — and is ready to investigate crimes involving cryptocurrencies such as Bitcoin, Ethereum, Litecoin, Cardano and Ripple.
Wilcox said he likes the puzzle-solving side of trying to solve financial crimes.
“I definitely want to have a career at some point in the public sector doing actual criminal investigation,” Wilcox said, “with the FBI or the IRS’ criminal investigations division.”
The CipherTrace training and his accounting minor set him apart from his peers interested in law enforcement careers, Wilcox said.
He — and the 70 or so Utica College students who have taken the training — are relatively early entrants into what experts say is the up-and-coming field of investigating crimes involving cybercurrencies.
“It’s only a matter of time before cryptocurrency becomes an everyday usage thing,” Wilcox said.
For most Americans, though, cryptocurrency remains, well, cryptic. More than 10 percent of adults never heard of cryptocurrencies, according to a February survey by The Harris Poll for Bloomberg.
Of those who have heard of them, 61 percent said they had little or no understanding of how they work, according to the poll.
But to understand the significance of cryptocurrency criminal investigation, you have to understand a bit about cryptocurrency.
What is cryptocurrency?
All money is an abstract concept; pieces of paper and stamped metal have very little inherent value. But cryptocurrency, which is digital only, takes abstract to another level.
Like fiat currency — money that is issued by a government but not backed by a commodity — cryptocurrency is not backed by a commodity. But unlike fiat currency, it is not issued by a government and is completely decentralized. It is not overseen by a government, by banks or by any other central authority.
That means that crypto transactions are made directly from person to person.
“Crypto is really the transfer of value,” said Suzanne Lynch, professor of practice in economic crime at Utica College, who spent years for companies including MasterCard Worldwide, Goldman Sachs and Comerica Bank.
There are many different kinds of cryptocurrency, including Bitcoin, Ethereum, Litecoin, Cardano and Monero. A few cryptocurrencies, such as Tether, are tied to the value of a fiat currency, the U.S. dollar in Tether’s case.
Why does cryptocurrency have value?
“What gives me value in cryptocurrency is my ability to spend cryptocurrency,” said Pamela Clegg, director of financial Investigations and education for CipherTrace.
Or, it has value because the people who use it say it has value. But that means that the price of most cryptocurrencies can be voluble with prices shifting as supply and demand rise and fall. The exception is currencies like Tether that are tied to another currency’s value.
What is cryptocurrency used for?
The usefulness of crypto is pretty much in the eye of the beholder. It can be used as a long-term investment; it can be traded for profits based on price fluctuations; it can be converted into fiat currency, gold or another kind of asset; and it can be spent. Some users choose crypto because they don’t trust banks.
It resembles money, stock, foreign currency exchanges, commodities and property, and gets regulated by the agencies overseeing all of those things, Clegg said.
“It really depends who’s looking at it,” she said.
How broadly is cryptocurrency accepted?
It might be a while before you can hit the stores in your hometown with only cryptocurrency.
“There’s still not a whole lot you can buy,” Clegg said.
But there are coffee shops in New York City that accept crypto, and she read that a Burger King in Germany will be taking Bitcoin, Clegg said. And Paypal and Square have adopted Bitcoin, for example, she said.
And more big companies keep joining in. Tesla invested $1.5 billion in Bitcoin in February and said it would soon accept Bitcoin as payment for its cars. And earlier this month, Morgan Stanley became the first big bank to offer Bitcoin investment to its wealth management clients.
How do you store cryptocurrency?
In a wallet, of course. The wallet can kept on a computer or other device. Or it can be kept in a wallet, a device that looks like a portable charger, Wilcox said.
A key opens the wallet so the currency can be spent. Lose the key (a password, not a physical key) and you’ve lost your cryptocurrency. The same goes if you lose your wallet or the device it’s on.
Cryptocurrency ATMs are becoming more common with 16,000 worldwide and 14,072 in the United States, Clegg said, citing statistics she saw on a website. These machines let users buy cryptocurrency, sending it to the address for the user’s wallet. And some convert cryptocurrency into cash after users sent their crypto to an address the ATM provides.
Does cryptocurrency work reliably?
The secret to cryptocurrency — and its security, anonymity and speed of transfer — is a technology called blockchain, a digital ledger that links blocks of data, or transactions, together.
“In theory, blockchain is a secure way to transfer information,” Lynch said.
Blockchain contains a record of every transaction made with a cryptocurrency. Instead of relying on a central server, the blockchain is verified by a network of computers around the world. It is difficult, possibly impossible, to hack or cheat the blockchain.
It has many potential applications, not just recording cryptocurrency transactions.
Don’t criminals use cryptocurrency?
The vast majority of crypto transactions are legal, Clegg said. Some estimate that illicit activity accounts for less than 1 percent of crypto transactions and some put the number higher, but still in the single digits, she said.
But yes, criminals have discovered that cryptocurrency allows for quick transactions, works anywhere in the world and offers complete anonymity, making crypto harder to trace than fiat currency.
“On one side, it’s trying to become more mainstream,” Lynch said. “And then on the other side, it’s being used in nefarious ways.”
Crypto is becoming the currency of choice for dark market activities, whether drugs, human trafficking or the sale of stolen data. It’s used to funnel money to terrorists, pay kidnapping ransoms and to launder money. And it’s used in all the same scams — Ponzi schemes, romance scams, send-money-overseas emergency scams — as other kinds of payments.
“It really is every kind of crime you can imagine with traditional money being done with cryptocurrency as well,” Clegg said. “It’s not new to the criminal. It’s just another payment mechanism for them to utilize.”
Can you investigate crimes involving cryptocurrency?
The blockchain contains a record of every transaction, including an address for the payor and the payee.
“We just don’t always know who is behind those addresses,” Clegg said.
So she considers crypto to be pseudonymous rather than anonymous, she said.
Picture it as a bank vault full of safe deposit boxes, Clegg suggested. The blockchain makes the boxes transparent, so you can see everything that’s in each box and you can see where it came from, she said.
“You just don’t know who owns Box 25,” she said.
“What we do is, we begin to chip away at the pseudonymous aspect of it,” Pam said.
Investigators work on figuring out who owns each box, or, outside the analogy, the addresses in the blockchain, she said.
Who hires people with this training?
Any federal agency that investigates money laundering and financial crimes needs people who know how to look into cryptocurrency, Clegg said. So do companies like CipherTrace, which will investigate matters involving too little money for federal investigators to take on, she said.
Banks, cryptocurrency exchanges, companies who have adopted crypto and law firms handling cryptocurrency-related cases also are hiring, Clegg said.
“All of these need to be able to have the ability to carry on investigations and to apply (anti-money laundering) to the cryptocurrency that they are touching and transactions so that they can be in compliance per the regulations that they have to adhere to.”
Why do CipherTrace and Utica College want to work together?
CipherTrace is trying to build capacity in a new, niche industry, Clegg said.
“There’s nobody out there that can possibly have more than five or six years of experience,” she said.
CipherTrace chose Utica College as its second college partner because of its strong programs in financial crime, money laundering and cybercrime, a good sign that they’ll be a large pool of students interested in the training and well versed in the subject, Clegg said.
Upperclassmen and graduate students who take the training, which CipherTrace started offering at Utica College in the fall, can then join the CipherTrace Defenders League to start working on cases while still in school.
“This is an absolutely perfect opportunity for our students to work real-life cases,” Lynch said, “and help people out.”
Amy Roth is the health and education reporter for the Observer-Dispatch. For unlimited access to her stories, please subscribe at the top of the uticaod.com homepage or activate your digital account today. Email Amy Roth at firstname.lastname@example.org.