aml

The European Union is preparing for significant changes in the crypto industry: starting from July 1, 2027, new anti-money laundering (AML) rules will prohibit anonymous cryptocurrency accounts and privacy coins such as Monero (XMR) and Zcash (ZEC). According to the AML Regulation (AMLR), banks, financial institutions, and crypto-asset service providers (CASPs) will not be able to support anonymous wallets or assets that conceal user data. This decision aims to enhance transparency and combat illegal activities in the digital space.

Platforms for trading cryptocurrencies that do not verify users' identities during registration are called exchanges without KYC.

Such platforms prioritize the anonymity and privacy of users, unlike exchanges that adhere to KYC (Know Your Customer) policies, which require users to provide personal information such as government-issued IDs, addresses, and sometimes even financial data.

Forensic Blockchain Investigation:
Note: The names and addresses mentioned in this report are fictitious to protect the identity of victims and to illustrate the case for educational purposes. The objective is to demonstrate how Forensic Blockchain Analysis can track illicit activities and reinforce that cryptocurrencies are not a lawless territory.
The Scheme: The Locked Token of “Crypto Club”

In 2023, a supposedly revolutionary platform in the cryptocurrency market began attracting investors with promises of high returns, around 1% per day.
The investment model was based on purchasing an exclusive platform token, which, according to the project team, had several advantages, such as:
• Constant appreciation due to the company’s growth.
• Monthly profit distribution through a staking system.
• Access to exclusive benefits, such as fee exemptions and bonuses (which is common in legitimate projects but also widely used by scammers).
To join the project, investors had to buy this token by sending ETH or USDT to the platform’s wallets:
ETH Wallet: 0x456def...789ghiUSDT Wallet: 0xabc123...456xyz
The Mechanism:
The acquired token would be locked for 90 days in a staking process, with the promise that a percentage of the locked tokens would be distributed as a return for supporting the protocol. During the staking period, users would not be able to withdraw their tokens, but in return, they could receive compensation based on the amount of tokens committed. Additionally, staking would allow participants to influence the protocol’s governance by voting on proposals and important decisions about its development, while also contributing to the network’s security by helping to maintain the integrity of the system.
When the alleged unlocking date arrived, allowing users to withdraw their profits, the project team announced technical issues due to a major platform update, which was expected to bring improvements that would enhance the platform’s performance and the token’s value.
However, to participate in this new phase, investors were required to lock additional tokens for another 60 days to earn even higher returns. Those who locked more tokens would receive greater benefits and priority access to withdrawals. A few weeks later, the website went offline, customer support channels were deactivated, and all funds disappeared. The estimated loss exceeded $7 million in funds.
The Investigation: Tracking the Fraudulent Transactions
Following multiple complaints, forensic analysts launched an on-chain investigation, utilizing tools such as Etherscan, BscScan, and specialized trackers to map the flow of funds and identify potential connections between suspicious transactions.
1 • Transaction Tracking: Dusting and Chain Hopping

Wallet analysis revealed structured transactions designed to obfuscate tracking. The scammers repeatedly split the funds into smaller amounts, transferring them through multiple intermediary wallets to make tracing more difficult. They also moved small parts of the funds across different blockchains before ultimately depositing them into centralized exchanges.
Transaction Flow:
ETH and USDT were sent from the token contract to intermediary wallets.The funds were split into smaller amounts and moved between multiple wallets to make tracking more difficult.Transfers were made to other blockchains, such as Solana, through decentralized bridges.A final conversion to USDT was made through a DEX contract before being deposited into a centralized exchange.
2 • Conversion to Stablecoins and Cash-Out via Exchange

Before attempting to withdraw the funds, the scammers converted their assets into a widely accepted stablecoin. The analysis showed that they exchanged their assets on decentralized platforms and transferred them to newly created accounts on a centralized exchange. From there, they attempted to move the funds to banks in regions without financial regulations. However, the involvement of centralized platforms made it easier for investigators to track the transactions.
Through the entire investigation and tracking process with specialized professionals and tools, as well as enhanced pattern monitoring techniques, the authorities were able to trace the funds to the exchange and request the freeze of the account, preventing all the funds from being withdrawn.
Conclusion: Cryptocurrencies Are Not a Lawless Territory

Although the decentralized nature and obfuscation techniques can make transaction tracking challenging, advanced tools and specialized monitoring methods enable authorities to trace the flow of funds through publicly available on-chain data, identifying fraudulent activities and preventing further damage. The use of centralized exchanges, decentralized bridges, and stablecoins, while employed to conceal transactions, still presents vulnerabilities that can be exploited by investigators. Ultimately, the existence and importance of blockchain investigations are essential to ensuring that the cryptocurrency space remains secure, transparent, and resistant to financial crimes.
This case underscores key aspects of blockchain investigations, where centralized exchanges played a significant role in identifying those involved, stablecoins served as a bridge between digital assets and traditional money, and investigators relied on blockchain analysis tools to track transactions and uncover illicit activities, demonstrating the effectiveness of forensic techniques in tracing financial crimes.
This case illustrates that, even within a decentralized and pseudonymous environment, financial crimes can be effectively traced and prosecuted through advanced investigative techniques and blockchain analysis.

#Bitcoin #Ethereum #BlockchainAnalysis #Investigation #AML