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Trafficking , US , World

Sex Criminals Use Bitcoin. So Do the Police.

by Corinne Redfern and Seulki LeeJan 30, 2021

This piece was published in partnership between Foreign Policy and The Fuller Project.


What you need to know
  • Cryptocurrencies are increasingly being used to fund child sexual exploitation, creating new opportunities for law enforcement to track down perpetrators.
  • Globally, law enforcement agents tasked with investigating child sexual exploitation often lack the training, knowledge and resources to pursue the growing number of operations financed by Bitcoin and other cryptocurrencies.
  • This lack of understanding of what cryptocurrency is and what its use in child exploitation looks like often leads anti-trafficking investigators in the U.S. and around the world to reject cases or miss crucial pieces of evidence.

Chris Janczewski was finishing up a lengthy investigation into online drug trafficking in Thailand when a source called him about a website in South Korea. Hosted on the darknet, the site encouraged users—including U.S. citizens—to pay Bitcoin to access over a million videos depicting the rape and sexual assault of children as young as six months old.

A special agent with the Internal Revenue Service’s Criminal Investigations division, Janczewski was used to tracing cryptocurrency transactions to track money laundering and other forms of organized crime. But he had never worked on a child sexual abuse case. “I was like, well surely the FBI or Homeland Security or somebody is already doing something about this,” he recalls. “Like, why does the IRS need to do something? And then I was poking around and I realized: Nobody was doing it.”

For the next two years, until late 2019, Janczewski found himself at the forefront of the investigation and takedown of what the U.S. Department of Justice has dubbed “the largest darknet child pornography website” in the world.

Cryptocurrencies are increasingly being used to fund child sexual exploitation (CSE), creating new opportunities for law enforcement to track down perpetrators. But experts say success stories are rare: Unlike those responsible for big money crimes like drug trafficking and money laundering, agents tasked with investigating CSE lack the training, knowledge, and resources to pursue the growing number of operations financed by Bitcoin and other cryptocurrencies. With law enforcement behind the curve, hundreds of thousands of sexual predators go uninvestigated, and are free to continue victimizing children.

Contrary to popular belief, some of the most mainstream cryptocurrencies, such as Bitcoin, Ethereum or Litecoin, can be easily tracked; every transaction is logged in a shared, public ledger known as a blockchain. Criminals can employ various techniques to try and obfuscate their spending, but the records—while harder to find—remain. “I pay you $2,000 in a dark alley, who are the witnesses to that transaction? Just you and I, right?” said Pamela Clegg, director of financial investigations and education at the blockchain analytics company CipherTrace. “With cryptocurrency… the whole world could be the witness.”

But a lack of understanding of what cryptocurrency is and what its use in child exploitation looks like often leads anti-trafficking investigators in the United States and globally to reject cases, or miss crucial pieces of evidence. Clegg cites an example from 2017 in which a team of experienced law enforcement officials from Central America uncovered a website hosting child sex abuse materials (CSAM), complete with Bitcoin addresses that could have identified dozens of users. The team didn’t know how to capture the data before taking down the website and mistakenly lost all of the information.

“I don’t want to paint this as ‘law enforcement doesn’t have experience in crypto,’” Clegg explains. “Law enforcement does amazing work with crypto. It’s primarily the teams that are focused on human trafficking and CSAM that I’m referring to.” In 2019, she gave a speech to 750 members of law enforcement from almost 100 countries, each a specialist in investigating human trafficking and child sexual exploitation. “I asked, ‘How many people have actually worked a case that involved cryptocurrency?’” To Clegg’s dismay, just five people raised their hands.

Around the world, governments are failing to prioritize cryptocurrency analysis in child sexual exploitation investigations, agrees Neil Walsh, chief of the Cybercrime, Anti-Money Laundering / Counter Financing of Terrorism Department at the U.N. Office on Drugs and Crime (UNODC). “It seems to me that this is still seen as a niche area: That it’s a bit geeky and not something that is common.”

Meanwhile, the rate at which sex predators are spending virtual money is far outpacing anti-trafficking agents’ capacity to track them. According to Chainalysis, a U.S.-based blockchain analysis company, the amount of money paid in Bitcoin and Ethereum to known child abuse websites nearly quadrupled between 2017 and 2019, topping 1.75 million dollars.

Some cryptocurrency pioneers are exacerbating the problem by ramping up privacy preservation and data protection to make transactions fully anonymous. Of the roughly 4000 cryptocurrencies currently listed on the price-tracking website CoinMarketCap, private analysts and senior IRS investigators say only a handful—like Bitcoin and Ethereum—are straightforward to trace. Even then, it requires the right training and tools.

“We’re in an arms race here,” said Rebecca Portnoff, director of data science at THORN, a U.S. organization working to build technology to counter child sex abuse. “And it’s a pretty complicated arms race.”

But Clegg says that training isn’t prioritized for these cases because the purchase and sale of online child sexual abuse materials amounts to just a fraction of what changes hands in white collar or drug crimes—most payments are between $10 and $50.

To take down Welcome To Video, the South Korean child exploitation site, Janczewski and a skeleton team of agents from the IRS and Homeland Security Investigations teamed up with the Korean National Police. Together, they spent two years tracing thousands of Bitcoin addresses, leading to the arrest of 340 men in 38 countries, including the United States, the United Kingdom, and Saudi Arabia. At least 25 children were rescued from situations of abuse.

Janczewski believes other federal agencies had overlooked Welcome to Video because they didn’t have the expertise or the necessary manpower. “The child exploitation investigators were very good, but they rarely had to look at cryptocurrencies and that’s a large learning curve,” he said. “And they’re just too busy.” On occasions when he shared a lead with other agencies, he often checked back in weeks later to discover they hadn’t made any progress. “In one example, the agent was like, ‘Yeah, I’d really like to work this case, but it takes a lot of effort for me to work out what’s going on.’”

The case was no less time consuming for officials in Korea. As chief of the Korean National Police’s cyber investigation division since 2018, Jong-sang Choi oversaw dozens of agents tasked with investigating Welcome to Video. The site catered to up to a million users and tracing their crypto transactions was challenging—“a fight between a spear and a shield,” Jong-sang recalled.

Despite Jong-sang and Janczewski’s best efforts, the majority of Welcome to Video’s users likely got away with their crimes. In several cases, investigators would trace Bitcoin addresses to foreign countries, only for the relevant authorities to ignore their reports. “Not only are they not interested,” Jong-sang said, “but they’re not capable.”

“It’s about turning this technical challenge into a mainstream part of investigative technology,” said Walsh of the UNODC. “And that requires political leadership domestically and internationally.”

Consumers of CSAM are everywhere, but demand is driven largely by people in wealthy countries. One study from the Philippines found that three-quarters of people who purchased materials depicting child sexual abuse were from the U.S., Sweden, and Australia. Meanwhile, 81 percent of child sexual abuse materials are produced in low-income regions, including in South East Asia, Africa, and Latin America, according to the Global Partnership to End Violence Against Children. In many of these countries, the tools required to analyze virtual transactions are prohibitively expensive. “If you’re in the UK or the U.S., the ability to invest in a blockchain analyzer is very possible,” said Walsh. “However, if you are from an economically developing country, then that’s really difficult to do.”

Instead of relying on resource-stretched agencies and governments in low-income countries to independently investigate CSE crimes using cryptocurrency, some experts have called on financial institutions—such as the “exchanges” that can convert cryptocurrency into other assets, including traditional, government-issued money—to introduce protocols to identify and report suspicious activity to authorities.

In May 2020, Aaron Kahler, founder of the Anti-Human Trafficking Intelligence Initiative, launched the Anti-Trafficking Cryptocurrency Consortium after seeing a “huge lapse” in the investigation of child sexual abuse by both U.S. law enforcement and financial institutions. “It’s still not a priority,” he said, explaining that the nonprofit consortium is working to encourage exchanges to cooperate with law enforcement, while providing U.S. investigators with much-needed tools and expertise.

Since shutting down Welcome to Video, Janczewski has collaborated with European investigators to trace over 300 Bitcoin addresses linked to a Dutch-hosted site called Dark Scandals, which sold more than 2000 videos of women and children being raped. In March of last year, authorities arrested the site’s administrator.

Janczewski admits he didn’t initially understand how prolific the use of cryptocurrency was in child sexual abuse or the role the IRS could play in combatting it. But he does now.

“Once I got into it, I realized this is the thing.”


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