New York Police Win FinCEN Award for Bitcoin Investigation

Michael del Castillo
May 13, 2016 at 19:36 UTC

The New York State Police won formal recognition this week for its work tracing bank deposits back to a number of drug deals conducted in bitcoin on an online dark market.

The Financial Crimes Enforcement Network (FinCEN) presented an award to the New York State Police Suspicious Activity Review (SAR) Team and the New York State Police Financial Crimes Unit during an event held at the US Department of the Treasury in Washington, DC.

In a statement to announce the award and five others, outgoing FinCEN director Jennifer Shasky Calvery spoke to the increasing sophistication of financial crimes investigation by US officials.

Calvery said:

"Without the valuable information that US financial institutions provide, the significant cases recognized here today would likely never have seen the light of day."

In this particular case, while reviewing financial reports provided as part of the Bank Secrecy Act, the police department’s SAR team discovered that over a six-month period, an unnamed individual made more than 20 un-sourced deposits totaling $170k, in amounts seemingly designed to evade detection.

An investigation by the department’s Financial Crimes Unit discovered that an individual had deposited cash into several bank accounts, used the cash to purchase bitcoin, then closed the accounts shortly thereafter. Eventually, the investigation revealed the individual had moved more than $250k through two different financial institutions derived income claimed to have been generated while trading bitcoins.

In cooperation with multiple unnamed companies in the bitcoin space, investigators eventually traced the money back to an unidentified dark market, culminating with both an arrest and a seizure of narcotics.

Similarities to Rochester arrest

Though the names of the institutions involved and the individual’s name are not disclosed, the details closely resembles the case of Dylan Soefing of Rochester, New York, who last year was reportedly found with 800 Xanax pills and $170 in cash.

According to the Syracuse Post-Standard, the alleged scheme employed the services of Bitstamp and Coinbase, with Soeffing allegedly using online blackmarket, Darknet, to sell illicit goods.

Albany law enforcement officials and FinCEN did not immediately respond to requests for further information about the investigation. According to FinCEN, the individual was successful prosecuted.

Once the currency of choice at the now-shuttered Silk Road dark market, which in 2012 generated a reported $22m revenue, bitcoin is now seen by some law enforcement elements as easier to trace than cash. Last month, Science Magazine published a lengthy report on why criminals should think twice about using the digital currency owing to its transparent nature.

Image of US Treasury Seal via Shutterstock.

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