NYPD's Crypto Sleuthing Is Powered by Chainalysis, Documents Show

The New York Police Department (NYPD) has been using Chainalysis software to conduct blockchain investigations since 2019. 

Though NYPD’s blockchain sleuthing efforts had been reported by The Block in January, it was not previously known which firm the nation’s largest police force had enlisted to help track suspect crypto transactions or how long it had been doing so.

The revelation comes as the NYPD quietly strengthens its rules governing who can use the cryptocurrency analysis tools and how the department stores the transaction data their investigations dig up.

Under a final policy document released Sunday, New York cops said they would only use the tools for “legitimate law enforcement purposes'' pre-authorized by an oversight board. A draft policy proposed in January would have permitted those tools “in any situation” the oversight board had seen fit.

Additionally, officers must now have “an articulable need” to conduct crypto transaction analysis before they’re allowed to use the agency’s tools. The previous proposal appeared to grant access to any “authorized user” with a username and password.

Chainalysis has established itself as one of law enforcement’s top allies in tracking cyber criminals who conduct business on public ledgers. The firm raked in $10 million in federal government contracts in 2020, but the company has told CoinDesk it maintains broad relationships with state and local police.

For its work with the NYPD, Chainalysis received an eight-month, $35,410 software licensing contract in October 2019. The New York-based firm subsequently agreed to a full-year deal worth $67,890 that granted NYPD use of its “intelligence collection tool.” That deal will expire at the end of August. 

NYPD first divulged its crypto tracing policies in response to a June 2020 state law that sought to give the public more input on its high-tech toolkit. But the department had already been surveilling transactions for nearly a year, according to city records reviewed by CoinDesk. 

NYPD did not respond to requests for comment.

Chainalysis, one of the largest private companies providing cryptocurrency tracing software to governments and crypto exchanges alike, last month raised a whopping $100 million from prominent backers.

Chainalysis Public Sector VP Chris Manouse told CoinDesk that local law enforcement agencies rely on transaction-tracing software to respond to cyber threats.

“Criminal activity involving cryptocurrency is directly impacting local communities,” he said in an email. “Ransomware is crippling local hospitals, schools, and governments. Individuals, including the elderly, are being targeted in scams and SIM swaps.”

Manouse declined to comment on Chainalysis’ relationship with NYPD.

In 2019 the department warned that scammers posing as Social Security administrators had bilked city residents of $2 million in bitcoin, gift cards and wire transfers. 

NYPD training records reviewed by CoinDesk indicate the departments’ crypto investigations may stretch beyond ransomware and SIM swaps. The 2020 detective training coursebook offered lectures on managing darknet investigations.

Albert Fox Cahn, the founder and executive director of the New York City-based Surveillance Technology Oversight Project (STOP), said the NYPD approach reeks of overreach.

“This is a policy that's designed to hide more than it shows,” Cahn said in a phone call. “The policy doesn't specify what vendor it uses, it doesn't specify the capabilities being deployed, it gives the most high-level cryptic description you could imagine of the cryptocurrency analytics tool they're using.”