On Thursday, January 30, 2025, Merkle Science hosted a webinar called A Three-Hour Crash Course in Mastering Crypto Investigative Strategies.
Led by Scott Simons, a crypto investigator and former drug enforcement agent, the webinar also featured Robert Whitaker, Merkle Science’s Director of Law Enforcement Affairs.
You can watch the webinar on-demand here.
This article recaps the key takeaways from the webinar, including trends in crypto crime, investigative strategies, and the role of blockchain analytics in tracking and apprehending criminals.
Scott Simons highlighted that crypto-related crimes led to almost $6 billion in losses in 2023.
“And keep in mind,” he noted, “this figure only includes cases where victims actually report the crime. Many don’t.”
The staggering losses stem from the vast range of crypto-related crimes. Simons emphasized that cryptocurrency is integral to various illicit activities, including ransomware, rug pulls, pig butchering scams, hacks, and money mule schemes.
Moreover, even traditional crimes such as drug trafficking, terrorism, human trafficking, arms smuggling, and child exploitation are now being facilitated through cryptocurrency.
Criminals favor crypto due to its pseudonymous nature. While blockchain transactions are publicly visible, identifying the individuals behind them is challenging. However, law enforcement can unmask criminals by collaborating with exchanges that are used as fiat off-ramps for laundering.
Despite the widespread use of cryptocurrency in crime, Simons stressed that many investigators, prosecutors, and judges still lack a deep understanding of blockchain forensics.
“It’s a good idea to attach a crypto white paper to discovery materials, seizure warrants, or police reports submitted to prosecutors. This helps them understand the specific cryptocurrency involved in the case,” he advised.
There are key principles that law enforcement must grasp early in an investigation.
“For instance, if we execute a search warrant or make an arrest and come across someone’s private key, that’s a major breakthrough. If we gain access to that private key, we can potentially recover illicit funds,” Simons explained.
However, obtaining access to a criminal’s wallet—and tracking them down in the first place—has grown increasingly difficult due to the rapid evolution of the crypto space.
“Just think of how many different cryptocurrencies and blockchains exist. Within a single wallet, a user can control hundreds or even thousands of addresses,” he said.
Simons outlined two categories of tools used to analyze criminal behavior on-chain: open-source tools like blockchain explorers, and blockchain analytics tools such as Tracker from Merkle Science.
These tools help trace illicit transactions, even as criminals employ various obfuscation techniques to cover their tracks.
Simons delved into how criminals exploit blockchain technology to evade detection, explaining key concepts like smart contracts and decentralized finance (DeFi) as well as coin mixers.
“If you ever hear the term ‘cross-chain swap,’ it’s essentially ‘chain hopping’—moving funds from one blockchain to another. A common laundering path is from Bitcoin through various swapping services to Ethereum, to Tron, and eventually into a stablecoin like Tether on the Tron or Ethereum blockchain,” he said.
Because criminals must create intricate money laundering trails, they rely on multiple wallets. Simons introduced the concept of clustering, where blockchain analytics tools identify and link addresses controlled by the same entity.
Clusters are critical for law enforcement because they help establish an overall date range of criminal conduct, determine the source and destination of illicit funds, identify additional victims, increase the total amount recoverable in asset seizures, and detect money laundering behaviors.
The goal of tracking illicit funds is often to follow the trail to a hosted or unhosted exchange.
“The key difference,” Simons explained, “is that hosted exchanges (like centralized platforms) maintain records that law enforcement can subpoena—assuming the exchange cooperates. In contrast, an unhosted private wallet is created and controlled by an individual without any institutional oversight.”
Given the complexity of tracking illicit funds onchain, many law enforcement professionals feel overwhelmed when entering the crypto space. Simons reassured them, encouraging a step-by-step approach to learning.
“When I first got into crypto, I started by watching YouTube videos—believe it or not. That was about 10 years ago. I read every article I could find, watched countless YouTube tutorials, and talked to people deeply involved in the industry,” he shared.
He urged webinar attendees to use this session as a launchpad for continuous learning, emphasizing that staying updated on blockchain advancements is crucial for effective investigations.
Law enforcement agencies are rapidly adapting to the complexities of crypto crime, using blockchain analytics to track illicit transactions and uncover criminal networks. As Scott Simons emphasized, continuous learning and the right investigative tools are key to staying ahead.
Tracker from Merkle Science helps investigators trace funds across blockchains, identify suspicious wallets, and reveal hidden connections. Enhance your crypto investigations—contact us for a free demo on how Tracker can support your law enforcement efforts today.
If you missed the webinar, you can watch it on-demand here.
