TY - JOUR
T1 - Of degens and defrauders
T2 - Using open-source investigative tools to investigate decentralized finance frauds and money laundering
AU - Trozze, A.
AU - Davies, T.
AU - Kleinberg, B.
PY - 2023
Y1 - 2023
N2 - Fraud across the decentralized finance (DeFi) ecosystem is growing, with victims losing billions to DeFi scams every year. However, there is a disconnect between the reported value of these scams and associated legal prosecutions. We use open-source investigative tools to (1) investigate potential frauds involving Ethereum tokens using on-chain data and token smart contract analysis, and (2) investigate the ways proceeds from these scams were subsequently laundered. The analysis enabled us to (1) uncover transaction-based evidence of several rug pull and pump-and-dump schemes, and (2) identify their perpetrators' money laundering tactics and cash-out methods. The rug pulls were less sophisticated than anticipated, money laundering techniques were also rudimentary and many funds ended up at centralized exchanges. This study demonstrates how open-source investigative tools can extract transaction-based evidence that could be used in a court of law to prosecute DeFi frauds. Additionally, we investigate how these funds are subsequently laundered.& COPY; 2023 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
AB - Fraud across the decentralized finance (DeFi) ecosystem is growing, with victims losing billions to DeFi scams every year. However, there is a disconnect between the reported value of these scams and associated legal prosecutions. We use open-source investigative tools to (1) investigate potential frauds involving Ethereum tokens using on-chain data and token smart contract analysis, and (2) investigate the ways proceeds from these scams were subsequently laundered. The analysis enabled us to (1) uncover transaction-based evidence of several rug pull and pump-and-dump schemes, and (2) identify their perpetrators' money laundering tactics and cash-out methods. The rug pulls were less sophisticated than anticipated, money laundering techniques were also rudimentary and many funds ended up at centralized exchanges. This study demonstrates how open-source investigative tools can extract transaction-based evidence that could be used in a court of law to prosecute DeFi frauds. Additionally, we investigate how these funds are subsequently laundered.& COPY; 2023 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
KW - Cryptocurrency
KW - Decentralized finance
KW - Ethereum
KW - Fraud detection
KW - Money laundering
UR - https://www.scopus.com/pages/publications/85162137174
U2 - 10.1016/j.fsidi.2023.301575
DO - 10.1016/j.fsidi.2023.301575
M3 - Article
SN - 0379-0738
VL - 46
JO - Forensic Science International
JF - Forensic Science International
M1 - 301575
ER -