Chainalysis Launches Plans to Crack Down on Crypto Scams

Investigators have shut down cryptocurrency accounts tied to $162m in losses as part of a newly disclosed public-private initiative launched by Chainalysis.

The project, Operation Spincaster, has already conducted a series of operational sprints in six countries (the US, the UK, Canada, Spain, the Netherlands, and Australia).

Operation Spincaster involved 100 partners, including 12 public sector agencies and 17 crypto exchanges.

7000 leads Identified, $162m of Losses in Crypto Scams

Cryptocurrency transaction research firm Chainalysis is the leader of the project.

In a blog post published on July 18, the firm said initial Operation Spincaster sprints leveraged actionable intelligence from the firm’s telemetry.

Chainalysis has identified thousands of compromised crypto wallets using its Crypto Investigations solution.

This led the investigators to follow over 7000 leads, relating to approximately $162m of losses.

“These leads were used to close accounts, seize funds and build intelligence to prevent future scams,” added Chainalysis.

In one of the sprints, Operation Spincaster partners were able to contact a victim directly to warn them of an ongoing scam, prompting the victim to take preventative action on-chain by revoking the approval before the scammer was able to steal a six-figure sum.

The Rise of Approval Phishing

Chainalysis explained that approval phishing is a popular tactic criminals use to steal funds through different scamming techniques, such as fake crypto apps and romance scams.

The typical approval phishing technique involves a scammer tricking its victim into signing a malicious blockchain transaction that authorizes the scammer’s address to spend specific tokens inside the victim’s wallet. The scammer then drains the victim’s address of those tokens.

Chainalysis has reported that over $2.7bn has been lost to scams leveraging approval phishing since May 2021.

A Ground-Breaking Initiative

Commenting on the operation, Celestino Calabrese, acting head of illicit finance threat at the UK’s National Crime Agency (NCA), said Operation Spincaster’s UK sprint helped identify over 230 UK victims and discover at least £33m of funds believed to be the result of approval phishing.

The Spanish Guardia Civil’s Criminal Cyber Intelligence Team was another partner of Operation Spincaster. A Guardia Civil spokesperson said the initiative was “ground-breaking” because of the first-ever collaboration between “key domestic exchanges, cutting-edge technology research units from the Guardia Civil, and investigators from Chainalysis.”

“The Web3 landscape presents evolving challenges, and public-private sector collaboration is paramount to addressing them. Beyond the potential victims identified and actions taken, the two-day collaborative effort has yielded invaluable learnings that will influence our ongoing investigation work immensely,” the spokesperson said.

The NCA’s Calabrese said the agency will “continue to provide support to ongoing investigations, ensuring that the public are kept safe from harm, and offenders are targeted regardless of their location.”

Operation Spincaster Built from Operation Disruption

Operation Spincaster is a global extension of Operation Disruption, an operational sprint Chainalysis researchers conducted with the Calgary Police Service in March 2024.

Sergeant Danny Leong of the Calgary Police Service Blockchain Investigations Team said this initial operation allowed the identification of over 770 individuals, 119 of which were Canadians, as victims of cryptocurrency fraud, with an estimated combined loss of $59m.

“Through this workshop, the participating organizations took swift action in notifying the impacted individuals to prevent further victimization,” he added.

Read more: Crypto-Money Laundering Records 30% Annual Decline