'We are always a step behind the best criminals'

When a state and local agency in the US faced a complex case of "pig butchering"—a long-term scam where victims are lured into making increasing contributions, usually in crypto—they turned to the forensic tools of Merkle Science to help track down the stolen funds.

Merkle Science’s co-founder and CEO, Mriganka Pattnaik, told The Crypto Radio how investigators were able to use the company’s Tracker solution to link multiple cases, trace the illicit crypto transactions, and ultimately seize millions of dollars that had been taken from victims.

Pig butchering refers to a type of scam where fraudsters cultivate relationships with victims, often over social media, before coaxing them into making substantial investments in non-existent crypto assets. This highlights the growing need for robust investigative tools in an era where cryptocurrency scams are becoming increasingly sophisticated.

This real-world success story underscores the critical role that Merkle Science is playing in the rapidly evolving world of cryptocurrency.

As a self-described "infrastructure company," Merkle Science is bridging the gap between crypto firms and government agencies, providing the analytics and investigative support needed to detect and combat criminal activity on the blockchain. "We view ourselves as an infrastructure company that bridges the gap between crypto companies and government agencies," explained Pattnaik.

"For crypto to become mainstream, it's very important for both people and government agencies to trust cryptocurrency companies and be able to detect and track criminal activity."

Pattnaik's team has developed two key solutions—Compass for compliance and Tracker for forensics—that are proving invaluable in the fight against crypto crime. By analyzing blockchain addresses and transactions, these platforms can identify high-risk activity and provide law enforcement with the visual tools and data they need to trace stolen funds. It's a critical service in an industry that has seen its fair share of hacks, scams, and illicit activity.

Inspiration

Pattnaik's inspiration for founding Merkle Science stemmed from his previous experience at a crypto exchange, where he witnessed the daily impact of these crimes on everyday users.

"Every day we'd see at least 20 or 100 incidents of crypto crime, and these would just be common people," he said. "I noticed that for crypto as an industry to grow, it was very important to start curbing the growth of illicit activity."

Merkle Science's tools are designed to make these complex crypto transactions easier for law enforcement to understand and navigate. "It's almost like a visualization tool where you can literally see funds go from one bubble to another, and it's very easy to use, where they just need to click on a few addresses, a few pluses and minuses, and can even make notes on that tool," Pattnaik said.

However, staying ahead of the ever-evolving tactics of crypto criminals is a constant challenge. "Crypto criminals are becoming more and more sophisticated," Pattnaik said. "Now that law enforcement is quick to detect and seize funds sent to exchanges, criminals are increasingly turning to decentralized finance (DeFi) protocols to hide their trails."

To address this, Merkle Science is investing in R&D and technology, as well as exploring ways to collaborate with the broader community. "We try and get the best data scientists in our space from different exchanges and the best investigators from both the private sector and law enforcement," Pattnaik said.

"But at the end of the day, law enforcement agencies are always a step behind the best criminals, and Merkle is in between them as well."

'Crypto is now mainstream'

Education and training are also key priorities for Merkle Science. The company's Institute platform offers free and paid courses on crypto forensics and compliance, both online and in-person, to upskill professionals and combat the growing threat of crypto crime.

As the crypto industry continues to evolve, Pattnaik remains optimistic about its future. "Crypto is now mainstream," he said. "Every major regulator has regulations ... catered to cryptocurrency. Every major federal agency has a crypto investigations team. It's already reached some degree of global adoption. It's only a matter of time before it becomes more important or coexists and is as important as cash or credit cards."

With companies like Merkle Science leading the charge, the crypto industry may be one step closer to realizing its mainstream potential while ensuring the safety and security of its users. And as the Wisconsin case demonstrates, their work is already making a tangible difference in the fight against crypto crime.

 

Listen to the whole interview on The Crypto Radio's live player or in our Thought Leaders podcast.