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Summary
- The Crypto Asset Division of the Italian Carabinieri (National Police) arrested Chinese national Franco Lee, the operator of an illegal crypto asset exchange involved in money laundering of approximately 8.8 million euros between 2021 and 2024, and seized part of the digital assets.
- This achievement was accomplished by combining the Carabinieri's custom-developed scripts, network analysis using Chainalysis Reactor, and advanced investigative techniques such as quickly identifying wallets from fragmented seed phrases using Wallet Scan.
- This case demonstrates the technological advancement of European law enforcement and establishes a concrete precedent for addressing increasingly complex crypto asset-related financial crimes.
International Network Based in Italy
Lee utilized overseas crypto asset exchanges and conducted transactions in France, Switzerland, and Spain. Furthermore, his participation in the blockchain-related event "Blockchain Week" in Rome clearly demonstrated his connections with the international crypto asset community.
Decoding: Building Evidence from Scattered Phrases
- Network Analysis (Chainalysis Reactor):Chainalysis Reactor was crucial in visualizing Lee's network. Investigators used Reactor to identify illegal fund movements across multiple blockchains and crypto asset exchanges, comprehensively mapping their transaction paths. This analysis enabled a clear understanding of fund movement patterns.
- Seed Phrase Restoration: To reassemble seed phrases stored in multiple fragments into the correct sequence, investigators utilized special brute-force methods and scripts developed by the Carabinieri.
- Wallet Scan Utilization: After restoring the seed phrases, the Carabinieri used Wallet Scan to analyze the phrase contents. Implementing Wallet Scan significantly accelerated the investigative process, enabling accurate identification of wallets containing illegal funds.
The Carabinieri successfully seized some crypto assets including bitcoin, ether, USDT, and Matic.
A New Groundbreaking Case in Crypto Asset Investigation
The operation conducted by the Carabinieri demonstrates the significant evolution of law enforcement agencies' capabilities in combating financial crimes. Despite the pseudonymous nature of crypto assets, by utilizing advanced blockchain forensic tools, they effectively eliminated transaction anonymity and dismantled criminal networks.
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