Inside the FBI: Crypto, Crime and National Security
🎯 Summary
Podcast Episode Summary: Inside the FBI: Crypto, Crime and National Security
This 52-minute episode features an in-depth conversation between Jonathan Loven (CEO/Co-founder of Chainalysis) and James Monaco (Deputy Assistant Director of the FBI’s Criminal Investigative Division), detailing the FBI’s evolution in combating cybercrime, particularly focusing on the pervasive role of cryptocurrency.
1. Focus Area: The primary focus is the FBI’s strategy and operational response to crimes involving cryptocurrency, spanning from early darknet market usage to modern, sophisticated schemes like ransomware and investment fraud (specifically “pig butchering”). The discussion centers on integrating blockchain analysis into traditional criminal investigations across nearly all FBI classifications.
2. Key Technical Insights:
- Ubiquity of Crypto in Crime: Cryptocurrency is now involved in approximately 170 out of 250 FBI investigative classifications, with over 2,500 active investigations incorporating crypto components.
- Centralized Expertise & Field Support: The FBI established a Virtual Assets Unit (VAU) at headquarters to centralize expertise, supported by a “hub and spoke” model utilizing several hundred agents across field offices in the Virtual Currency Response Team (VCRT) for local blockchain tracing support.
- Proactive Intelligence Gathering: The ability to trace real-time money flows on the blockchain provides critical intelligence about the entire supply chain of criminal operations (e.g., ransomware actors or fraud compounds), moving investigations beyond relying solely on delayed victim reporting.
3. Market/Investment Angle:
- Ransomware Recovery Success: The FBI has demonstrated significant success in recovering illicit funds, citing an example where $12 million out of a $15 million ransomware payment was recovered due to early victim engagement and tracing capabilities.
- Fraud Escalation: Crypto investment fraud (pig butchering) losses reported to IC3 reached approximately $5.8 billion in 2024, marking a 48% year-over-year increase, highlighting a massive and growing financial threat.
- Private Sector Necessity: Success in combating these crimes is heavily reliant on public-private partnerships, leveraging tools and relationships from exchanges (VASPs), tracing companies, and major tech infrastructure providers.
4. Notable Companies/People:
- James Monaco (FBI DAD): Provided the primary insights into the FBI’s organizational structure, training evolution, and operational challenges regarding crypto crime.
- Jonathan Loven (Chainalysis CEO): Hosted the discussion, framing the context through Chainalysis’s role in providing tracing tools and industry expertise.
- IC3 (Internet Crime Complaint Center): The central reporting mechanism for victims of fraud and cybercrime.
- Hexigate/Venus Protocol: Mentioned in the pre-roll as an example of Chainalysis/Hexigate’s early detection capabilities successfully safeguarding $13 million in a social engineering attack.
5. Regulatory/Policy Discussion:
- Inter-Agency Cooperation: The FBI actively manages working groups (e.g., Ransomware, Terrorism Fundraising) to ensure collaboration between intelligence and criminal investigative arms, as well as with federal partners (Secret Service, HSI, Postal Inspection Service).
- Victim Engagement Initiative (“Level Up”): This joint government/private sector initiative proactively contacts potential victims of pig butchering. In 15 months, they contacted over 6,300 people, with 76% unaware they were victims, leading to an estimated $275 million in losses averted.
- Discouraging Ransom Payments: While the FBI encourages institutions not to pay ransoms for business continuity reasons, they emphasize the importance of immediate reporting to maximize recovery chances.
6. Future Implications: The industry is moving toward proactive disruption based on real-time blockchain intelligence rather than reactive investigation based on late victim reports. The sophistication of transnational criminal enterprises, including those utilizing forced labor in overseas fraud compounds, requires sustained, deep collaboration between global law enforcement and the private sector infrastructure providers.
7. Target Audience: Cybersecurity Professionals, Financial Crime Compliance Officers, Law Enforcement/Government Officials, and Crypto Investors/Analysts interested in the nexus of national security, regulatory enforcement, and blockchain tracing methodologies.
Comprehensive Narrative Summary:
The episode chronicles the FBI’s nine-year journey from viewing cryptocurrency as a niche tool for darknet markets to recognizing it as an enterprise-wide threat vector. Deputy Assistant Director James Monaco detailed how crypto initially landed within the Money Laundering program due to its function in value transfer, but quickly expanded its footprint.
The initial FBI strategy focused heavily on education, deploying small teams to conduct “Cryptocurrency 101” training across field offices. This evolved into a more structured approach with the creation of the Virtual Assets Unit (VAU), co-locating experts from Cyber, Counterintelligence, and Criminal divisions. This VAU now manages the VCRT, a network of hundreds of field agents trained in blockchain tracing, acting as the central resource for the Bureau’s 2,500+ crypto-involved investigations.
Monaco highlighted the success against ransomware, emphasizing the FBI’s dual role as an intelligence and investigative body, which facilitates collaboration with intelligence agencies against nation-state actors. The success in recovering millions in ransom payments underscores the value of early engagement with victims.
The most pressing current challenge discussed was crypto investment fraud, or “pig butchering,” which saw reported losses surge to $5.8 billion. The FBI’s “Level Up” initiative exemplifies the necessary public-private synergy, proactively identifying and warning victims before they lose
🏢 Companies Mentioned
đź’¬ Key Insights
"I mentioned earlier, there was a hospital in Boston last year. They were being attacked. We got the data to indicate that they were being attacked, and we were able to go to the hospital, knock on their door, hey, here's what we're seeing, here's the code, here's what's out there. They were able to take mitigation efforts, and the attack wasn't successful."
"If you're in the space and you haven't spoken to your local FBI office, you should. Talk to the financial crime squad. Talk to the cyber squad. They will come out and talk to you about the threat landscape, the trends, and the typologies that they're seeing."
"The first real success story that I was part of was about 2019. An analyst came into my office, and he says, I've identified a wallet that some of the values being transferred. And I see people that have contributed money to that wallet. So, okay, what do you have? And so they identified where the people were located. And what our investigation revealed is these people were donating money to ISIS fighters."
"Because as you know, the vast majority of use of crypto is legitimate. It's not business; it's good business. We're just looking at the illicit use of it. That's all we care about."
"...thinking much more strategically, as you've sort of outlined a lot, is thinking macro-level about these threats and how to understand the entire supply chain and actually go after the money before you necessarily can get to the person."
"We created what's called, isn't known as IVAN, the Illicit Virtual Asset Notification System. And that is a group of government agencies and private sector partners that have signed a member in them, and we work together. What we do is we share dirty wallets."