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Of degens and defrauders: Using open-source investigative tools to investigate decentralized finance frauds and money laundering
Trozze,A. Davies,T. Kleinberg,B.
Trozze,A.
Davies,T.
Kleinberg,B.
Abstract
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/).
Description
Date
2023
Journal Title
Journal ISSN
Volume Title
Publisher
Research Projects
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Journal Issue
Keywords
Cryptocurrency, Decentralized finance, Ethereum, Fraud detection, Money laundering, SDG 10 - Reduced Inequalities, SDG 17 - Partnerships for the Goals
Citation
Trozze, A, Davies, T & Kleinberg, B 2023, 'Of degens and defrauders : Using open-source investigative tools to investigate decentralized finance frauds and money laundering', Forensic Science International, vol. 46, 301575. https://doi.org/10.1016/j.fsidi.2023.301575