Seize and Desist podcast

S&D E8 - The lasting impact of asset seizures

Author
Lo Furneaux
Marketing - Associate

“The speed at which this happens is faster than anything we’ve seen before.”

In this episode, Seize & Desist host Aidan Larkin is joined by Jarod Koopman, the Executive Director of Cyber and Forensic Services at IRS-CI.

As the only federal law enforcement agency to focus completely on fighting financial crimes, IRS Criminal Investigations has seized more digital assets than any other agency in the world. Aidan and Jarod discuss the secret to IRS-CI’s status as a world leader in digital currency investigations, the reliability of blockchain analytics data in court and the lasting impact of asset seizures on criminal behaviour.

Jarod shares his thoughts on the legitimacy of cryptocurrency transactions, the necessary compliance guidelines, and the parallels between Brazilian jiu-jitsu and cryptocurrency investigations.

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Timestamps

01:00 - IRS's Expertise in Cybercrime and Asset Seizures

05:30 - Unveiling the Success Behind Major Investigations

07:00 - Revolutionizing Transactional Analysis with Blockchain Tools

11:30 - Collaborative Innovation in Cybercrime Investigations

13:30 - Evaluating FATF's Effectiveness in Asset Recovery

16:00 - Balancing Privacy and Crime Prevention

19:30 - Explaining Cryptocurrency Mixers and Blockchain Laundering

20:00 - Legitimate Uses of Cryptocurrency Amongst the Illicit Activity

25:30 - The Impact of Asset Seizure in Fighting Crime

30:00 - Law Enforcement and the Evolving Digital Landscape

33:00 - Fostering Resilience and Innovation

36:00 -  Why Martial Arts Promotes Success in the Investigative Services

41:00 - Civil Forfeiture in Asset Recovery

44:00 - Validating Blockchain Analytics in Legal Judgments

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Resources Mentioned

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About our Guest‍

Jarod Koopman is the Executive Director of Cyber and Forensic Services at IRS Criminal Investigations and a black belt in Brazillian Jiu-Jitsu.

He joined the IRS directly after college, rising through the ranks to become the agency's first director of cybercrime. In this role, Jarod oversees all global operations involving cyber and forensic activities, including policy, procedures, budget and investigative services. He also oversees the operation of their new centralised Advanced Collaboration and Data Center (ACDC) which specialises in training and support for crypto compliance.

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Disclaimer

Our podcasts are for informational purposes only.  They are not intended to provide legal, tax, financial, and/or investment advice. Listeners must consult their own advisors before making decisions on the topics discussed.  

Asset Reality has no responsibility or liability for any decision made or any other acts or omissions in connection with your use of this material.

The views expressed by guests are their own and their appearance on the program does not imply an endorsement of them or any entity they represent. Views and opinions expressed by Asset Reality employees are those of the employees and do not necessarily reflect the views of the company. 

Asset Reality does not guarantee or warrant the accuracy, completeness, timeliness, suitability or validity of the information in any particular podcast and will not be responsible for any claim attributable to errors, omissions, or other inaccuracies of any part of such material. 

Unless stated otherwise, reference to any specific product or entity does not constitute an endorsement or recommendation by Asset Reality.

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Transcription

Speaker: Aidan Larkin

On a wider international basis, what sort of advice are you giving to the agencies that are trying to get from zero to one? 

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Speaker: Jarod Koopman

I think understanding you don't have to recreate the wheel. This has been done in other areas, reaching out and partnering. We realized that you should be collaborating. You have to rely on others because the transactions and the activity takes place all over the world. The speed at which this happens is faster than anything we've seen before. So you're relying on getting information at the same speed from other parties. So these countries, these law enforcement community players that need to to understand that you don't have to do it yourself, reach out to us, reach out to me to find ways that you can emulate what we've done. We're happy to partner with those countries to provide training, to provide resources, to try to get access to tools, find ways to identify potential fraud that's occurring in your jurisdiction. Because that's really the hard part. It's like, okay. We have all the tools. We have dedicated resources. Now how do we find the bad things going on so that we can attack that stopping and boarding out bad actors? 

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Speaker: Aidan Larkin

Hello, and welcome to Seize and Desist. I'm Aidan Larkin, your host and the co founder and CEO at Asset Reality. In this episode recorded on the twenty sixth of April, I'm joined by Jarod Koopman, executive director of cyber and forensic services at IRS Criminal Investigation in the United States. Jarod joined the IRS right after college and spent his entire career there rising through the ranks to become the first director of cybercrime. We hear about IRS CI being the only federal law enforcement agency to focus one hundred percent on financial fraud and learn that they've seized more crypto assets than any other agency in the world. Why is that? What is their secret sauce? What are they doing differently that other agencies can learn from? Or what success stories can they share that we can dissect, unpack, and try and implement that in various jurisdictions around the world? We also get his views on that actually seizing assets is one of the real deterrents for criminals in many cases and that crypto isn't the criminal that it's often painted as. It facilitates criminal activity and we have to remember that. We also discussed the BitcoinFog case and the reliability of blockchain analytics data in court? And finally the future of asset seizures. What will that look like, what's the role of web three, gaming and so many more topics. 

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Speaker: Aidan Larkin

Jarod, thanks very much for joining us today. This has been a long time coming, and when we always knew we were launching Seize and Desist podcast, you were very much at the at the sort of top of my list, to speak to because I think that you've pretty much unrivaled experience in all things seizing assets, seizing crypto, and having to do that on an international stage so welcome to the show. 

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Speaker: Jarod Koopman

Yeah, thanks, I appreciate it. Always happy to join Asset Reality’s activities and events somewhere in the world because you guys are top notch, so I appreciate it. 

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Speaker: Aidan Larkin

No. No. That's very kind of you. We had the pleasure, obviously, of talking about this a bit at the FATF panel on seized assets and sort of give me a bit of an insight into your world. But I would like to start off by people will know from, I'm thinking non US folks, now will have heard of the FBI, will have heard of these agencies. But admittedly, even when I was in HMRC, I knew I was aware of the different subsections within IRS, but I didn't understand. And then obviously when I started to get into this world, I realized, who the heck are these IRS CI guys? And why and how and all of this? Can you give me the brief, the one hundred and one on IRS CI and it's not just tax? 

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Speaker: Jarod Koopman

Yeah, absolutely. So IRS Criminal Investigation, we investigate violations of the Internal Revenue Code within all financial crimes, which is pretty interesting because our jurisdiction is very wide. We're the only federal law enforcement agency in the US that completely dedicates one hundred percent of our time to investigating financial fraud. So that can range from the traditional tax violations, which is certainly our bread and butter because that's we're the only agency that can do that, but that only makes up about fifty percent of our time globally. The other fifty percent starts to trigger into money laundering, terrorism financing, public corruption, identity theft, and then certainly cybercrime, which is what I've been focused on the last, you know, almost decade. 

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Speaker: Aidan Larkin

And how does that work then in terms of, like, jurisdiction? How does it get decided? Is that a sort of tasking thing? If a victim or a corporation or intel comes in and says there's this huge, huge financial crime case, how does it end up with the likes of yourselves or an FBI or someone like that or Secret Service? 

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Speaker: Jarod Koopman

Yeah. Sure. So typically, we have an, there's usually an IRS CI agent on almost every major case. Our specialty, our niche is working financial fraud cases and tracing the money flow, whether it's digital or traditional finance. That's what the backbone of our agency has been built on for over a hundred years now. But it's something that everybody brings their own skill sets to the table. Certainly, FBI, large agency, HSI, DEA, they all have great capabilities. Ours is focused on, you know, the financial trail and that and that money component. I always, give the example of a good drug case. Right? So we don't do drugs. We certainly help in those cases, but DEA brings their expertise in those organized crime and drug investigations. And then we support those cases and work alongside them by tracing the money flow and helping with that financial piece. So that's kind of where everything flows in. And to be honest with you, there's more crime than there is, you know, agents that works. We certainly don't have an ego here that, you know, we need to be taking cases. That's something that we try to collaborate with our federal partners to to really just work these cases as effectively as possible. 

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Speaker: Aidan Larkin

I am going to push the ego bit because, I mean, how and why? Like, what is the secret sauce? Why is it that? And I don't know if you can say I know it there's lots of cases in the public domain, but, by all means, like, how has the IRS CI become this, like, world lead? Do you guys seem to be just posting figures that are exceptionally beyond everybody collectively combined? I know you're gonna be very diplomatic. I get that there's lots of multi agencies involved. I get the fact there's lots of people on the ticket for a lot of these things, but clearly a lot of these are, you know, IRS CI driven cases. What do you think has been those factors? And where I'm getting to in all of this is how other agencies can try and emulate this sort of globally. But what for you stands out in the decades you've been involved as the reason? What are you doing right that you think gets you these huge, huge cases? 

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Speaker: Jarod Koopman

We kinda always break it down into three buckets, people, technology, and relationship or capacity building. Our people, first and foremost, I mean, starting back in 2013/14. We were engaged in the space with a full group, two full groups really around that time, and they were working the first cases of this kind. I mean, you were talking about digital currency in its truest form of, like, Liberty Reserve to then Silk Road to then BTC and some of those, like, foundational cases. Those cases set the precedent for it, and I credit it to our agents. I mean, our agents at that time were because we were financially driven and working those financial fraud cases, they were all in. They understood the complexity, the importance, and the future leaning aspect of crypto and digital assets at that time. They dove all in. You know, we kind of gave them the resources and they were off and running. This is prior to blockchain analytic tools, prior to the structure and support that exists today of really a wider audience that understands the complexities of the technology. So they really did that as like a homegrown grassroots revival. That they just spread that. And it's taken off in our agency as something that we're gonna claim to be the best financial investigators. It has to include crypto and digital assets. So they've all bought into that. 

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Speaker: Aidan Larkin

Gotta do the difficult stuff. 

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Speaker: Jarod Koopman

Yeah. Exactly. And then to add to that is technology. We invest in understanding the tech, being creative, being innovative, whether that's pushing to areas that most law enforcement agencies aren't even looking at yet. Gaming, a Web3, and the metaverse, you know, things like that that we as law enforcement usually wait until it's a problem right in front of us versus being a little bit proactive and taking those steps to gain knowledge in that area. And then lastly, capacity building. We've partnered very closely with industry leaders, academia, to really leverage what they're providing. You know, we understand we're not gonna be able to do this on our own. You know, we're we all are trying to learn the space, stay on top of the space, and that becomes very hard when limited resources, personnel, and you're trying to do a thousand other cases that are active. So, you know, it's one of those things we realize that it's a takes a village to kind of attack the space to stop the criminal activity. 

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Speaker: Aidan Larkin

So would you say it's fair to say then you're sort of seeing the ROI because you were brave enough? Because I can imagine from my own limited time in a law enforcement setting that sometimes it's just hard to get cases adopted and taken on. And I can only imagine what those conversations must have been like at least ten years ago now. They'd be saying, oh, yeah, we're gonna do this thing the blockchain and who's that and what's this and there's no tools and we're gonna do that. Would you mind giving me the simple version in the sense of, because I don't think that many people, unless they've read the books, everyone's heard about The Silk Road, everyone's seen the movie on Netflix, and they say knows things. But just to give, like, how that actually originated in IRS CI, because some of your guys the Silk Road story doesn't exist within IRS CI. 

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Speaker: Jarod Koopman

Yeah. And a lot of those cases, especially the early ones, it was the challenge of not only internally, because we had a support from our culture and our group and everybody else, but it was the next level. Right? It was making leadership understanding what we're trying to do here. It was convincing the US attorneys and Department of Justice of pursuing these cases and the impact that they had. I think we had some really great forward leaning attorneys as well. You had some pioneers in the space that were driving these cases and really supporting what we were trying to pitch. And without that, it wouldn't have gone anywhere. It required kind of this holistic government approach to kinda take down these criminals. And, yeah, it was definitely a challenge. I mean, I used to always say we're we're trying to build a castle out of toothpicks, you know, because we very little resources. You know? Nobody was giving us tons of funding, so we were trying to partner with analytic firms at very early startup stages, trying to just figure out how we could bring justice to these cases. 

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Speaker: Aidan Larkin

It is. And we often talk about the fact that they're not just crypto cases. I mean, so many people get sort of dragged into looking at these, whereas I'm right in saying one of the key things in Silk Road was the overall just the ossent around the case. It's like if you're a country that doesn't have all of the analytic tools, doesn't have all of the resources, it doesn't mean you can't be involved in these big sort of crypto cases or seizure opportunities or just working the case because a lot of the times there will be lots of I think he famously signed a blog post, like rossulbricht@gmail.com.

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Speaker: Jarod Koopman

Yeah. That's true. And I think you're hitting on a good point because, I mean, a lot of those cases were done before we had all these, you know, high-tech tools and monitoring, tracing capacities. What it's done, though, is just made it easier. It's made it more efficient. What used to take us so much longer to actually go through transactional details by hand, you know, doing, like, public blockchain research, you know, the block explorer and going through every tracing component now is done at the fingertips of entering a wallet address and boom, these analytic tools have kind of mapped out all the transactions through multiple hops. All that's changed drastically, but it is a good point that you could still do all of this without the large outlay of funding to big pools, personnel, and resources. But it does take work. You gotta be creative, and that's what speaks volumes to the personnel. There are very great investigators that are on our cyber teams that they get creative. They use open source tools, open source intel to really find those needles in the haystack. 

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Speaker: Aidan Larkin

And that sort of ties in quite well with the fact that you'd mentioned earlier on about the taking a village approach. And it's that combination of having the willing of because a lot of these cases, they would never see the light of day if you don't have people internally interested in doing it. And we all have experienced times when, you know, we can't get cases adopted and you've got people sort of pushing back On a wider international basis, what sort of advice are you giving to the agencies that are trying to get from zero to one and beyond? Maybe it's not even a tooling and a resourcing thing. What sort of advice are you trying to give people to is it just a bit of entrepreneurialism and they have to pitch to their bosses to go and allow these cases? How do you think they could do better? 

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Speaker: Jarod Koopman

I think understanding you don't have to recreate the wheel. This has been done in other areas. It's kind of reaching out and partnering. That's that capacity building concept. We realized that you should be collaborating. We've done it with in other areas, but one of the first times in my career, this has really broken down a lot of barriers that existed between collaboration internally, externally, internationally. You have to rely on others because the transactions and the activity takes place all over the world. The speed at which this happens is faster than anything we've seen before. So you're relying on getting information at the same speed from other parties. So these countries, these law enforcement community players that need to understand partner with those countries to provide training, to provide resources, to try to get access to tools, and to also find ways to identify potential fraud that's occurring in your jurisdiction. Because that's really the hard part. It's like, okay. We have all the tools. We have dedicated resources. Now how do we find the bad things going on so that we can attack that and show that ROI in terms of enforcement, in terms of seizure, in terms of stopping and boarding out the bad actors. 

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Speaker: Aidan Larkin

Do you think that the new FATF or the new standards that are we're expecting to see coming down the line now for the next three to four years, part of me tries to be a realist about it that, of course, it's going to be a good thing, but just how effective can it really be? Some of the biggest critics of FATF standards currently are former FATF staff saying that the entire world right now, there still isn't a single country that is compliant with all of the standards. So is it a case of the standards are wrong or ineffective? Or is it a case of one person even posed that maybe FATF needs oversight to check. FATF are checking people. What are your thoughts on the future direction of travel with FATF's new push on asset recovery? Is it a good thing? Do you think it's going to force people into action, or maybe should we sort of temper expectations about it? 

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Speaker: Jarod Koopman

Yeah, I think a combination of both. Anytime you have a regulatory aspect put in place, some type of potential enforcement in that front, guide rails that are set, you have more compliance. I mean, that's kind of known. So if the object is to have better compliance to stop potential criminal activity, that's going to help. But I think from a realistic standpoint, yeah, certainly, you're never gonna have full compliance. That's almost never going to happen. And you can't regulate your way out of that. It's always gonna have those actors. You're always gonna have personnel capacity issues that folks just can't comply or don't comply intently or willfully, and that's where we come in. So if you have guide rails set up and countries, service providers, entities are not complying willfully. Those are the ones we're gonna focus on, right? Because now there's a regime in place, there's standards that are set across the globe, and those that don't wanna comply with it will draw the attention of all the law enforcement community across the world to basically stop them. So it's really putting that small group that hopefully is small into a corner and trying to go after them that we can have that higher sense of compliance. 

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Speaker: Aidan Larkin

Yeah. You almost need to draw the battle lines. First to then figure out who's outside or or the guide rails. Speaking of drawing attention, and I appreciate some of these cases you may or may not be able to comment on, so just tell us. We'll skip on. I was reading a lot over the last couple of days and in a spectacular drawing attention to oneself and then getting the wrath of the global law enforcement was samurai wall, which for those that don't know, whether it was tongue in cheek or not, because I saw both sides. Now I'm starting to see on LinkedIn some people saying, oh, they were just having some fun when they were mocking sanctions and promoting circumventing sanctions by welcoming the Russian oligarchs to use their tools and services, and then pretty much being quite disrespectful about Europol. I'll not repeat the phrase, but let's just say they weren't particularly afraid of Europol coming after them. What do you think this sort of says for the future of mixers? Because I know it's such a big and I'd love to hear your own thoughts to the extent that you can share about this balance between the right and the genuine need or privacy versus those deliberate bad actors. I'd love to hear your thoughts on mixers and obviously whatever you could say on some, right? 

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Speaker: Jarod Koopman

Yeah, absolutely. So some great points because I think you're hitting on exactly the topic of this technology in general. Right? It's the balance of privacy to allowing bad actors, a platform to take advantage of it, and that's really going to be the focus. So this case underscored it. It was one of those very high profile, long standing obfuscation wallet service that provided kind of everything and anything to those that wanted to use it. And I think that's the line is that I support privacy in terms of your financial transacting, but not at the cost when it potentially bring about, you know, serious illegal activities. I mean, we're talking about exploitation, terrorism financing. I mean, if you're allowing that type of stuff to flow through your platforms, you're gonna have some major issues. So I think from a mixer, tumbling service, that area right now is drawing a ton of scrutiny because there isn't a lot of oversight in terms of, you know, that monitoring to understand the source of funds. If they can build in capabilities, I think that privacy would still remain a viable solution to proceed. But without deterring criminal actors abusing the platform, that's always gonna remain a high priority for law enforcement, for regulators because you can't allow that. You're opening it up to kinda wild west, what happens and what transacts on your tool. Specific to the samurai wallet and the owners, I mean, you're talking about two billion dollars in unlawful transactions over time. 

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Speaker: Aidan Larkin

It's not two kids in a basement. 

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Speaker: Jarod Koopman

Yeah. Right. So you're talking about some significant funding that the problem is you don't know what that's being used for. It range from all those kind of criminal activities I talked about to just somebody wanting to use privacy to transact. And without knowing that delineating between the two, that that's very tough. But over a hundred million dollars, you know, laundered, so that's specifically identifiable to criminal activity. So you're talking about really significant amounts there that we have to be cognizant of. This was a big issue. I mean, we just came off of the Bitcoin Fog investigation, which had some really great Yeah. 

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Speaker: Aidan Larkin

That was my next question. 

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Speaker: Jarod Koopman

Yeah. That was another great example of a wide open platform that was allowing, you know, or service that was allowing legal activity and actually promoting the use of their service on darknet marketplaces similar to Helix. I mean, the list goes on and on. You see this repeated pattern of…

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Speaker: Aidan Larkin

…because it's profitable? 

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Speaker: Jarod Koopman

Yeah. Yeah. If they're making money, we don't care. Right? And to the extent that you proactively are allowing illegal activity that you know is illegal to basically use your platform and your service to to circumvent. That's the problem. That's the line in the sand that we have to control. 

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Speaker: Aidan Larkin

So that's really useful. Let me one of the themes of this podcast is around keeping it simple. And one of my favorite speakers, Simon Sinek, always talks about being the idiot and asking the questions that many people don't want to ask. And you and I have seen this on panel sessions where you know there are people who they won't put their hand up, but afterwards they'll come and say, look, this isn't my lane. I don't get a lot of this stuff. And the same way, I don't understand digital forensics or programming or coding. So can you give the for those that don't know, the one on one on mixers and tumblers. And you made a really important point there, and I wanna hit on this illicit figure, the very contentious blockchain sort of what's illicit, statistic. But you'd mentioned that they know it's illegal. How do they know it's illegal and how does a mixer work in general? 

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Speaker: Jarod Koopman

Well, first, mixer and tumbling services operate by bringing in cryptocurrency and bringing it into usually a reserve that they have or clean funds that they have in the same crypto and doing an exchange. And on the back end, they're sending that fund back to the individual where it's now not 

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Speaker: Aidan Larkin

So who's stuff that is getting mixed or exchanged with? 

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Speaker: Jarod Koopman

The owners of that service. So it could be a wallet provider like Samura Wallet. It could be an actual service like Helix or Bitcoin five, where they're only set up to mix the funds. In Samurai Wallet, a little bit different. They control the wallet, which then provided these services within the wallet. I think they called it they have a Whirlpool and a Ricochet. Those were the two services that could basically mix the funds and then kick out on the back end clean funds, which aren't tied to your original source. That transaction is basically laundering on the blockchain. That's all it is. I mean, you're literally mixing it up to then kick out clean digital assets or crypto on the back end. 

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Speaker: Aidan Larkin

What are some of the legitimate reasons that you've heard why people would do because I imagine that these aren't cheap in terms of transaction fees and incredibly risky that they could just not give you the money back or get hacked. 

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Speaker: Jarod Koopman

Absolutely. Yeah. And there's definitely a trust factor there. And these companies exist because they've probably been in business for seven, ten years operating on dark net marketplaces, building credibility. But, yeah, the fees are, they can range from, I think, like, two and a half percent in Helix up to ten percent. 

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Speaker: Aidan Larkin

And for those that don't know, that's not market given that most people are paying, like, point something of a percent at a well known regulated exchange. 

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Speaker: Jarod Koopman

Yeah. And as far as legitimacy, I mean, other than privacy and not wanting to share, you know, your kind of transactional information for not wanting your information publicly known. And I've also heard of whistleblowers, you know, trying to, transact to be able to not have that information shared to protect their identity, you know, and things like that. 

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Speaker: Aidan Larkin

It's the same with like, I've heard of political donations and funding war, but these are exceptional outliers. I often think of the example, it's like if I'm driving down the motorway, the freeway, and I have a wife that's in labor or a parent that's having a heart attack and I have to break the speed limit, that's the one time that the judge might say, do you know what? On this occasion, I'm not going to or the prosecutors aren't going to take a case. Has it been proven before? Have you seen even anecdotal in the public domain? Are they using, like, transaction monitoring tools in the sense of anyone just comes in and sends in the transaction? Or is it allocation of the fact that the attribution on what you're saying, they know it's a list? It's because it's on a dark net website is where they're accessing and advertising their services. 

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Speaker: Jarod Koopman

So I think, the cases that we pursue, there's completely nothing in place. I mean, they are wide open to allow this. And now they are in environments like dark net marketplaces for that reason. And, you know, it just adds to the intent of the owners and the service to just allow anything to come through it. I mean, they are 

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Speaker: Aidan Larkin

They just don't have transaction monitoring at all? 

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Speaker: Jarod Koopman

No. Not at all. They are blatantly open about, we we will open this up. I mean, they messaged us on darknet forums and on boards that you have illegal income. This is the way to do it and use our service because they wanna make money. And that's kinda what it comes down to. 

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Speaker: Aidan Larkin

It is crazy. And I suppose when people then make the comparison, then you don't have to be a crypto expert to understand. If I said to you, I have a hundred thousand in US dollars and I want to change those to British pounds, You wouldn't expect there to be a single institution in the world that wouldn't ask to see your identity information or ask to see something. And I think you've hit the nail on the head. It's this balance. But I hate to quote Gary Gensler, but I do agree hypothetically that all industries have to have guide rails as because you have seen and I have seen an unlimited version that if you leave these gaps it'll get exploited and it won't be the person running for their life, it'll be the person who's engaged in child exploitation cases. It's the welcome to videos of the world. It's the people that are trying to hide the proceeds of their ill gotten gains to then on ramp into the legitimate economy. And on that point, cases like welcome to video, I think that was a great reminder of one such an important case, but that these just aren't crypto cases, just a digital asset being used as a means of payment. But could you give us a bit of a just a reminder for those who don't know? 

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Speaker: Jarod Koopman

Yeah. Sure. So probably one of the most impactful cases in CI history and something that highlighted that the exact point that you're making is that, you know, the realization that crypto is used as a means of the facilitation of this. It's not that crypto is illegal. It's not that the crypto itself is the bad aspect. It's that these criminals use it as the medium of exchange. And in Welcome to Video, you have a darknet marketplace that was one hundred percent focused on child exploitation and one hundred percent dealing in cryptocurrency as their means of transacting. They were selling and buying and posting child exploitation material, CSAM material for global consumption. And it was the largest darknet marketplace involving this activity. The I think at the time, I think still, ICMEC and NCMEC, you know, the National Centers for Exploited Missing Children, said it was the largest consolidation of videos and material in history and new material than videos, which is astronomical. But case that CI worked solely and then, with some of our foreign partners, brought in others to assist just based on the magnitude. We ended up seizing significant amount of money in that case, I think around a million dollars, but then also seizing the servers of all that material, taking down the admins and the vendors associated, and then went after all of the individuals that are using that platform globally. So we partnered with our global law enforcement partners. And I think last time I looked, it was up over probably approaching four hundred arrests worldwide, you know, and just taking down some of these criminals. 

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Speaker: Aidan Larkin

So you're able to get the actual offenses there, but, obviously, the financial fraud element from IRS CI is those that are operating the service and doing so for a profit as well.

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Speaker: Jarod Koopman

Yeah. So those that are benefiting, those that are taking advantage of it, but then also the users. I mean, this is the heinous time, one of that, you know, we can't allow to continue at anywhere. So it's one of those things that we attack from all ends. We try to take down the admins, shut down the server, but then you can't forget all these people that are conducting. 

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Speaker: Aidan Larkin

And you've all that data? 

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Speaker: Jarod Koopman

Yeah. They're gonna bounce somewhere else, you know, and use a different platform when it pops up. So it's trying to really have a global wider impact. 

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Speaker: Aidan Larkin

If you like you say, it is something that the team should be genuinely proud of because those cases, like, it's it is impossible to measure the impact on those cases, but it's very clear the positive impact that has been taken one time. But I sadly believe that it's the whack a mole. And that is that's the rat race. That's the job that you signed up for. 

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Speaker: Jarod Koopman

Bringing that back to the seizure component, if we don't take down these criminals and strip them of those proceeds and those ill gotten gains. All you're doing is lopping off the head of the snake and another one grows. Right? It's they will move to another platform or those criminals will see it as a cost of doing business. Okay. I'll get arrested. I'll do my time, and I come out, and I'm a millionaire. Right? So we have to understand the economy at play and why they do this, going back to the mixers and tumblers. It's to make money. And if we're not stopping them from making money, they will continue, and they will continue to profit and be creative in their business op. 

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Speaker: Aidan Larkin

It's something we discussed at length, if you remember on the FATF panel, this was the importance that asset seizure plays. And in the US, that's obviously been a very hot topic around civil forfeiture, non conviction based forfeiture. You've just sort of alluded to it, but perhaps just to to give it its own section to dive into, as someone who's been a practitioner in this front for so long and involved in such a broad range of cases, I've certainly seen money laundering cases and criminal investigation cases and prosecutions that the asset seizure part wasn't really a key part. But just give us your thoughts on just the role of asset seizure. What's the four D's? Denying, depriving, dismantling and deterring, and the impact that actually has. You'd alluded to the cost of doing business a little bit. Just how important is asset seizure in the overall sort of fight against crime? 

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Speaker: Jarod Koopman

Yeah. This is, it's huge to our agency, but also to all law enforcement, and it should be a priority. And I think it gets lost sometimes on the folks that are working these cases that they're super focused on holding somebody accountable, finding the criminals and locking them up and getting that big splash. Right? And that's great. It is big, big component of it, but you have to kinda continue to follow through on that because to that point that if you just do that, they're able to come out and have millions of dollars sitting in some account or assets all over the world. You had no deterrent effect. They will continue to operate. They will continue to show that criminal activity pays. From our standpoint, again, going back to our job, financial investigators, we kinda run that gamut of following through the financial trial all the way to the end. We wanna know where that money was spent, housed, what assets were purchased because that's all going back to that criminal activity. So a real efficient investigation should go that entire debt and then seize, you know, those funds. And that is always a priority on our mind from day one was we know we have a large criminal enterprise. Can we take them down, and can we seize everything they profited from that? Because that's gonna be the real impact. That's gonna be the real deterrent fact. We've had cases where the criminal themselves are crying or telling us that they don't mind going to jail, but they just didn't want all of their assets seized, you know, because that's their win. 

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Speaker: Aidan Larkin

Take me, not the speedboat. 

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Speaker: Jarod Koopman

Yeah. That's right. 

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Speaker: Aidan Larkin

Right. It's fascinating because I remember seizing assets in the UK, and you would see, you know, the neighbors peeking out the window. And you can see the sort of the sense of satisfaction that the same sort of the kingpin, the mister big that lived in the mansion with the speedboats and the jet skis and the big vehicles and the holiday homes and no legitimate income. And that's the bit that gets the attention. That's the bit. I think if you think of it like a startup, you need to deprive them of their capital. Otherwise, it's just as you say, someone else takes over, they're reinvested, the cost of doing business isn't high. What is the future of this? You'd alluded to Gamify, for example. I mean, you guys have been very good at future gazing and making a bet in 2014. We need to look at this more. I appreciate we can never be certain. What do you think, like, an average IRS CI portfolio could look like in five years, ten years' time? What do you think the seizure landscape? Like, what are we going to be going after? Are we going to be in our Oculus headsets chasing people around the metaverse or actually seizing digital tokens that could be everyone right now with a meme coin? These are the future potential millionaires in another five or ten years. 

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Speaker: Jarod Koopman

Yeah, that's a great point, you know, and it's, it's funny because I mentioned that almost the same verbiage on other things. And you'll get a little chuckle out of people about the oculus wearing agents and but we are dead serious. You know, we are very focused on the future of where the space is going. And again, it might not be mass scale where you have all society using these platforms, but that's not who we're after. Right? That's why the guide rails will be in place from a regulatory standpoint to take care of all of those, the society as a whole. 

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Speaker: Aidan Larkin

You're going after the outliers. That's exactly it. They're not the normal cases. 

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Speaker: Jarod Koopman

That's right. And we'll still have cases that come from the formal regulatory space because criminals will be criminals. They'll try to do something, and it will get caught. But the outliers are gonna be those ones on gaming industries and, you know, the metaverse, setting up digital stores and digital footprints to be able to kinda operate in more of that DeFi space. And we do see that as kind of the next wave. We are focused on that area. It's something that we think is potential for exploitation because there isn't a lot of understanding, lot of guide rails, a lot of monitoring, and it's open to a lot of individuals being involved that could have ill intent. From a gaming perspective, I think it also brings in a lot of things we talked about. Nowadays, I mean, you have, criminals that are talking with smaller children on these gaming platforms, so you're opening a potential up for child exploitation. You have criminal enterprises in different countries for sanctions activities, for terrorism financing. You have secure chat channels. You have the ability to hop between games using different tokens in a seamless manner. I mean, it is really creating an environment that is tough for law enforcement and others to monitor and to really enforce. So we are focused on making this a mission for us to make sure that it doesn't become the next area that is exploited. 

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Speaker: Aidan Larkin

And I think exploited is a great point to anchor that on because it is the area that always raises a bit of a chuckle with people, and they think it'll never be that thing. And I know that if I was a criminal, well, that's exactly the place I'm going to exploit because I know it doesn't have the attention that it deserved. And I think it's only when and that's why you guys deserve a lot of credit. It's only when you jump into it and you get your eyes opened and you realize, how can you investigate a criminal who uses a particular system if you don't understand 

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Speaker: Jarod Koopman

That's right. 

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Speaker: Aidan Larkin

That system. I remember someone giving us the example around new methodologies for sort of smuggling drugs. Well, no. The cartel used to use planes, and then they used to spot the planes. And if you just said to someone thirty or forty years ago, oh, no. They'll build mini submarines and be moving the stuff around with mini submarines. But it took some people with sort of naval and maritime experience to start tracking the invoices of the spend and go down the rabbit hole of going, why are they buying this sort of equipment? It is the, it's always the absurd stuff, and it's only absurd until someone debunks it and demystifies it. Do you think that the methodology still stays the same though? I mean, I was just talking at a conference yesterday about the fact that behind all of this complexity, whether it's a DAO or it's a DeFi platform of some description or it's a token or it's some new metaverse sort of that is a cover for a scam. In these criminal cases, there's still a person. Until we have sort of sentient AI committing fraud, there's always a person or a gang or a thing underneath. How do you think about the next batch of recruits coming through? How do you stay resilient and make sure as people are retiring, people are getting new jobs in the private sector and moving on? How do you keep people sort of enthused into that? So did you just have this, like, class of 2024 mentality? We had a bunch of rock stars, but, oh, you guys are repeating success. How do you keep that formula up of new people coming in as enthusiastic in spite of you always having a bit of an Everest in front of you of, you know, fighting against very well funded criminals? 

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Speaker: Jarod Koopman

Yeah. It's a great point. I mean, we have certainly have challenges in government. You know, we're competing with private sector, but we don't look at that as a detriment. I think we find those folks that have a drive to really have more impact, Right? To have that impact that for love of country, for love of the right thing, they have a little bit different drive, which makes them really dangerous. Right? It makes them really good at their job because they're driven by something much more than just money. And when we have that, we have folks that are really focused on pushing the space, coming good at their craft, and we've repeatedly tried to tap into those folks, whether it's recruiting at different venues, whether it's identifying those people that really have an interest in the space for the right reason, and then giving them the tools, setting them up for success. You can't just bring them on and be like, “Hey, have at it”. You know, it's one of those things where you have to… 

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Speaker: Aidan Larkin

You're making a contract with them. They'll come in here with enthusiasm. We will give you the cases and give you the tools. 

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Speaker: Jarod Koopman

Yeah. We're not looking for someone that has knows everything about the space. That's almost impossible. It's your interest in the space. Maybe you have a background in it, but you have that mindset, that growth mindset that you wanna come in and we're gonna feed you tools, the resources, capabilities, and then let your innovation, your imagination kinda run to figure out where we should be focused. At the same time, we have our priorities on what we wanna attack. And then building a culture, I think, internally where these great cases are continuing to develop, continuing to be work. There's almost like this internal sense of pride and competition amongst our group that, hey, who's gonna work the next, you know, three billion dollar seizure? Who's gonna work the next case that is the highlight of the year? And then partnering certainly with private sector to get the trainings in these really unique areas. Right? We try to reach out and find those folks that have expertise in metaverse, in DeFi protocols, in smart contract, and say, “Hey, we wanna tap into your knowledge. Teach us”. You know, because we need to know. 

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Speaker: Aidan Larkin

Well, I think probably the industry will tell you most people are afraid to say no to you because you're a black belt. 

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Speaker: Jarod Koopman

Yeah. My best, I mean, I have, I've trained a couple times with Royce Gracie, you know, on different hats. Yeah. I had him sign my tie, I think I was a blue or a purple belt. I had him sign my belt. Actually, I had them sign UFC one on VHS. I have the original VHS. 

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Speaker: Aidan Larkin

Nice. 

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Speaker: Jarod Koopman

Yeah. I know. I know. I was like and it was funny when I was doing it, I had a couple younger students behind me that were asking me what it was. They're like, what is that? And I'm like…

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Speaker: Aidan Larkin

It's a large stick of plastic? 

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Speaker: Jarod Koopman

Yeah. They're like, what do you do with it? And I'm like, you play it. A VHS. They've never seen a VHS. I was like… 

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Speaker: Aidan Larkin

I used to have that as a desktop, like, screensaver. It's a lest we forget, and it's a picture of a VHS, a cassette tape, and a three and a half inch floppy disk. Yeah. They're all holding their hand, all submural. It's like that's true. People just look at it and go. Yeah. The change of digital forensics. That's more how do how do you think your sort of extracurricular activities have helped your mindset? Because we're always talking about how to build resilient asset recovery teams and how to I mean, we're trying to tackle this one percent. It's not easy. You've summarized it very well that you need willing people. You need that from a leadership standpoint for your counterparts around the world, the people that are trying to build similar teams. Could you share some of your experiences on how that's so I'm sure you've had some long hours and sort of early days where you're sort of thinking, how do you tap into and have the energy to still be so enthusiastic for this fight? 

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Speaker: Jarod Koopman

Yeah. I think part of it's a personal that growth mindset going back to I talk about this a lot, you know, and it's something that you just have to have that drive internally to continue to grow. I think for me, I just found a passion in that area. It challenges both my mind and physically to a point where you're never gonna learn everything in that space. You're always gonna have somebody better than you. And that is the hard part to comprehend, but then to, it's what feeds your motivation to continue. And, you know, it's pretty cool. I just found out another agent in CI is also a black belt, which makes our fourth in CI across the country. So we're developing this little Wow. 

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Speaker: Aidan Larkin

So this is the secret sauce if you’re building a team…

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Speaker: Jarod Koopman

Yeah. It might be. It might be. But it's a uniqueness that I think we get a lot of folks drawn to that sport that have very unique mindsets. They are driven by this, like, intellectual. It's funny that I say that because it's more about the mindset versus the physicality. The mindset is one that people come in, they're thirsty for knowledge, they want to expand their capabilities. And it, but it's also knowing that there's never an end in sight. Been training twenty plus years, and it's like, you will continue to grow the rest of your life and never have the understanding of the space. And that's kinda what the interesting aspect is, and I equate it to digital assets. You know? 

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Speaker: Aidan Larkin

It's like education and academia. Like, you're never gonna go, I'm dumb now. I've learned everything in the world. Right. I know everything. I'm good. I have all the knowledge. That's so it goes back to my where the Simon Sinek reference his book, so to start with wise, is one of my one of my favorite books. And he talks about having that, you know, to inspire people along on a challenge, you need to have a North Star. And he says, it's called a North Star for a reason. It's not because of the direction. It's because of the distance. You're never gonna reach it. It says, for those people that are truly committed to something, your target needs to almost be unreachable or almost unreachable in your lifetime. We are never going to see a day in our lifetime that we solve a hundred percent of the asset recovery cases. Knock off all the criminals and seize all the assets. But if we know that doing it as part of our lifetime, we move the needle in the right direction and just map out a little bit more of the playbook for the next wave. I think attracting people to that sort of mission is a particular type of person that wants that. And I think that obviously Brazilian Jiu Jitsu as well. Like resilience, if you're in the middle of an armbar and sort of reflecting on things, that must be quite similar to some of the challenges you guys face in these sort of in these cases. Yeah. And creativity. Chest match? 

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Speaker: Jarod Koopman

You can hit walls. Yeah. You hit walls, right, that you're stuck. You're in a bad position. You're in somewhere that doesn't feel like there's any out. And just like our cases, you find ways to where can I go? Where can we try to make attribution? How can we get creative to use the tools we have or the information available to really uncover these criminals? So, yeah, it's kinda that interesting similarity. 

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Speaker: Aidan Larkin

So, basically, the takeaway point, the too long didn’t read is basically just, you know, go and hire black belts only for your, for your team. 

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Speaker: Jarod Koopman

That's right. 

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Speaker: Aidan Larkin

For those that can't hire those, what do you think the future looks like with, you know, elections aside? There has been this battle raging. We spoke to Amanda Wick just a couple of weeks ago and talked about that in the US in particular, non conviction based forfeiture is a very, very hot topic because of alleged abuses of process. Now as a big asset recovery advocate, I would not throw the baby out with the bathwater. And the example I'd given to a man, there was that for the terrible times that innocent people have been locked up or incarcerated, we don't say you shouldn't lock anybody up anymore. For those that don't know, some of IRS CI's biggest seizures and some of the biggest crypto cases in the world were actually civil forfeiture was the mechanism for which you took those assets. Could you talk a bit about IRS CI and sort of civil forfeitures being useful for you guys? 

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Speaker: Jarod Koopman

Yeah. Absolutely. So IRS CI has been the forefront of this for many years. It's in our jurisdiction of asset forfeiture recovery. So we've used going back to traditional finance and traditional crime cases and civil forfeiture, criminal forfeiture, they're always a component of what we can use to seize funds anytime it's involved in any illegal activity. Problem is is that sometimes you get program areas that are focused on, you know, a civil aspect that could be, you know, one that is contemplated as, you know, whether it's really criminal in nature or whether it should be subject to civil forfeiture. And I think the idea is making those adjustments quickly, you know, understanding that if that is an area that shouldn't be focused on or that the government as a whole wants to remove, I think to your piece, you don't throw out all of them. You need to then shift gears to focusing on the areas that we need to be in. Over the years, I mean, since 2020, you know, we've seized about eleven and a half billion in cryptocurrency, and, you know, those cases primarily are tied to investigations, criminal investigations. So we're working in criminal investigation. Sometimes the forfeiture is done as either proceeds of that crime, as evidence of the fraud, but other times it can bring in, you know, the civil component, civil seizure aspects to be able to act to really get our hands on those funds. With that comes a big responsibility. Right? Because we have to do those seizures properly. We have to understand the impact that that's causing because they can be case precedent setting. They can really blame the groundwork for what follows, and that's a challenge. I mean, we tend to really focus efforts on criminal seizures in our work, sometimes depending on when that information is available, the status of the criminal case at the time, you know, where we are in actually making attribution and holding somebody accountable, that's not always feasible. So we have to use the means that we have available. And if it's the wrong thing to do, we will also own that and make sure that we, you know, rectify it, giving funds back to the individual, stopping those type of program areas. It does happen and it changes with the legal landscape, but we always try to do the right thing for the right reasons. 

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Speaker: Aidan Larkin

Again, it's the fascinating thread here that we're getting from a BJZA point of view. It's the agility. Yep. It's being able to actually say that particular way isn't working that direction of travel. And obviously, for those that don't know or need reminded, IRS probably has no the most famous, no use of criminal to civil case in history with Al Capone. Yeah. Team I used to work in the criminal taxes unit. We famously had our tagline to, like, ministers or when the organization was being set up in HMRC was the Al Capone effect. If you can't get them on criminal, get them on civil. If the alleged drug dealer also claims his profits are from his car wash, let's prosecute him for not declaring his business and paying his tax. So I love that, and I think everything I've heard from you today is just about going in sort of bravely into these new cases, dealing with the facts that are in front of you, being agile and nimble in sort of decision making. But recruiting the right people with the right mindset allows you to sort of future proof in terms of recruitment and hiring as well and having that team. The last thing I just wanted to ask you because it's so relevant, and I think a lot of people still don't understand the significance of the BitcoinFog and that judgment. A lot of mudslinging in the press. There was a lot of talk about, you know, what this meant for blockchain analytics as a whole. I think a lot of people don't understand necessarily the Daubert test and what those things mean. From your point of view, how important is that particular decision? What effect should that have going forward, in your opinion? 

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Speaker: Jarod Koopman

It's a great segue. So, yeah, very interesting case. So for those not familiar, defense raised arguments that blockchain analytics, specifically in that case, was associated with the Chainalysis Reactor platform. And some of the information and analytics completed in that, along with the expert testimony, was basically should not be included that I think they called the blockchain analytics as junk science. You know, this is something that can't be relied on. Good thing for us is that, based on that decision, they ruled in favor of the government and against the defense, stating that blockchain analytics is a valid, scientific proven method for the analytic portion of tracing those funds. And we've been very judicious in the way that we attack that in terms of making sure that we go through and understand attribution, that we understand data, that we understand heuristic modeling and how they're actually coming up with those attributions because that's really what's driving the information behind it. And in terms of for us specifically, we don't we don't hone in on one tool. We use all of the tools. They all have great attribution data. They all have great capabilities, and we understand that we want to leverage that as a whole from industry and then mix that with the other data that we can find throughout our investigative efforts through open source intelligence. So what it has done is it's kinda laid that groundwork that blockchain analytics is here to stay. Monitoring transactions is a must do in these type of cases if you're gonna show good faith that your your business, your entity, your service provider, your wallet, whatever, is actually stopping any known illegal activity.

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Speaker: Aidan Larkin

And I guess that that is a good point for us to sort of wrap up on is that all of this technology, all of these things that we have, there's kind of no reason why companies, if they wanted to try and develop some sort of privacy enhancing solution, Just make it compliant with the laws of the jurisdiction and, you know, don't don't sort of poke the bear. Jarod, thank you so much for your time. I appreciate how busy you are and for sort of helping debunk a lot of these things. I think that I will probably see a large rise in sign ups to gyms as police chiefs all around the world will start recruiting black belts to tackle crypto and asset recovery. 

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Speaker: Jarod Koopman

Absolutely. Yeah. Thank you very much for having me, and always great talking with you. 

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Speaker: Aidan Larkin

Thanks again. 

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Speaker: Aidan Larkin

I'm very grateful to Jarod for sharing his time and insights with us and I would encourage you to follow IRS Criminal Investigation on LinkedIn. They've truly been at the cutting edge of best practices in asset recovery, especially involving digital assets for some time now. And there's a lot of great insights and regular cases that they share. So that's definitely one you don't want to miss out on following. If you've enjoyed today's conversation please like and subscribe to Seize and Desist podcast on whatever platform you choose to listen to. And also leave a comment and any suggestions for future topics you would like us to discuss or guests that you would like to see on the show. Next time, I'm joined by David Carlisle, vice president of policy and regulatory affairs at Elliptic and the author of the book The Crypto Launderers. We discuss cryptocurrency policy, the intersection of crime, technology and finance as well as his incredibly interesting and informative book. It's a walk through the use of crypto and money laundering with a phenomenal timetable of all of the exciting cases and insights into them. A must read for anybody in this sector. Until next time and as always thank you for listening. 

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Speaker: Lo Furneaux

Our podcasts are for informational purposes only. They are not intended to provide legal, tax, financial, and or investment advice. Listeners must consult their own advisers before making any decisions on the topics being discussed. 

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