D2 is the target and exchanges can provide identifying data taken during the onboarding processes (anti-money laundering and counterterrorism financing checks) including passport information and email addresses. Even questionable information (I have seen 123[expletive]@protonmail.com), is useful.
Vitally, this identifying data allows D2 to be served with the claim and kick starts the formal process.
Role of crypto exchanges
Despite mixed reputations, crypto exchanges are often open to helping victims of fraud, namely because it builds sector confidence, improves their reputation and avoids time-consuming and costly legal proceedings.
However, there are instances where exchanges are registered offshore, claim to be decentralised, or simply fail to reply to requests.
Debate reigns on whether crypto exchanges owe a duty to consumers where they are on notice of fraud and allow a withdrawal, and a formal duty may mitigate risks in the future and compel exchanges to act.
In any event, market pressures ensure customers, including organised criminal gangs, are attracted to the reliability, ease and stability of trusted exchanges.
Service and recovery
Once the individual has been identified, they then must be served with legal documents and victims can rely on the crypto exchange’s disclosure: email and physical addresses.
However, in certain instances exchanges fail to onboard customers properly and no data is available. Here, parties can still be served documents via non-fungible tokens (NFTs), a process ratified by the courts utilising blockchain technology.
In addition, information gathered via intelligence agencies, as well as published data on the dark web following a hack, or proprietary software to identify individuals, can assist, starting with very few breadcrumbs.
Investigators are also able to review open-source intelligence, social media sites, those behind websites, and gather clues via geolocation of account access.
In most cases, D1 and D2 do not respond, given bad actors’ resistance to open court procedures. This usually results in an on-paper win for victims.
Next is getting the funds back. In the instance there are funds at the exchange, court sanctioned processes allow for the repatriation of those funds, whether in crypto or fiat currency.
In the event exact funds are not in the account, victims are often entitled to compensation on a restitutionary basis. There is usually a clear link between D1 and D2, so any funds associated with either are fair play.
Intelligence plays a key role in identifying potential assets; firms like GreyList utilise big data to determine whether email addresses are registered at banks or exchanges, so more funds can be located.
Centralised token issuers
Importantly, in instances where there is a centralised token issuer (tether, for example), there are alternative processes. If the funds have not reached a crypto exchange and are instead sitting in a private address, blacklisting the address with a token issuer’s assistance can freeze assets by preventing withdrawals.
