Analysis Of Prosecution Of Cryptocurrency Fraud Using Blockchain Evidence
Case 1: Shakeeb Ahmed – DeFi Smart Contract Exploit (USA)
Facts & Charges:
Shakeeb Ahmed, a security engineer, exploited vulnerabilities in two decentralized exchanges in 2022. In one exploit, he manipulated smart contract pricing data to withdraw about $9 million in cryptocurrency. Weeks later, he executed a second exploit for $3.6 million. He was indicted for wire fraud and money laundering.
Blockchain Evidence Use:
On-chain records traced the manipulated fees and token resales.
Wallet addresses were linked to his identity through transaction analysis, device logs, and communications.
Laundering steps were tracked across chains, including Solana to Ethereum bridges and Monero mixers.
Outcome:
Ahmed was sentenced to three years in prison and required to forfeit the stolen cryptocurrency (~$12 million).
Significance:
Demonstrated blockchain forensic analysis can trace even pseudonymous transactions.
Set precedent for prosecuting smart contract-based DeFi exploits.
Case 2: Rowland Marcus Andrade – Fraudulent Token Sale (USA)
Facts & Charges:
Andrade, founder of “AML Bitcoin,” raised millions via a token sale by falsely claiming partnerships and technology. He diverted $2 million to personal purchases and luxury items. Charges included wire fraud and money laundering.
Blockchain Evidence Use:
On-chain transactions linked investor payments to Andrade-controlled wallets.
Further tracing connected crypto withdrawals to real-world asset purchases.
Outcome:
Found guilty by a federal jury in 2025 and sentenced to restitution and fines.
Significance:
Shows how token sale fraud can be prosecuted under traditional fraud laws using blockchain as evidence.
Demonstrates the combination of on-chain analysis with traditional financial tracing.
Case 3: Roman Sterlingov – Bitcoin Fog Mixer Operator (USA)
Facts & Charges:
Sterlingov operated Bitcoin Fog, a cryptocurrency mixer, laundering hundreds of millions of dollars of illicit crypto. Charged with money laundering conspiracy and unlicensed money transmission.
Blockchain Evidence Use:
Experts traced funds entering mixer wallets and exiting to other addresses or exchanges.
Wallet clustering techniques and co-spending heuristics identified patterns consistent with the mixer operation.
Outcome:
Convicted in 2024; assets linked to the laundering scheme were seized.
Significance:
Confirmed that mixer services can be traced using blockchain analysis.
Expert testimony on blockchain forensics became admissible evidence.
Case 4: Sam Bankman-Fried – FTX Collapse (USA)
Facts & Charges:
Founder of FTX, Bankman-Fried, was indicted for wire fraud, commodities fraud, and securities fraud after misappropriating billions of dollars from customer deposits.
Blockchain Evidence Use:
On-chain transaction records demonstrated the flow of customer funds to Alameda Research accounts and executives.
These records were combined with internal emails, trading logs, and accounting data.
Outcome:
Found guilty in 2023 and sentenced to 25 years in prison.
Significance:
High-profile case showing blockchain data complements traditional records in corporate crypto fraud.
Reinforced accountability of exchange operators.
Case 5: Wen – Ethereum Arbitrage Scam (China)
Facts & Charges:
Wen persuaded victims to buy Ethereum with promises of arbitrage profits and then transferred the funds to personal wallets, disappearing with the funds.
Blockchain Evidence Use:
On-chain transaction data proved transfers from victim wallets to Wen’s account.
Court recognized cryptocurrency as property subject to fraud laws.
Outcome:
Sentenced to 4 years in prison and fined; appeal rejected.
Significance:
Demonstrates use of blockchain evidence in non-US jurisdictions.
Validates cryptocurrency as property for fraud prosecution.
Case 6: Ilya Lichtenstein & Heather Morgan – Bitfinex Hack Laundering (USA)
Facts & Charges:
Lichtenstein and Morgan laundered approximately 119,754 BTC (~$4.5 billion) stolen from Bitfinex in 2016. They used exchanges, NFTs, gold, and gift cards to obscure the origin.
Blockchain Evidence Use:
Stolen funds were traced through wallet clustering, mixers, and cross-chain transfers.
Identified the final wallets and linked them to the suspects.
Outcome:
Arrested; prosecution ongoing; significant assets seized.
Significance:
Shows blockchain tracing can expose even highly sophisticated laundering schemes.
Demonstrates that large-scale thefts are not safe due to the transparency of blockchain.
Key Takeaways from All Cases
Blockchain Evidence is Central – Ledger data allows tracing funds even across pseudonymous wallets.
Identity Linkage is Critical – Wallets must be tied to real-world individuals via KYC, IP, devices, or communications.
Expert Testimony is Essential – Courts accept forensic blockchain analysis when properly explained.
Existing Laws Apply – Fraud, money laundering, and wire fraud statutes are sufficient.
Asset Recovery and Forfeiture – Early blockchain tracing aids in freezing and reclaiming stolen assets.
International Cooperation – Many crypto frauds involve multiple countries; cross-border coordination is often necessary.
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