OK, so it is February 2026. And if you've been
anywhere near a financial news feed or honestly
just scrolling X for five minutes. Yeah. You
definitely know the vibe. Oh, yeah. The last
two years in crypto haven't just been, you know,
volatile. They've been I think exhausting is
the word. Exhausting is a good word for it. It
feels like the stakes have just fundamentally
changed. We've seen Bitcoin break records. Sure.
But we've also seen this. this dark side of the
moon just expand in a way that feels, I don't
know, different. It feels different because it
is different. We aren't just talking about, you
know, teenagers buying stuff on the Silk Road
anymore. That was chapter one. Right. Now we
are talking about nation states funding nuclear
programs. We're talking about industrial scale
fraud factories and digital bank robberies that
make Ocean's Eleven look like, I don't know,
a convenience store petty theft. That's exactly
the tension we need to unpack today. I'm looking
at this huge stack of... research we have on
the virtual table here. We've got the latest
analysis reports, FBI assessments from the last
24 months, new Europol data on organized crime.
And when you read through it, you get this crazy
split screen effect. On one side, you've got
the tech evangelists still telling you this is
the future of financial freedom, the unhackable
ledger, the revolution. And on the other screen,
you have... regulators and skeptics just screaming
that it's the currency of crime. And, you know,
usually the truth is somewhere in the messy middle.
But what really stands out in this specific data
set, especially looking at 2024 and 2025, is
the professionalization of the criminal element.
Yes. This isn't a hobby anymore for a few coders
in a basement. It's an industry. It really, really
is. I was going through those chain analysis
numbers and the scale is just. It's hard to wrap
your head around. In 2024 alone, illicit addresses
received over $40 .9 billion. And they're always
clear that that's a lower bound estimate. That's
the floor. That's the floor. That's what they
can definitively prove. $40 billion slowing through
the digital underground. That's not a rounding
error. I mean, that's the GDP of a mid -sized
European nation just vanishing into the shadow
economy. And that number, as big as it is, doesn't
even capture the full psychological toll. We're
going to talk about the money, obviously. The
$1 .5 billion Bybit hack. The massive ransomware
payments. But the mission for this deep dive
is really to look under the hood. Mechanics.
Exactly. I don't want to just list off the crimes.
I want to understand the mechanics. How does
a North Korean hacker actually trick a billion
dollar exchange? Or how does a pig butchering
scam operation in Southeast Asia manage to liquidate
millions without getting caught? It is so much
like a heist movie. But the scary part is how
often the really high tech exploit turns out
to be just, well, human error. Always. We have
stories in here about spies, hidden wallets literally
buried under floorboards, fake romances and code
that was supposed to be law but ended up being
a welcome mat for thieves. It's this incredible
collision of sophisticated digital infrastructure
and, you know, Stone Age human psychology. That's
where the sparks fly. That's what the danger
is. OK, so let's ground this for a second before
we dive into the really crazy stories. We know
the listener understands the basics of crypto,
but let's just quickly recap why it's the tool
of choice. for this specific breed of criminal.
If I'm planning a heist, why am I choosing Monero
or Ether over, say, a suitcase full of non -sequential
bills? It really comes down to a triad of features
that are, at the same time, the technology's
greatest strengths and its most dangerous liabilities.
Okay. First, and this is the big one, you have
irreversibility. In the traditional banking world,
the fiat world, the whole system is designed
with a safety net. If someone clones your credit
card and buys a speedboat in Miami. You call
your bank. You call Chase or Barclays. You dispute
the charge. And that centralized authority, the
bank hits undo. Right. It's just a database entry
they can edit or delete. Precisely. In crypto,
the blockchain is what we call an append -only
ledger. Once a transaction is signed with a private
key and broadcast to the network, then the blocks
are confirmed. Yeah. That's it. It is etched
in digital stone. Forever. There is no admin.
There is no customer support line for the Bitcoin
network. If you send a million dollars to a scammer
or if a hacker signs that transaction for you,
the money is gone. Mathematically, it belongs
to the new key holder. End of story. Which effectively
makes it digital cash. You know, if I drop a
bag of gold bars on the sidewalk and you pick
them up, possession is nine -tenths of the law.
In crypto, possession of the private key is ten
-tenths of the law. Full stop. Exactly. The second
feature is pseudonymity. And I really want to
emphasize pseudonymity, not anonymity. This is
a massive misconception that criminals, especially
the, let's say, less sophisticated ones. often
learn the hard way. Yeah, Bitcoin isn't anonymous
at all. In fact, it's probably the most transparent
accounting system ever invented. It's a glass
vault. Yeah. A perfect analogy. You can see every
single transaction moving from address A to address
B, but address A isn't labeled John Smith. It's
labeled 0x7E4 and a long string of characters.
So it's like writing a book under a pen name.
Perfect. You don't need your government ID to
open a wallet, which lowers the barrier to entry
for criminals. But... And this is the big but.
If law enforcement can ever link your real world
identity to that pen name. Maybe you used an
exchange that has your passport on file. Or you
paid for a pizza delivery with it 10 years ago.
Then they can retroactively see everything you've
ever done on that address. The whole history
is public. So it's just privacy by obscurity
until the spotlight hits you. OK. And the third
factor? Speed and the borderless nature of the
network. This is the absolute killer app for
international crime. Think about it. If you want
to move $50 million from a bank in London to
a bank in Pyongyang, you have to go through SWIFT.
And all the correspondent banks and compliance
officers? Compliance officers asking, hey, why
are you sending $50 million to a sanctioned regime?
It takes days. It might get blocked. In crypto,
you hit send, pay a gas fee. And it's there in,
what, 12 seconds for Ether? or 10 minutes for
Bitcoin without a single human being in the middle
to say no. That lack of censorship, which is
the libertarian dream, is the regulator's nightmare.
OK, so we have the motive and the means. Now
let's get into the method. The research breaks
this all down into different genres of crime.
And I want to start with the one that feels the
most personal to the average user. Section one,
the art of the con. Fraud and scams. This is
really where the bulk of the victim count comes
from. It's not necessarily the hackers breaking
code, it's the con artists breaking trust. And
looking back at the history, it seems like we
go through these huge cycles of this stuff. We
had the what you could call the golden era of
Stams back in 2017 with the ICO boom. Oh, the
ICO mania. I remember this so vividly. You couldn't
go five minutes without seeing a new coin promising
to revolutionize, I don't know, dental hygiene
or banana farming or something. The initial coin
offering the ICO was the Wild West. There was
a Citus Group report from back then that was
just staggering. It estimated nearly 80 % of
all those projects were outright scams. 80%.
And the mechanic was almost always the same.
The rug pull. Which is such a perfectly descriptive
term. You're standing there all comfortable and
confident and suddenly the floor is just gone.
And the setup is so simple. You create a flashy
website, you write a white paper filled with
all the right buzzwords, decentralized, synergy,
paradigm shift. You hire a few influencers on
YouTube and Twitter to hype it up. This is the
next Bitcoin, they say. Don't miss the moon mission.
And people get FOMO. They get scared of missing
out, so they pour in their Ethereum or their
Bitcoin to buy these new shiny tokens. And all
the while, the developers are the ones who control
the liquidity pool. That's the key. Once that
pot gets big enough, the developers dump all
of their tokens on the market. They withdraw
all the real liquidity, the actual valuable assets
like ETH or BTC, and they vanish. The website
goes 404. The Telegram group gets deleted. The
token price instantly goes to zero. Rug pulled.
We have a case study here from the notes that
is just audacious. Modern tech. In Vietnam, the
PinCoin and iFan scandal. Oh, this one hurts
to read about because the promise was so obviously
transparently fraudulent, and yet it worked on
a massive scale. What were they promising? They
were promising monthly returns of 48%. 48 % a
month. That's nearly 600 % a year. If anyone
offers you that, you don't even need to do due
diligence. You just run. You'd think so. But
greed is a powerful drug. It blinds people. They
see their neighbor making money, or at least
they see a number going up on a screen, and they
jump in. Modern tech raised $660 million. From
how many people? 32 ,000 investors. And they
put on a show. They held these huge gala events
with fireworks, champagne. It looked like a legitimate
thriving empire. Until it wasn't. Until the founders
packed their bags and ghosted with two thirds
of a billion dollars. Wow. And, you know, we
can't talk about this era without mentioning
BitConnect. Of course. It's basically a meme
now. Everyone knows the hey, hey, hey. guy screaming
on stage. But underneath that meme, it was just
devastating financial ruin for thousands and
thousands of people. BitConnect was the archetypal
Ponzi scheme. They reached a market cap of $3
.4 billion. Think about that for a second. A
completely fake project worth more than many
legitimate S &P 500 companies at the time. And
what was their pitch? What was the lie? Their
pitch was that they had a proprietary trading
bot. You lend them your Bitcoin, the bot trades
the market's volatility, and it pays you a consistent
1 % a day. Spoiler alert. There was no bot. There
was never a bot. It was never about a bot. They
were just taking money from new investors to
pay the interest to the old investors. It's the
classic Bernie Madoff structure, just accelerated
by the speed and reach of the blockchain. So
those are the big wide net financial frauds.
But the research really highlights a shift in
the last few years to something much more targeted
and frankly, much darker. Pig butchering. Pig
butchering. The name alone just makes my skin
crawl. It should. It's a direct translation from
the Chinese term Sha Zupan. The metaphor is gruesome
for a reason. You take a pig, you feed it, you
groom it, you fatten it up, and then you slaughter
it. And in this analogy, the pig is the victim
and the fattening is a completely fabricated
romance. This is where crypto crime intersects
with modern slavery and human trafficking. Unlike
the ICO scams, which just cast a wide net, pig
butchering is sniper focused. How does it usually
start? It often starts with a simple wrong number
text or a match on a dating app. Oh, sorry, I
thought this was my yoga teacher's number. You
reply, no, wrong number. And they say, oh, well,
you seem nice, though. Let's chat. And they don't
ask for money. Not at first. That's the key.
No, no, that's the amateur move. Yeah. These
people are professionals. They will talk to you
for weeks, sometimes months. They build a relationship.
They simulate a real emotional connection. They
send voice notes, photos. Often stolen or...
these days, generated by AI. They talk about
their life, their dreams, and then just casually,
so casually, they'll mention how well they're
doing with their investments. Oh, I just bought
a new car thanks to this amazing liquidity mining
node I'm in. Exactly that. And eventually, the
victim asks how it works. The scammer says, oh,
it's easy. I can show you. They direct the victim
to a website that looks completely indistinguishable
from a real exchange. It has charts, Tickers,
customer support chatbots, the works. And they
encourage the victim to start small. Always.
Just put in a little money, they say. Maybe $1
,000. And the victim does. And they let them
win. They rig the numbers. The screen shows a
profit. They even let the victim withdraw, say,
$200 or $500 back to their bank account. And
that's the hook. That's the moment the trap is
set. That is the hook. The victim thinks, it's
real. I got money out. This person really cares
about me. And then they go all in. Life savings,
retirement funds, they take out second mortgages.
And that's the slaughter. That's the slaughter.
When they try to withdraw the big amount, the
trap slams shut. The site suddenly says, account
frozen due to suspicious activity. You must pay
a 20 % tax to unlock it. So they're bleeding
them even more. They bleed them dry. Desperate.
The victim pays the tax. Then it's a security
deposit. Then it's an expedited withdrawal fee.
They keep going until there is absolutely nothing
left. But the twist here, and this is why you
mentioned human trafficking, is that the person
on the other end of that text message often isn't
the mastermind. They're a victim too. That's
the most horrific part of it. We call them fraud
factories. There are these massive guarded compounds
in places like Myanmar, Cambodia and Laos. People
are lured there with legitimate job offers for
call centers or casinos. And when they arrive,
their passports are taken and they are forced
to run these scams under the threat of extreme
physical violence. So when you're interacting
with a pig butchering scammer, you are often
talking to a victim of modern slavery who is
victimizing you just to survive. It's a tragedy
on both sides of the screen. It really changes
the calculus from just a greedy criminal to something
far more systemic and, frankly, horrific. Yeah,
it creates a moral complexity that I imagine
law enforcement really struggles to deal with.
Okay, let's pivot to something slightly less
heavy but equally pervasive. The giveaway scam.
This feels like the cockroach of the internet.
It just survives everything. It really does.
The classic, send me one ETH, I'll send you two
ETH back. It seems so obvious. But it relies
on the suspension of disbelief that's triggered
by authority. If a random account tweets that,
you block them. But what if Elon Musk tweets
it? Or what if Apple's official account tweets
it? The 2020 Twitter hack. That was such a wild
day. I remember just refreshing my feed and seeing
Obama, Biden, Bill Gates and Kanye West all tweeting
about a Bitcoin giveaway at the exact same time.
That was a massive, massive failure of centralized
security. The hackers didn't break Bitcoin. They
break Twitter. They used social engineering to
get access to Twitter's internal administrative
tools. And from there, they hijacked 130 high
profile accounts. And the scam itself was so
dumb. I'm feeling generous. I'm doubling all
payments sent to my address for the next 30 minutes.
It's dumb to us because we're looking at it with
a cool head. But in the moment, with that blue
checkmark, back when the blue checkmark actually
meant identity verification, people panicked.
They thought, this is it. My chance. How much
did they actually get? They raked in about $110
,000 in just a few minutes, which honestly feels
low for hacking the president's account. It could
have been so much worse. So much worse. But the
modern version of this is even more insidious
because it uses deepfakes. We've seen this plague
YouTube. They'll take an old interview of Steve
Wozniak or Michael Saylor, and they'll use AI
to loop it or alter the audio so it sounds like
they're promoting a new giveaway live on stream.
I remember Wozniak actually sued YouTube over
this. He was furious because they just couldn't
take the streams down fast enough. His reputation
was being used to rob people in real time. And
it gets even more targeted. Look at this example
from the notes. The 2025 Trump -Vance inauguration
scam. This wasn't a broad public broadcast. This
was a spear phishing attack. Right. They impersonated
Steve Witkoff, the real estate guy. Exactly.
Witkoff is a well -known real estate mogul and
a close ally of Donald Trump. The scammers spoofed
an email domain that looked almost identical
to his real business. They reached out to a specific
political donor and said, we need a last minute
contribution for the inauguration committee and
we need it in crypto for speed. And the donor,
trusting the source, just sent it. Transferred
$250 ,000 in USDT. The FBI actually managed to
work with Tether to freeze about $40 ,000 of
it, but the rest was gone. Wash through mixers
in minutes. It just goes to show that whether
you're a grandmother on Facebook or a high roller
political donor, the vulnerability is the same.
Trust. OK, so let's move on from the con where
they trick you into giving them the money to
the heist where they just kick the door down.
This is section two, the exchange hacks, the
infrastructure exploits, the bank robberies of
the digital age. And you have to start by paying
homage to the original disaster, Mount Gox. If
you were around in crypto in 2013, 2014, this
was the event. It was the Cambrian explosion
and the extinction event all at once. Mt. Gox
handled something like 70 % of all Bitcoin transactions
at one point. It was the center of the universe.
And the hack itself wasn't a one -time smash
and grab, right? It was a slow bleed over years.
That's what was so crazy. Hackers had access
to the exchange's hot wallet for years. By the
time the exchange finally collapsed and filed
for bankruptcy, 850 ,000 Bitcoin were missing.
850 ,000 Bitcoin at today's prices. I mean, don't
even do the math. It's just... too depressing.
It's hundreds of billions of dollars. It was
the event that birthed the mantra we all know
now, not your keys, not your coins. It taught
an entire generation of users that a centralized
exchange is just a bank, but with much, much
worse insurance. But you'd think we would have
learned from that. Yeah, here we are looking
at the notes for February 2025 last year, the
Bybit heist, $1 .5 billion in Ether stolen. How
does that happen 10 years after Mt. Gox? Are
security teams just sleeping? No, not at all.
The security is exponentially better, but the
attackers are exponentially more sophisticated.
The Bybit attack has been attributed with high
confidence to the Lazarus Group. Which means
North Korea. Yes. And we need to pause on this
for a second because it's a crucial geopolitical
point. For North Korea, crypto theft isn't just
crime, it's foreign policy. It's a revenue stream.
It's a primary revenue stream for the state.
They use it to fund their missile program and
to evade crushing international sanctions. They
have a literal army of state -trained hackers
who do nothing all day but look for vulnerabilities
in Western and Asian financial infrastructure.
How did they do it? How did they hit Bybit? It
wasn't a simple password guess or anything like
that. They exploited a very subtle discrepancy
in the exchange's hot wallet management system.
A hot wallet, as you know, is connected to the
internet for quick withdrawals. Right, as opposed
to a cool wallet, which is offline. Exactly.
The hackers found a way to manipulate the internal
ledger of the exchange versus the actual blockchain
execution. They effectively tricked the system
into processing the same large withdrawal request
multiple times across different transaction batches
before the internal balance had a chance to update.
A kind of race condition. A very, very complex
and well -timed race condition. By the time the
automated alarms finally triggered, $1 .5 billion
had been siphoned out to thousands of newly created,
unidentified addresses. And it's not always pure
code exploits either. The DMM Bitcoin hack in
2024, $300 million lost. That was pure social
engineering again, but corporate style. That
one was just brutal. The hackers posed as recruiters
on LinkedIn. They targeted specific engineers
working at DMM. They went through a weeks -long,
totally convincing interview process, built a
rapport, and then for the final stage, they sent
a coding challenge for the engineer to complete.
Just download this file and solve the puzzle.
And the file was malware. The moment the engineer
ran it on their work laptop, the hackers had
a backdoor into the exchange's internal network.
From there, they pivoted to the key management
server and systematically drained the wallets.
That's terrifying because it weaponizes ambition.
It exploits the very normal human desire to get
a better job. State -sponsored actors are just
playing a different game. And sometimes it's
not even about the money. Look at the predatory
sparrow incident in 2025. This was the Iran -Israel
cyber warfare component that we saw flare up.
Exactly. During that heightened conflict, a hacking
group linked to Israel. known as Predatory Sparrow
targeted Nobitex, which is Iran's largest crypto
exchange. They drained $90 million. But the goal
there arguably wasn't just theft. It was economic
disruption. It was about causing panic in the
Iranian financial sector. It turns the blockchain
into just another battlefield. Literally. Now,
we also need to talk about DeFi decentralized
finance. This is where that code is law philosophy
really gets stress tested. And the biggest single
point of failure seems to be these things called
bridges. Bridges are the choke points of the
multi -chain world. To understand why, you have
to picture blockchains like Bitcoin and Ethereum
as separate islands. They don't speak the same
language. They can't interact directly. So if
you want to move gold from Bitcoin Island to
Ethereum Island, you can't just throw it across
the ocean. Right. You need a ferry, a bridge.
You give your Bitcoin to a bridge protocol. The
protocol locks your Bitcoin in a vault on the
Bitcoin island, and then it issues you a receipt,
a wrapped Bitcoin or WBTC on the Ethereum island.
So the bridge itself is holding all the real
underlying assets in one big pile. And that's
the problem. It's a massive honeypot, a huge,
tempting target. If a hacker can find a single
bug in a smart contract that governs that vault,
they can unlock everything. And that's exactly
what happened with Poly Network, which lost $611
million. And Wormhole. Wormhole, which lost over
$300 million. That's a recurring nightmare. The
Quibbit Finance one is almost darkly funny. Quibbit
was a tragedy of pure logic. The hacker exploited
a function in the bridge code that had a flaw.
They realized that if they told the contract
they wanted to deposit zero ETH, the code didn't
reject it properly. We didn't have a check for
zero. No. Instead, through this logic flaw, it
accepted the zero deposit and credited them as
if they had deposited millions of dollars. So
they deposited literally nothing and the computer
said, OK, cool, here's 80 million dollars in
credit for you. And they then borrowed real assets
against that completely fake collateral and just
walked away. It perfectly highlights the risk
of pure DeFi. There is no human backstop. If
the code allows it, the blockchain will execute
it, no matter how absurd the outcome. Before
we leave this heist section, I have to ask about
the attacks that hit the little guy. We've talked
about these huge exchanges, but what about wallet
drainers? I feel like I see people on Twitter
crying about this every single day. I clicked
a link and my apes are gone. This is probably
the most prevalent threat for the average user
right now. A drainer is a malicious smart contract.
You're browsing and you see a site promising
a free NFT mint or a special airdrop claim. You
connect your wallet because you want the free
thing. And a transaction pops up in your MetaMask
or your fandom wallet asking for approval. Right.
And nobody, and I mean nobody, reads the code
in that pop -up. It's just gibberish to 99 .9
% of people. It looks like every other transaction.
Exactly. But it's usually calling a function
like set approval for all. If you click confirm
on that, you are not receiving a free NFT. You
are legally, according to the code, granting
the attacker's wallet permission to move all
of your tokens, all your NFTs, all your coins.
It's like handing someone the keys to your house
and signing over the deed, all because you thought
you were just signing for a package delivery.
That's a perfect analogy. One click, one signature,
and your wallet is empty seconds later. And what
about clipboard hijacking? This one makes me
paranoid every single time I copy paste an address.
It should. It's a very sneaky piece of malware.
It infects your PC, and it just watches your
clipboard in the background. It's programmed
to know what a crypto address looks like, that
long string of characters starting with 0x or
BC1. So when I copy my friend's address to send
them some money, the malware detects it instantly
and swaps it in the clipboard with the hacker's
address. So I hit copy on my friend's address,
but when I hit paste into my wallet, a completely
different address appears. And because they all
look like random alphanumeric soup, most people
don't notice the change. They hit send. and the
money is gone forever. So the only defense is
to be vigilant. Always. Always check the first
four and the last four characters of the address
after you paste. It's the only way to be sure.
Okay, so the money is stolen. The hacker has
the $100 million. But now they have a new problem.
Everyone can see the money. It's sitting there
on the public ledger. Which brings us to section
three, the shadow economy. How do they wash it?
How do they make it clean? This is the critical
wash cycle. You have dirty crypto coins that
are tagged by blockchain analytics firms like
Chainalysis as stolen. If you try to send those
coins directly to a major exchange like Coinbase
or Binance to cash out, their systems will flag
it instantly. The exchange will freeze the funds
because their compliance systems know they're
stolen property. So you need to break the chain
of custody. You need to obfuscate the history.
And the primary tool for this historically has
been mixers or tumblers. Tornado Cash was the
most famous and effective one. How does a mixer
actually work mechanically? Imagine a giant digital
pot. I put in my one dirty Bitcoin. You put in
your one clean Bitcoin. A thousand other people,
some with clean coins, some with dirty, all put
their Bitcoin into this pot. The protocol uses
cryptography to mix them all up. And then it
allows us to withdraw one Bitcoin each to fresh,
new, unconnected wallets. So my withdrawal can't
be deterministically linked back to my specific
deposit. That's the idea. It breaks that on -chain
link. But law enforcement has gotten very good
at analyzing the statistical probabilities of
these flows, and they've started sanctioning
the mixers themselves, making them radioactive.
So criminals have moved to chain hopping. Which
is just jumping from Bitcoin to Ethereum to Monero
and so on. Exactly. They use those bridges we
talked about. They swap BTC for ETH on a decentralized
exchange. Then they bridge the ETH to another
chain, swap it for Monero. which is a privacy
coin with its own built -in obfuscation, then
swap the Monero for a stable coin like USDT.
It's like a getaway car. It's like a technique
to getaway car, painting it a different color,
swapping the license plates, then trading it
for a boat, then trading the boat for a private
plane. Each hop makes the trail exponentially
harder to follow. And the notes mention NFTs
as laundromats. This is fascinating to me, this
idea of wash trading. The high -end art world
has always been a haven for money laundering
because value is completely subjective. Why is
this Jackson Pollock painting worth $100 million?
Because someone was willing to pay that for it.
NFTs are the same, but on steroids. So walk me
through it. If I'm a hacker with a million dollars
in stolen ether. You create a really dumb NFT,
a picture of a rock, let's say. You list it for
sale. Then you use a completely different wallet,
the one that holds your stolen funds, to buy
that rock from yourself for $1 million. Oh. And
now my first wallet, the artist wallet, has $1
million of what looks like clean, legitimate
profit from selling a piece of digital art. Precisely.
You can tell the tax authorities, I'm just a
savvy digital art dealer. It creates a plausible
story to legitimize the funds. The U .S. Treasury
actually released a whole study comparing the
high value traditional art market to NFTs for
exactly this risk. And all of this infrastructure,
the mixers, the cash out services, a lot of it
lives on the dark net. We all know the Silk Road
story, but that was just the beginning, wasn't
it? Silk Road was the proof of concept. It showed
it could be done. But markets like Hydra, which
was a massive Russian language market, were industrial
scale. Before it was taken down by German police
in 2022, Hydra was doing $1 .5 billion in revenue
in a single year. And it wasn't just drugs. Oh,
no. They sold everything. Fake IDs, stolen credit
card data, hacking services. And they offered
sophisticated cash out services where you could
arrange for dead drops of physical cash in exchange
for your crypto. So it creates a completely closed
loop economy for criminals. And for rogue states.
Sanctions evasion is the macro version of all
of this. We saw $15 .8 billion in sanctions related
flows in 2024 alone. Countries like Russia and
Iran are using crypto to bypass the swift blockade.
If they can't use U .S. dollars to trade, they'll
use Tether or Bitcoin to settle international
deals. Which brings us to a specific criminal
business model that relies entirely on this shadow
economy. Ransomware existed before crypto, but
crypto was the rocket fuel that let it take over
the world. Before Bitcoin, if you hacked a hospital's
database, how did you get paid? It was a huge
logistical problem for the criminals. Right.
You couldn't ask them to wire money to your bank
account. The police would trace it instantly.
You'd have to ask for a bag of cash left in a
park, which is incredibly risky. Crypto solved
the payment problem. It completely solved the
payment problem. It allowed hackers to extort
victims from thousands of miles away with relative
safety. And the numbers have just exploded. We
saw $1 .1 billion in ransoms paid in 2023. And
the individual payouts are getting bigger and
bigger. The Dark Angels group. That was a real
watershed moment in 2024. They targeted a Fortune
500 tech company. And they didn't just encrypt
the data. They exfiltrated it. They stole terabytes
of sensitive R &D, customer data, employee info.
The company caved and paid a $75 million ransom.
$75 million. That's an IPO for a small company.
It creates this perverse incentive structure.
If you can make $75 million in a single hit,
you can afford to hire the best developers in
the world, you can buy zero -day exploits on
the black market, and you can run a sophisticated
criminal enterprise. We call it RAS ransomware
as a service. It's a franchise model. The core
developers write the malware and run the infrastructure,
and they recruit affiliates who do the actual
hacking, and then they just split the profits.
It's like McDonald's, but for extortion. It's
just a business. A very profitable one. And then
there's the parasite version of this, cryptojacking.
Right. This is less violent, more of a nuisance,
but still a huge problem. Hackers infect a computer
or a server with a script that just mines cryptocurrency
in the background using your resources. So my
computer suddenly slows to a crawl, my fan sounds
like a jet engine is taking off, and my electricity
bill doubles. And the hacker is collecting the
coins. There's a famous script called CoinHive
a few years ago that infected thousands and thousands
of websites, universities, government portals,
you name it. If you visited the site, your browser
would start mining Monero for the hacker. for
as long as you have the tab open. And why Monero
specifically? Because Bitcoin requires specialized
hardware now. Those loud, hot ASIC miners. You
can't mine Bitcoin efficiently on a regular laptop
anymore. But Monero's algorithm is designed to
be mined on regular CPUs. So it's the coin of
choice for these massive botnets. OK, so we've
been very digital so far. But Section 5 brings
us into what the Internet calls meatspace. The
physical world. Because ultimately, humans live
in houses, not on the blockchain. And this is
the wrench attack. This is the ultimate trump
card against any digital security. You can have
a hardware wallet. You could have a 24 -word
seed for ASMRize. You can use a complex multi
-sig vault. But if someone breaks into your house,
ties you to a chair, and... threatens to break
your kneecaps with a $5 wrench. You give them
the password. You give us the password. Cryptography
cannot solve the problem of physical violence.
And we saw a horrifying case of this in Manhattan
in 2025. An investor was kidnapped off the street
and held for weeks. They beat him, drugged him,
and systematically forced him to disclose his
keys and transfer his assets. It shows that as
crypto wealth becomes more public, As people
flash their NFTs and portfolios online, the physical
risks increase dramatically. It's why so many
of the early crypto billionaires have completely
disappeared from public life or now travel with
extensive security teams. In the Ellis Pinsky
case, the irony in that one is just so thick.
Pinsky was known in online circles as Baby Al
Capone. At just 15 years old, he allegedly masterminded
a SIM swapping ring, stealing people's phone
numbers to get into their accounts. and stole
around $24 million from an early crypto investor
named Michael Turpin. A 15 -year -old with $24
million. But here's the twist. In May of 2020,
Pinsky himself was the victim of a violent home
invasion. Other criminals knew he had the loot.
They broke into his house with shotguns, looking
for the money he had stolen. Wow. No honor among
thieves. It's an incredibly dangerous game. When
you decide to become your own bank, you also
have to be prepared to become your own security
guard. And speaking of physical infrastructure,
we have to touch on energy theft. This is a massive
issue in any country with cheap or, I guess,
stealable power. Mining proof of work coins like
Bitcoin requires a massive, massive amount of
electricity. It's the single biggest operational
cost for any mining farm. So to boost their margins,
criminal gangs just steal the power. The numbers
out of Malaysia are staggering. Tanaga National,
the main utility company there, estimated they
lost nearly $1 billion over a five -year period.
due to illegal mining connections. The miners
literally bypassed the meters. They wired directly
into the high voltage mains. Which is incredibly
dangerous, right? It causes fires. It causes
blackouts for entire neighborhoods. It destabilizes
the grid. We saw that case in the UK where police
raided a warehouse because the heat signature
from their helicopter was off the charts. They
were absolutely convinced it was a giant cannabis
farm. They kicked down the door expecting to
find weed. And found racks and racks of servers
mining Bitcoin with wires running everywhere.
It's the perfect symbol of the modern criminal
economy shifting from drugs to data. Okay, so
we've painted a pretty bleak picture here. Hacks,
scams, kidnappings, energy theft. It really does
sound like the Wild West. But Section 6 is the
long arm of the law. Is the sheriff finally coming
to town? The sheriff is already here. And he
has much better tools than the bandits realize.
And this brings us right back to the central
paradox of all this. The public ledger. The permanent,
unchangeable record. Criminals love the speed
and borderless nature of crypto. But cops are
learning to love the permanence. If you stole
Bitcoin in 2011, the record of that theft is
still there today. It never degrades. It never
gets shredded. And agencies like the FBI, Europol,
and especially the IRS have become absolute experts
at chain analysis. So they can follow the money
even through the mixers and the chain hops? It
takes time. It takes resources. But they can
do it. Look at the Bitfinex hack. That was back
in 2016. Billions of dollars worth of Bitcoin
stolen. For years, the money just sat there moving
occasionally. Everyone thought the hackers had
gotten away with it. And then years later. Then
in 2022, the DOJ arrests a couple in New York.
Ilya Lichtenstein and Heather Morgan. Razzle
Cubs. Yes, the aspiring Forbes contributor and
surrealist rapper. I've watched her music videos.
I'm still not sure what was the bigger crime,
the money laundering or the rapping. The rapping
was arguably worse. But the seizure itself was
historic. They recovered $3 .6 billion initially,
a value which later grew to over $4 .5 billion.
It was the largest financial seizure in DOJ history,
and it sent a message. You can hide on the blockchain
for a while, but cashing out without getting
caught is incredibly hard. And the Silk Road
recovery involving this guy James Zong, this
story is just, it's cinematic. Zong was an early
user of the Silk Road darknet market. He found
a glitch in their withdrawal system way back
in 2012. He figured out how to trigger it multiple
times and stole 50 ,000 Bitcoin from the site.
So he literally robbed the robbers. He did. And
he just held on to it for 10 years. He never
touched it. And the value ballooned from a few
hundred thousand dollars into the billions. And
where was he keeping this digital fortune? In
a Swiss bank. In some underground fortress. In
a popcorn tin. You're kidding me. No, I'm serious.
He had a single board computer with the wallet's
private keys on it, hidden inside an empty Cheetos
popcorn tin buried under a pile of blankets in
his bathroom closet in Gainesville, Georgia.
A popcorn tin holding billions of dollars? That's
incredible. He lived a pretty modest life, didn't
spend much. But the on -chain analytics eventually
traced the stolen coins to him. They raided the
house, found the tin, and seized all of it. It
just shows that even if you have... perfect operational
security for a decade, you only have to make
one tiny mistake. The blockchain waits. And we're
also seeing the industry itself start to police
the ecosystem. The notes mention Tether helping
the FBI freeze funds. This is a major, major
shift. Companies like Tether, which issues USDT,
and Circle, which issues USDC, are centralized.
Their stable coins are basically smart contracts,
and they have a freeze function built into the
code. So they have a kill switch. They have a
kill switch. If the FBI identifies a wallet,
Holding USDT as belonging to a scammer or a terrorist
group, they can send a warrant to Tether and
Tether will blacklist that address. The money
in it is frozen instantly. It becomes unmovable.
That kind of destroys the whole uncensorable
money narrative, but I guess it's great for stopping
crime. Well, it is for centralized tokens. In
the 2025 inauguration scam we mentioned earlier,
that's how they recovered the $40 ,000. It wasn't
the Ethereum blockchain that stopped it. It was
the centralized company running the token on
top of Ethereum. And all of this is happening
as regulation tightens globally. The travel rule.
Right. This is the standard banking rule being
applied to crypto. The idea is that if an exchange
sends over a certain amount of money to another
exchange, they have to send the customer's identity
data along with it. It forces the ecosystem to
de -anonymize. So the walls are definitely closing
in. For the casual criminal, absolutely. The
old Wild West days of anonymous transfers on
major regulated exchanges like Coinbase or Binance
are completely over. So let's try and bring all
this together. We've covered a lot of ground
here. From the deep psychology of the pig butchering
scam to the technical wizardry of a cross -chain
bridge hack, what is the grand synthesis here?
I think the big takeaway is that crypto crime
has evolved from being this niche, nerdy curiosity
into a full -blown mirror of the global financial
underworld. It has everything. State actors,
organized crime syndicates, lone wolf hackers,
desperate individuals. But the technology amplifies
everything. It makes the scams faster, the thefts
larger, and the investigations more complex than
anything we've seen before. And for our listener,
the learner we're talking to who might be holding
some Bitcoin or is maybe experimenting with DeFi,
what is the practical take -home lesson from
all this? The lesson is that self -custody is
a double -edged sword. The idea of being your
own bank is incredibly empowering. You have total
control, total autonomy, but you also have total
unforgiving liability. There is no fraud department
to call if you mess up. So the big question,
is crypto safe? I'd say it's safe in the way
a tank is safe. The core machine is practically
invincible if you know how to operate it and
you keep hatches locked. But if you open the
main hatch because a stranger with a nice smile
asks you to, or if you accidentally drive it
into a minefield. Or if you just leave the keys
in the ignition. Exactly. The vulnerability is
almost always the user, the human being sitting
at the keyboard, not the math that secures the
network. I want to end with a provocative thought
that the notes bring up, which I find fascinating.
We talked about the permanent public ledger.
As artificial intelligence gets better and better
at pattern recognition and as these blockchain
tracing tools get more powerful. Are we heading
toward a future where crypto is actually the
worst possible tool for crime? That is the beautiful
irony that might be waiting for us at the end
of this road. If you rob a bank of physical cash,
those bills eventually degrade. They get dispersed.
They're spent. The evidence fades over time.
But on the blockchain, the evidence is immortal.
So you might get away with the hack in 2026.
But in 2036, a powerful AI agent might be tasked
with looking back at the entire history of the
chain, and it might spot a tiny pattern, a correlation
that no human could ever see, and it could identify
you. There is effectively no statute of limitations
on the evidence itself. The idea of the clean
getaway might just be a myth in the age of the
public blockchain. We might eventually find that
this Wild West was actually the most surveilled
financial system in human history. We just didn't
have the lights turned on yet. That is a very
sobering thought to chew on. If you enjoyed this
deep dive, maybe go check your wallet permissions.
Think about buying a hardware wallet. And please,
for the love of everything, do not send ETH to
anyone on the internet promising to double it.
Please just don't. Thanks for listening. We'll
see you in the next one.