Crimefighting from the FBI to Crypto

How a technologist is using blockchain tech to stop criminals

Ric Edelman: It's Friday, March 1st, and on today's show, talking knees, plus a conversation with Gurvais Grigg, a former FBI agent who's now deep into crypto. First, I want to talk to you about my trainer. Jean, and I work out several times a week with a guy who is, well, he's rather brutal, but he's not just brutal on us. He's brutal on himself. He's had a knee replaced, he's had heart surgery, and most recently, he just had his ankle replaced. Seems like they can replace anything these days. Well, this is just the beginning.  

Now, there are artificial knees that have built in sensors that wirelessly transmit data, telling your orthopedic surgeon how the replacement knee is doing. Your doctor can see if you're hitting recovery milestones or if you need a new type of physical therapy. Soon we're going to see these sensors in replacement hips, shoulders, spines, and hearing aids and in guy glasses to see if you need any adjustments. Eventually, they say we're going to see brain implants that warn that an aneurysm is about to burst.  

And speaking of your brain, technologists are now designing headphones that can detect whether you're distracted and beam electrical beams into your brain to give you new cerebral energy. We've already seen tests where a monkey was able to control a cursor with its mind, and paralyzed patients who had electrodes implanted in their brains were able to create texts on an iPhone just by thinking about them. This is all just the beginning of what we're going to see over the next decade and beyond. And it's not just brain implants that are going to be the thing. Those are invasive and they require surgery, and that means painful, expensive and risky. For a lot of us, it's going to be something else, something better.  

Forget about brain implants, the tech tools that are going to help you move or talk or see or hear or remember they're going to be wearables you put on a headset or eyeglasses or earbuds. These devices can already detect drowsiness and fatigue in drivers and give them real time, AI-powered feedback. To prevent car crashes, you're required to wear a seatbelt today. Tomorrow, you'll be required to wear one of these headbands. These wearables can detect changes in blood oxygen levels, measure the impact of music on the brain, and assess your skills. Combine all this with activity sensors, food diaries, sleep logs, eye trackers, and other data sources, and we're going to be able to monitor and improve our function like never before. These devices will diagnose mood disorders, enhance mindfulness, learn your musical preferences, and let you type without using your hands. You'll control all your devices, from the phone to the oven to the coffee maker just by thinking about them.  

And all this is coming within the next 10 to 20 years. Some of it will be here by 2030. Some of it is already here, like earbuds that instantly translate dozens of languages in real time. You can speak nonstop, and translation is played in the other person's ear almost instantaneously. 40 people speaking 40 languages and a Zoom meeting. These things cost only 300 bucks. Soon you're going to be talking to someone else on the other side of the planet who doesn't speak English.  

While your artificial knee will be talking to your doctor, just think about the investment opportunities here and the opportunities for revised portfolio construction. Is your portfolio a portfolio of the 21st century, or is it still built with 20th century investments?  

If you're a financial advisor, I want you to know that Wealth Management Convergence, which I've created, is coming to West Palm Beach March 10 to 12. It's exclusively for financial advisors. You'll get the investment strategies you need today with no breakout sessions, no PowerPoints, and only financial advisors and RIA firms allowed to register. You'll learn from some of the most successful people in this business with conversations on generative AI, exponential technologies, longevity, estate planning, crypto a whole lot more. Free one-on-one meetings and “dine arounds” with plenty of CE credits. West Palm Beach, March 10 to 12. I've got a promo code for you too, exclusively for advisors listening to this podcast. Use the link in the show notes to register. Discount code WMC2024. You'll save $100 and I'll see you there. 

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Ric Edelman: I'm really happy to be bringing onto the program. Gurvais Grigg, he is, well, I'm going to tell you who he was, he was with the FBI for 23 years. Now he is the global public sector CTO, chief technology officer, for Chainalysis, which is one of the most important companies in the crypto space. Gurvais, welcome to the program. Great to have you with us.  

Gurvais Grigg: Thank you. Ric, it's great to be here.  

Ric Edelman: Gurvais began as a special agent back in 1997. He rose to be a senior executive at the FBI, where he worked with partners around the world to track terrorists, spies and criminals as well as their finances. He retired in 2021, and he's now the CTO for the global public sector at Chainalysis, as I mentioned, where he works with governments worldwide to help them fight the illicit use of digital assets. And it's worth noting, I love this factoid that before he joined the FBI, Gurvais was a stockbroker. So you know a little bit about Wall Street as well. It's great to have you with us here today. And I'm really excited about this, because without a doubt, the most common misconception I hear, I'm going to call it a misconception, I want you to tell me if I'm right or wrong about my allegation. This common misconception that the only thing crypto is good for is illicit activity. True or false?  

Gurvais Grigg: Yeah. That's false. But it is a common myth or misperception about crypto in the industry. I think some of that was colored by the early days of startup, especially as people were really unfamiliar with the concept of what are digital assets and how they're traded. The data shows that the vast majority of crypto utilization globally is for lawful and legitimate purposes. But as I like to say, you can't have trillions of dollars move into a new asset class and not attract criminals and grifters because they follow the money.  

Ric Edelman: Yeah, I guess that's the only thing, is that success, it's the punishment of success, right? That you make yourself a target to a degree and they're going to, like you said, follow the money. And I want to follow your career. I mean, I get that you wanted to retire from the FBI after a 23 years of a distinguished service. And thank you for your career and all you did to protect us here in the US. But what made you choose Chainalysis as your next gig? And tell us, for folks who are unfamiliar, explain who Chainalysis is.  

Gurvais Grigg: Yeah, Chainalysis is the leading blockchain analytic firm. That means we map the blockchain to identify illicit activity, to support governments, and particularly law enforcement who are tracing bad guy money. But we also provide compliance services for banks and the crypto industry who are moving into the digital assets, so they can do counterparty analysis and identify those potential risks and services. But to answer your question, why did I get go to Chainalysis? Well, I knew when I wanted to retire from the FBI that I love technology and I love where technology intersects operations to support public sector efforts. So I was looking at what are the leading technologies out there that are really impacting and are going to change the face of 21st century and artificial intelligence, blockchain analytics, robotics and the like. And for me, because I had such a background in finance and I love the follow the money both to protect the financial industry as well as advocate for victims of abuse and fraud, that working blockchain really became that intersection for me. So to work for the leading blockchain analytic firm to be their CTO and to help work with law enforcement globally to protect victims was just perfect.   

Ric Edelman: So you've mentioned that in agreement with me, that it's a myth that this accusation that the only thing crypto is good for is illicit activity. That's a myth. It's a very common myth. And you're right. I guess it goes back to the early days of the crypto community ten, 15 years ago when there were a bunch of crooks out there. A lot of people still quote Silk Road to me, even though the FBI shut that down when, 2013, I think.  

Gurvais Grigg: Yeah, quite a long time ago. Although the bureau still continues to stumble across some of those stolen funds today and sees them as they come back on the grid, or bad guys attempt to move them.  

Ric Edelman: So why do you suppose so many people persist in claiming that the only thing crypto is good for is illicit activity?  

Gurvais Grigg: Well, I think it really stems from, like most things, a lack of awareness. As you begin to take a look at what digital assets offer and how they're used, what they really are and the benefits they can have on commerce, assisting the unbanked and democratizing access to money, I think some of those begin to melt away. I'll tell you another myth that persists, that it's only used for illicit purposes is the myth that crypto is not traceable, and that once a person goes on to the blockchain and conducts a transaction, no one will be able to follow that. And that's, of course, simply not true as well. The blockchain was designed to be transparent.  

Ric Edelman: And that's really the cool thing about crypto is that digital money, that's what crypto essentially is. Digital money leaves a digital footprint, and you might not know who the person is, but you can follow the flow of money as it moves from one wallet, one digital wallet to another digital wallet. Like you said, the whole point of blockchain is that it is transparent. We can trace every transaction that has ever been done and we know exactly where the money is.  

Gurvais Grigg: Yeah, that's true. And while your privacy, your personal privacy and your personal data is protected, the transactions on the blockchain are public because it's a public ledger.  

Ric Edelman: Now, you mentioned a moment ago that the vast majority of transactions are used for legitimate, lawful purposes. Can you give us percentages of this? I mean, if you take a look at all of the crypto transactions done in a given year, like let's take a look at 2023. If you've got that data, what percentage of those transactions are for illicit activities?  

Gurvais Grigg: Sure. Our analysis consistently shows that it's less than 1%. Last year, we saw a little over $20.6 billion associated with known or suspected illicit activity. Now, when you think of the. Trillions of dollars that exchange hands on the blockchain. It really is a small percentage, and certainly there's bound to be more somewhere north of that number, $20.6 billion. But it is relatively a very small amount. In fact, I like to say if I was still an FBI agent working cases, I would rather have the subject of my case use crypto than any other value transfer system.  

Ric Edelman: More than cash?  

Gurvais Grigg: Sure. Why? Because of that public ledger transparency of records. So even if I don't know who the target of my case is today, those records are still going to be here seven years from now, ten years from now. Which is why you will see some of these cases be made regarding thefts that happened a number of years ago. And law enforcement agencies are finally able to make attribution of who the parties were involved in that, and then they can follow the money. And that's why over the last, oh, almost two and a half, three years, authorities just in the United States alone have recovered over $11 billion in crypto assets.  

Ric Edelman: So if you were king for a day and you had the opportunity to order a choice, you would rather have the economy functioning in digital money than paper money, from a law enforcement perspective.  

Gurvais Grigg: I don't know that I would say that. I think diversification is a really important and healthy principle. You and I both know that as financial advisors and individuals, at least I was in the day. I think there is some value in diversification of choice for consumers. What I am saying, though, is that digital assets offer a level of transparency and security unequaled by traditional value transfer systems such as cash.  

Ric Edelman: So put it into context for us, if the use of crypto in illicit activity is less than 1% of the total, how does that compare to cash?  

Gurvais Grigg: Yeah, I don't know of any other value transfer system that can boast of similar numbers. Right? Especially in illicit activity used by transnational organized criminals, narcotics distributors and the like, where cash remains king. Nothing can similarly compare. I mean, if I were to pull out a $100 bill out of my wallet and conduct an illicit transaction, and that person walked into a bank and make a deposit, there's virtually no way for the depositor institution to know where that $100 came from, except for what the depositor may say or declare. The same is not true with crypto. If an individual is selling child exploitation material or narcotics on the dark web, receives crypto, and then eventually attempts to off ramp that at a cryptocurrency exchange with blockchain analytics, those receiving institutions can screen for potential illicit activity.  

Ric Edelman: But we keep hearing stories of ransomware, computer hackers breaking into computer systems at companies, government agencies, hospital systems, etc. and they shut down the computer systems and they demand ransom. They say, we won't turn your systems back on or give you control until you pay us a bribe, a ransom, and they demand that the ransom be paid in bitcoin. So is that true? Are they frequently choosing bitcoin as their preferred method of payment, and if so, why, if it's so easy for the FBI to trace the money?  

Gurvais Grigg: Well, there's several factors. Number one, liquidity and speed are always the friends of a criminal as well as a legitimate user. Right? A business wants liquidity, speed and security. Those are the very same reasons why criminals are turning to crypto as well. Now, there is still a myth in the minds of some of them, as well as the legitimate public, about the anonymity of a blockchain transaction. But, bad guys still rob banks, and they know full well that dye packs may be put into the bag of the money. They know full well that there are cameras and other preventative and security measures, yet they still do it. Why? Because they want money, and so ransomware individuals utilize crypto and they use it because it is a high-speed, low-cost way to transfer value globally in a fraction of a second. However, what they hope is that they will move it quick enough or obfuscate the trail sufficient to throw off the law enforcement who are attempting to trace those funds. This year is no different. We're on course to probably get close to $900 million in reported ransomware schemes, where individuals have attempted to ransom almost $900 million from victims this year, a portion of which have been recovered and traced.  

Ric Edelman: Give us some examples.  

Gurvais Grigg: Sure. Well, I think one that you might remember. If you lived on the East Coast and tried to put gas in your car in 2021, you might remember the ransomware attack against the Colonial Pipeline, in which disrupted fuel services across the East Coast, and they ransomed money from a Colonial Pipeline. However, the FBI was able to respond and recover those ransomware funds or a good portion of them. So that's an example. And there are many, many others as banks, institutions and others are embracing and utilizing blockchain analytics, they're better able to one defend against these and then trace those illicit funds and actors.  

Ric Edelman: There were stories in the media that Hamas had been collecting funding via bitcoin, and earlier in 2023 asked its supporters to stop doing that because Israel and other governments had been able to shut down those wallets. Can you talk about that?  

Gurvais Grigg: Sure. That's another one of those persistent myths that large amounts of money are being raised via crypto and digital assets for terrorist organizations. It is certainly true that some have, and they do, but not at the scale that you've seen in some of the public reports. It is true however, as you said, Hamas begged their supporters to stop sending them money via crypto because it is traceable by law enforcement and authorities working counterterrorism were then beginning to map out the terrorist supporter network as well as the terrorist accounts, and execute seizures against those. And that just bespeaks the transparency of the public ledger blockchain. Crypto is a very poor form of raising money if you're a terrorist organization or a criminal attempting to move those funds.  

Ric Edelman: So talk about the activities on Capitol Hill. Crypto is a controversial topic among lawmakers. Some are very, very strong proponents and working hard to promote the use of digital assets into the economy, seeking regulatory and legislative clarity regarding all those rules. Other members of Congress, however, are strong opponents of the idea and have an attitude that it really isn't of any particular benefit to the economy or to individuals. What would you want to say to members of Congress about crypto?  

Gurvais Grigg: Sure. Well, the United States has a rich history of debate when it comes to introducing new technologies and capabilities. So it's not surprising that a technology as complex and new that this is, is going to generate ideas and opinions across the spectrum. What I would say is that let's look at what the successful things we've done to bring stability and security to other financial value transfer systems, and look at how do we bring the crypto industry into closer parity with those, so that we provide investor protection and promote those things that are safe and secure, and as well as promote a place where innovation can happen. This technology is powerful and it has the potential to democratize access to finance like no other in recent memory. But we need to make sure that we promote environment that helps with innovation, because we can't afford for this technology to leave our shores and be controlled by authoritative regimes who have objectives different from our own. We need to lead the world in this technology innovation in a safe and secure way.  

Ric Edelman: So give me your predictions for 2024 in terms of criminal activity involving crypto.  

Gurvais Grigg: What I think you will see, and we anticipate, is that transnational, organized criminal groups will continue embracing and adopting crypto as a way to transfer value. Why? Because it's a high-speed, low-cost way to move money globally in a fraction of the time. Traditionally, and as they believe, avoid traditional tripwires and detections. So I think you're going to see increased adoption by criminal organizations, nation states and those attempting to conduct illicit activity. I think you're also going to see the growing sophistication of what we call obfuscation techniques, meaning use of privacy coins, mixers, and other types of capabilities to obfuscate this trail because they are coming to know that their crypto is traceable. So they're engaging some of these obfuscation techniques to try to muddy the water, if you will, and slow down the law enforcement tracing.  

Ric Edelman: And does this mean you think there's going to be an increase in the activity as a percentage of the total crypto transactions? You said it's less than 1% this past year. Is it going to be more than that in 2024?  

Gurvais Grigg: Well, it's hard to say. I think as the crypto industry grows volumetrically, the overall amount of fraud will correspondingly grow volumetrically whether the percentage will remain the same and somewhat consistent, or whether it will go up or down, will all depend on whether those agencies are doing their due diligence to protect their consumers, engaging in blockchain analytics, doing counterparty analysis before the transaction happens, right, and looking for smarter, more secure ways to protect those DeFi protocols and those bridging networks. And it's usually those things that lead to the problems. I mean, we saw over $3 billion, three point what was it… $3.8 billion last lost last year in hacks alone. And North Korea did $1.7 billion of that. So the little, tiny country of North Korea punching way above its weight in hacks and thefts. Why? Because they have a dedicated cyber team who are doing that, and they realize that's a great way to raise money for their regime. Well, criminal organizations are realizing that as well, and devoting resources to scams and frauds by bringing human trafficking victims in and making them run call centers to scam individuals. And so the other prediction I didn't mention for the next year is I think we're going to see an increase in investment scams and pig butchering, particularly to those who are investment-vulnerable people are feeling the pressure of the down economy over the last several years. And so they're looking to how do I make up those gains in my portfolio, which can make them sometimes vulnerable for investment inducements? So we need to be very careful in that regard.  

Ric Edelman: And how would you say that law enforcement is doing not just here in the US but globally? What grade would you give law enforcement in their efforts to combat this activity?  

Gurvais Grigg: Well in my role because I travel around the world meeting with law enforcement at every level in countries on just about every continent, I can tell you that we are seeing a growing level of crypto literacy among those agencies. That was not the case 2 or 3 years ago. I still think there's a long way to go in that regard, because many of them whose budgets are constricted, as well as they're making that transition to increase the cyber literacy. So I think we still have a ways to go. There are some agencies that are really noting stellar performance, both here in the US and a few places in Europe and Asia where we see really sophisticated embracing of blockchain analytics and crypto tracing. And you need only pull up the news and query. You can see case after case, so that's kind of what I'd say about that growing crypto literacy. When we talk five years from now, we'll look back on today and say, remember when this was still nascent? I think that's what we'll find.  

Ric Edelman: So what is the takeaway message for folks that are listening to this conversation? Should we be scared as a result of this and stay away from crypto? Or should we recognize with a shrug of shoulders that it is part of the cost of doing business and you just got to protect yourself. Do you invest or not invest in the light of everything you've described?  

Gurvais Grigg: Right. Well, you and I, both in our careers, have advocated diversification lowers risk. This is certainly an area that offers a lot of interest and promise. I would not approach it with fear. I would approach it with education and awareness that helps us to become educated. So I would say, educate yourself about this technology and find out what part of it, if any, makes sense for you. If you look back, go back 20 years ago when the World Wide Web was really beginning to come on. And in the late 1990s, inclusive people were scared to go on a website and put in their credit card. We didn't have SSL protections like we do ubiquitously now where that data is encrypted from the moment you input it into your computer until the time it arrives at that website. And when you look at credit card scams or thefts of these, they always happen after it's arrived at the holding company because they didn't protect their servers in some way, not that your transaction got intercepted in the transmission if you will, because of SSL or secure transmission. So I think this industry is growing and we're going to not only see advancements in adoption, but we're going to see advancements in the ability to protect consumers. And I think that will grow consumer confidence. And you're going to continue to see global adoption of crypto. Each year we publish a report [The Chainalysis 2024 Crypto Crime Report] which tracks that. And so I would encourage investors and those thinking about moving into the space to become informed, be careful where they get their information from, because there are misinformation out there, as well as individuals who will tempt you to make unreasonable gains. And that's how they people get into trouble.  

Ric Edelman: And for our members of Congress who are busy debating the issue of new legislation and regulation regarding crypto, would your message be: Shut it down. Ban it. Make it go away, ignore it all? Or would you say there's no stopping it? It's here to stay. We need to embrace it. We need to regulate it, control it, protect people in dealing with it. Which of those two camps do you think is the more appropriate approach?  

Gurvais Grigg: I think the latter, again, it gets back to we as the United States and other freedom and democracy-loving nations should embrace this technology and lead the world in its implementation and imbue to it our values of consumer protection, privacy and safety and security of transactions. We cannot allow this technology to be framed by authoritative regimes who don't share our values, and who will use this kind of technology for ill good. Nor can we cede that ground to illegal actors who will use this for illicit purposes. So I think my message would be that let's look for innovative ways to bring this technology to the American people and others who are like-minded, so that we can grow the technology and embrace it for the goodness that it brings.  

Ric Edelman: That's Gurvais Grigg. He's the global public sector CTO for Chainalysis, following a 23-year career with the FBI. If you would like to learn more about the work that Chainalysis is doing, you can visit them at chainalysis.com. We've got the link to their website in the show notes today. Gurvais, thanks so much for joining us on the program.  

Gurvais Grigg: Thank you, Ric. It's great to be here.  

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