All right. Let's get started. So thank you for joining today. And I'm Mudra. I work at Elliptic as an engineering manager.So we are the most comprehensive platform for blockchain data and intelligence. So we aid in making decisions on crypto assets. So today, we are going to start talking about crypto scams, why they are so difficult to identify. And I'll give you a glimpse of what we do at Elliptic to investigate these financial crimes and how we go about the crypto investigations. So let's just before we dive into the too deep into the scams and trying to understand the crypto investigations, let's start with with the basics. So let's first try to understand what is centralized and decentralized networks. So if you look at centralized networks, these are these have a central authority.

Like, for instance, think of a bank. The bank knows where the funds are coming from and where the funds are going. So if you have a you know, you have made a payment, which is in error, you can always call up the bank and say, hey. Can you reverse my transactions? And the bank is able to do that because they have a central control. You trust the bank. So that is what centralized networks are about. But on the other hand, if you look at decentralized networks, there is no single point of control. It's the network you trust. The transactions are irreversible because you cannot call a bank or you cannot call somebody to say that, okay. I've been through a scam, so please reverse my transaction. And I think that is the biggest difference between decentralized and centralized networks.

And this is something important to bear in mind as we go through this session. So remember, decentralized networks is what we are talking about. So next up, let's just look at the some of the key terms because I can see a lot of you are, you know, beginners in this. So this will help us understand the session better. So cryptocurrency. So when I say cryptocurrency, it's basically the digital money that lives online. We have Bitcoin. We have Ethereum. And any crypto activity that happens on the decentralized network is actually locked into a digital ledger, and that is your blockchain. And then we have wallets. Wallets are similar to what we have as our purse or a wallet in which we keep money. These are digital wallets where you would have a cryptocurrency kept in. So now one thing to remember here is wallets are like addresses which has bunch of characters, a string of characters.

So you wouldn't know who is the owner or who is actually a a user of that wallet. And each wallet will have a sick a secret recovery phrase associated with it. So this is something like you have locked your purse and you have a key. So that key now, if you share with somebody, then, obviously, they are going to take away all your money. So you would never share your secret with anybody. So that's about wallet. Now transactions. So what are transactions? These are similar to the bank transactions that In In the digital world, these are the digital assets, and you can buy and trade in the crypto apps. So these are the basic terms that you it's good to know when going forward into this session. So next, why are we talking about the scams?

Now first up, we spoke about the decentralized networks. Right? So in this case, there is no central authority. So if you have made a payment, if you have given some funds to somebody through your wallet, it's there is no way you can call someone and say, okay. Can you reverse this transaction? So there is no central authority. The wallets are actually addresses, which are just bunch of characters or strings, and it's hard to trace the funds. So recovering the funds is very difficult. And the next step is scams are getting smarter. So that is something another thing to remember that knowing how to identify scams, knowing what to look for will save you from actually losing money.

So let's look at some of the common scams that we have. So first up is rug pull scam. So imagine you you see an ad which gives you it's for a Michelin star restaurant. They are giving you a eight course meal for a very affordable price, and everybody is buying into that. Everybody has bought the vouchers. You feel you're going to miss out on it, so you go ahead and buy these vouchers as well. But this is a scam, so the restaurant never opens. The owners run away with their your money, and you're left with vouchers that are completely worthless. So this is what rug pull scam is about. The project looks very appealing. The tokens are are worth lot of money. That's what they project.

But when you actually buy the tokens and do the investment, this they fall the scam, run away with your money, and you're left with tokens which are of no value. So rug pull scam feeds off fear of FOMO or sorry. FOMO, which is fear of missing out. So that is what it feeds on. It's literally the rug is pulled from under your feet, and you're left with worthless tokens. Next off is honeypots. Imagine there is a big pot of honey on your table, and it's very delicious. It's very tempting. You want some of it, and you put your hand in it. At this point, your hand is stuck. You can't take it out. And this is what honeypot scam is about. You you invest in something, you can buy the tokens, but you can never sell them.

And that is the reason the victims get trapped in this investment, and they are not able to exit. Now this honeypot scam feeds off greed because you're tempted. You want to invest, but you can't take out your investment after you have done it. Last but not least is the AirDrop scam. Imagine you have come back home. You find this present on your doorstep. It's neatly wrapped, and there is no return address. There is no sender. Nothing no information on it, but it looks very, very expensive. So you're tempted to open it. So you open it and the alarms go off and you're trapped. So this is what happens in a airdrop scam. So fake tokens suddenly appear in your wallet, and you try to interact with them. And at that point, the scammers actually get hold of your information, and they take away your funds. So that is what airdrop scam is about.

And airdrop scam feeds off curiosity. Because you were curious, you attempted, you tried to interact with these tokens. Now I haven't I'm not covering all the scams because those are a lot of scams out there. But these are the common ones, and it gives us an ability to identify what a scam is and what red flags can we look for. So identifying a scam is important. First up is too much hype and publicity. If you see a project that has come up overnight and there is so much hype and publicity about it, probably you should take a step back and think about, okay, slowing down so that you have, you know, some time to think about it. The next is promise of huge unrealistic returns.

At this point, if you are let's say you're putting in one pound and they have promised you a million, it's an unrealistic return. It is not, you know, proportionate return. So it definitely should trigger some red flags for you. Next is social engineering tactics. Too much pressure, too much of, you know, force to invest right now. Do this right now so that you can get a million pounds. Do this right now. Otherwise, you're missing out on an amazing opportunity. So those are kind of red flags that should trigger as soon as you see this. The last one is unexpected freebies with urgent action. Similar to what we saw in the airdrop scam, it's you have got something for free. They're asking you to click on a link to trade your tokens, do something.

And the urgency should be a red flag that why am I getting something for free, and why are they pushing me so much to do this investment? So when you see these red flags, stay calm, stay skeptical, and take your time to invest. That's something which is really important at this point. So now that we know how to identify the scams, what can we do to avoid getting scammed? So first up is do your own research. Find out about the company. Find out about what the who the directors are, what they have invested in. Have they invested their own money in it? These crypto assets are listed. So try to find out, is there a value in the investment? Use the reputable exchanges and platforms. That's another thing to bear in mind. If it is a reputable exchange, if it is a reputable, platform, they would have put in security measures to avoid their customers from getting scammed.

So go with the reputable ones. And the last one is stay updated on the scam tactics. Now this is, again, the same thing. Keep yourself educated. Keep yourself abreast of what's happening around and how can you prevent yourself from getting scammed. Now what we have done so far is spoken about scams, how do you avoid as an individual, what you can do as an individual. But there is another side to the story, which is what can the organizations or what can the exchanges do to avoid their customers from getting scammed? And this is where these are some of the things that the exchanges and the platforms can do proactively to prevent scams. For instance, they can have active monitoring of the crypto transactions. They can actively screen the wallets to see if there is any suspicious behavior.

And it's not just about screening and monitoring. They can they need to act fast on the threat. So if they find something which is suspicious, a transaction for money laundering or illicit activities, they then should flag that particular wallet or freeze those assets. Otherwise, the customers are not going to be, protected. And, of course, keep the users informed. Something if it's happening, something looks suspicious. If they keep the users informed, then they can protect their users. So this is these are some of the things that the exchanges and the platforms can do for to protect their users. But what does a real world risk or look like? Or what does a real world investigation looks like?

So let's, at this point, don our investigator hats and look at some of the investigations. Now let's say you are an investigator. This is a screenshot from, Elliptic, and this is what we do for investigations. So let's say you are an investigator. At this point, you have seen a wallet which contains 117 US dollars. Now this amount is a fairly small amount, but you are a very seasoned investigator, so you know that a threat can come in small packets. So you decide to screen the wallet. When I say screen, it means that you are trying to find out the source of the funds. At this point, you see that the source of the funds, the 60% of it is coming from Silk Road.

Now Silk Road is actually a dark market, and dark market is known for its illegal drugs, illicit activities. So if 60% of the funds are coming from Silk Road and going into this wallet, even though the amount is small, you know that it's a high risk transaction. So at this point, you as an investigator would red flag it and give it away for further investigation. So this is one example where the amount is small, the risk is really high, and it's coming from a dark market. If I go to the next slide, this is another wallet which has got £280,000 US dollars in it. And you, again, because you are very seasoned and know about all the crypto scams happening, you decide to screen this wallet.

When you screen the wallet, you see that the funds, 88% of it, are coming from Stake Casino. And gambling as such is not restricted in most countries, but if the gambling entity is coming from a country a sanctioned country or a country which is under financial scrutiny, then the risk is higher. So in this case, you can see that the source of the funds, the risk score given is 8.8 at for the source of funds, and the destination is 9.4. So this transaction, as you can see, it's going from casino to your screened address, is a risky transaction. It's most likely a money laundering transaction. So as an investigator, you would red flag this and give it away for further investigation. So what I'm trying to say at this point is, had this been a centralized network where banks are involved, it is very easy to find what is the source of the funds, what are the destinations of the funds, and you can always the bank can interfere and stop the transaction.

But this is a decentralized network. The addresses are just numbers or strings, and it's very difficult to find the source of the funds. So in this case, I'm showing you a transaction, which is a very simple investigation. There is nothing complicated. There is there are there's just one hop between other transactions. But as you as the funds increase, the comp you know, it you might end up with an investigation which has multiple hops. You might have some mixers involved, which are used technically for hiding the source of the funds. And it might just get so complicated that you really don't understand where the of of funds have originated from. And this is where it becomes very critical that you, as a user, needs to know what investments you're doing, what sort of funds you're investing into.

So it brings me back to the fact that even if the wallet is has only 117 US dollars or, in this case, it's, straightaway just a casino is moving funds to another wallet, but it doesn't matter how much amount what is the value of the transaction. It could still have some criminal element to it, and the users can fall victim to the scam. So this is what is how an investigation looks like. And I hope you have, you know and I have got something, which you haven't seen before, and I I hope you I have intrigued your curiosity. So this is a and just let's to recap, first of all, know your scams. We have seen three of them so far, rug pull, honeypots, and airdrop. But there are many more, and you can do more investigation on that. Watch for the red flags, pressure tactics, hype, which is, you know, something which is definitely to watch for, emotional manipulation.

For instance, if there is too much pressure, if there, you know, watch for fear of missing out. Take a step back. Think about what you're investing in. Trust but verify. That's another thing. Know what you're investing in. Keep yourself educated. Find out what company are it's this, what the directors are doing, and only then make an informed decision. Don't just blindly follow just because your friends or your family have invested in it, and reduce the risk at source. That's another thing. Invest with reputable exchanges because they would have put the security measures. They would try to understand the transaction. Know your transaction. Know your customers is something the reputable exchanges and platforms would be doing. So on the whole, stay sharp, stay informed, and invest wisely.

So thank you so much for attending this talk, and I hope you enjoy the rest of your day. So thank you.