Chainalysis

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Chainalysis
Chainalysis logo.png
Founded 2014
Headquarters New York, New York
Key People Michael Gronager, Co-founder, CEO; Jonathan Levin, Co-founder, COO; Jan Moller, Co-founder, CTO
Products Anti-money laundering software for Bitcoin businesses.
Twitter @chainalysis
LinkedIn Profile
Facebook Chainalysis
Website Chainalysis Home
Blog Chainalysis blog

Chainalysis’s mission is to look for patterns on the public bitcoin blockchain to help fight cybercrime.

Overview

In 2016, Chainalysis CEO Michael Gronager told ComputerWeekly.com, "Bitcoin transactions used to be anonymous, but our software is capable of linking the source and recipient, so, in effect, bitcoin has become less anonymous than cash." Chainalysis was working with various law enforcement organizations at the time in pursuit of the cyber extortion gang known as "DD4BC," which is meant to stand for "distributed denial of service for bitcoin."[1]

The venture funding arm of Japan's largest bank, Mitsubishi UFJ Financial Group, announced in April 2019 that it had invested $6 million in Chainalysis Series B funding round, bringing the round's total to $36 million.[2] With earlier funding rounds, Chainalysis has attracted $53 million in outside investment.[3]

In July 2019, Chainalysis became the first blockchain company to be listed on Forbes's "Next Billion-Dollar Startups List."[4]

Seeking the on ramp to what Maddie Kennedy, Chainalysis’s director of communications, called a "path to profitability," Chainalysis announced on November 21, 2019 that it was laying off 39 employees. After the reduction, Chainalysis's total headcount was 155.[5]

In July 2020, Chainalysis raised $13 million from Ribbit Capital and Sound Ventures, increasing its Series B fundraising round to $49 million.[6]

In October 2020, Chainalysis revealed via a blog post that the company's revenue grew 100 percent year-over-year in Q3 of 2020. The company said that this was largely due to its customers growing by 65 percent in that period. The majority of these customers were national governments, who enlisted Chainalysis to provide blockchain analytics support to cybercrime investigations.[7] The same month, Chainalysis also announced new hires, including Amanda Wick, former FinCEN and Department of Justice official, and Don Spies, former Department of Treasury official, as its new director of market development. Due to its success in 2019 and 2020, Chainalysis began expanding, Tokyo and Singapore.[8]

Targeting government and law enforcement agencies, the company announced in November 2020 that it had launched a service for handling, monitoring and ultimately disposing the crypto assets they seize.[9]

Notable findings

Mt. Gox

An early customer of Chainalysis, Kraken, the major U.S.-based cryptocurrency trading platform, contracted with Chainalysis to aid in its efforts to find the bitcoin lost in the Mt. Gox hack in 2014.[10] In 2017, co-founder Jonathan Levin testified before Congress that Chainalysis had found 650,000 of the missing bitcoin stolen from Mt. Gox.[11]

Ethereum whales

In May 2019, a study published by Chainalysis revealed that one-third of the total supply of Ether, the native cryptocurrency of the Ethereum platform, was held by just 376 people worldwide.[12]

Suspicious transaction alerts

In August 2019, Chainalysis announced the launch of a new software product called Chainalysis Know Your Transaction (KYT), which gives alerts to users of cryptocurrency trading platforms when it detects suspicious crypto transactions. This product is an anti-money laundering (AML) product primarily for cryptocurrency trading firms and financial institutions.[13]

2019 Overviews

In January 2020, Chainalysis published a report saying that bitcoin's use for buying illegal products was growing, with over $600 million worth of bitcoin was spent in darknet markets during Q4 of 2019. Chainalysis also found that bitcoin's use in darknet markets is "less influenced by the highs and lows of its price."[14][15]

The company released its review of 2019 cryptocurrency crime on January 29, 2020. According to Chainanlysis, $11.5 billion worth of cryptocurrency transactions were associated with criminal activity in 2019. The single type of crime that the company found accounting for the largest percentage of crime-related transfers were two Ponzi schemes.[16]

Twitter Hack 2020

In July 2020, the Twitter accounts of several high-profile public figures - including Barack Obama, Elon Musk, and Bill Gates - were apparently hacked in a massive cryptocurrency giveaway scam involving an organization named, "Crypto For Health." The Twitter handles of exchanges like Gemini, Coinbase, and Binance, as well as prominent figures in the digital asset world like Justin Sun, were also hijacked. Many of the hacked accounts posted the same announcement: “I am giving back to my fans. All Bitcoin sent to my address below will be sent back doubled.” Others, like the account of Presidential hopeful Joe Biden, posted messages that said more or less the same thing worded differently.[17]

The day after the attack, Chainalysis told Coindesk that the BTC amassed during this scam was "on the move." Chainalysis said it had identified and was monitoring four wallets into which the stolen BTC was transferred.[18]

Proportional decrease in criminal activity in 2020

In January 2021, Chainalysis released a report saying that year-over-year, the proportion of the total cryptocurrency transactions executed in 2020 that were related to criminal activity fell from 2.1 percent to 0.34 percent. The report said this was partly due to a significant decrease in the total value of cryptocurrency tied to criminal activity, from $21.4 billion in 2019 to $10 billion in 2020. Another factor discussed by the report was the explosion of cryptocurrency trading volume from retail and institutional investors in 2020 that tripled the total amount of cryptocurrency-related activity from 2019, which resulted in the proportion of total transactions tied to criminal activity relative to the total number of transactions decreasing further.[19][20]

Key People

  • Michael Gronager - Co-founder, CEO
  • Jonathan Levin - Co-founder, COO
  • Jan Moller - Co-founder, CTO

References

  1. Expect ransomware arrests soon, says bitcoin tracking firm Chainalysis. ComputerWeekly.com.
  2. Japan’s Biggest Bank Invests in Crypto Sleuthing Startup Chainalysis. CoinDesk.
  3. Chainalyis. Crunchbase.
  4. Next Billion-Dollar Startups 2019. Forbes.
  5. Blockchain Sleuthing Firm Chainalysis Slashes 20% of Workforce. CoinDesk.
  6. Series B Funding With a Further $13M Funding. Finance Magnates.
  7. Chainalysis Grows Revenue 100% Year Over Year; Prepares for Surge in Private Sector Business. Chainalysis.
  8. Government agencies help Chainalysis double its recurring revenue in Q3. The Block.
  9. Blockchain analysis startup Chainalysis launches new service for managing seized crypto. The Block Crypto.
  10. Kraken to Assist in Search for Missing Mt Gox Bitcoins. CoinDesk.
  11. Cryptocurrency Crimefighter Chainalysis Becomes First Blockchain Company To Make Next Billion-Dollar Startups List. Forbes.
  12. Just 376 People Found to Own a Third of All Ether Cryptocurrency. Bloomberg.
  13. Chainalysis Launches First Actionable Real-Time Alerts for Suspicious Transactions Across 15 Cryptocurrencies. Chainalysis.
  14. Darknet Market Activity Higher Than Ever in 2019 Despite Closures. How Does Law Enforcement Respond?. Chainalysis.
  15. Bitcoin’s use in darknet markets continues to grow: Chainalysis. The Block.
  16. The Chainalysis 2020 Crypto Crime Report is here!. Chainalysis.
  17. Everything We Know About the Bitcoin Scam Rocking Twitter’s Most Prominent Accounts. Coindesk.
  18. Chainalysis Says Bitcoin Scammed From Twitter Users Is ‘On the Move’. Coindesk.
  19. Chainalysis: The share of crypto transactions associated with criminal activity fell dramatically in 2020. The Block.
  20. Crypto Crime Summarized: Scams and Darknet Markets Dominated 2020 by Revenue, But Ransomware Is the Bigger Story. Chainalysis.