Trozze, Arianna; Davies, Toby; Kleinberg, Bennett; (2023) Of degens and defrauders: Using open-source investigative tools to investigate decentralized finance frauds and money laundering. Forensic Science International: Digital Investigation , 46 , Article 301575. 10.1016/j.fsidi.2023.301575.

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Abstract

Fraud across the decentralized finance (DeFi) ecosystem is growing, with victims losing billions to DeFi scams every year. However, there is a disconnect between the reported value of these scams and associated legal prosecutions. We use open-source investigative tools to (1) investigate potential frauds involving Ethereum tokens using on-chain data and token smart contract analysis, and (2) investigate the ways proceeds from these scams were subsequently laundered. The analysis enabled us to (1) uncover transaction-based evidence of several rug pull and pump-and-dump schemes, and (2) identify their perpetrators’ money laundering tactics and cash-out methods. The rug pulls were less sophisticated than anticipated, money laundering techniques were also rudimentary and many funds ended up at centralized exchanges. This study demonstrates how open-source investigative tools can extract transaction-based evidence that could be used in a court of law to prosecute DeFi frauds. Additionally, we investigate how these funds are subsequently laundered.

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