As crypto-related crimes continue to rise, law enforcement agencies are increasingly expected to respond, but many remain underprepared. The most persistent challenges often fall into a few recurring categories, each of which can significantly hinder an investigation if left unaddressed.
This article outlines four of the most common mistakes law enforcement makes when handling crypto crime cases, drawing from real-world examples and case studies. Organized in the rough order they would occur during an investigation, these include: failing to collaborate early with the private sector, conducting tracing outside the time frame of the incident, underestimating the need for cross-chain analytics, mishandling seizures, and neglecting long-term capacity building.
Law enforcement often approaches the private sector reactively—engaging blockchain analytics firms only after a crypto crime has taken place. While this can yield insights for a specific case, it puts investigators in a constant game of catch-up. This reactive stance limits their ability to spot emerging patterns, connect seemingly unrelated incidents, or anticipate new criminal tactics. It also leaves agencies dependent on external expertise without the internal knowledge needed to act quickly and independently.
The better approach is proactive and continuous collaboration. But despite increasing demand, law enforcement still lacks consistent, structured avenues to engage with experts in blockchain analytics. At Merkle Science, we’re addressing this gap not only through investigative tools but also through educational initiatives. Our ongoing webinars help upskill law enforcement professionals, and we periodically host in-person events like the upcoming Law Enforcement Crypto Workshop in partnership with Carahsoft.
Finally, it's not enough to learn privately—law enforcement must also share insights publicly when appropriate. The FBI has set a strong example, actively identifying and notifying pig butchering scam victims to prevent further loss as part of a new Level Up campaign. In contrast, slower recognition of new trends—such as the rise of crypto crimes driven by social engineering—can result in delayed action. Merkle Science flagged this emerging threat early through our research, underscoring the value of proactive information sharing and cross-sector collaboration.
One of the most common pitfalls during an active investigation is imprecise tracing. For example, when law enforcement collaborates with an exchange, the exchange usually knows when the intrusion or hack began. Yet investigators often end up tracing transactions outside this critical window—either well before the breach or after it has concluded.
This misstep can stem from simple carelessness, eagerness to get started, or technical errors like miscalculating time zones. Regardless of the cause, following false trails wastes valuable time—time that criminals can use to move funds deeper into the laundering process.
To avoid this, law enforcement must stay laser-focused on the actual crime window. Using blockchain analytics tools with precise filtering capabilities is key. Merkle Science’s Tracker enables investigators to filter transactions by specific date ranges and time zones, helping them concentrate only on the most relevant activity—when time truly is of the essence.
In the infamous Ronin bridge hack of 2022, widely attributed to North Korea’s Lazarus Group, attackers stole $625 million—but law enforcement initially struggled to follow the funds as they moved across blockchains. This difficulty is understandable given the rise of cross-chain crime, which presents two major challenges: first, a loss of visibility when illicit assets hop across networks using decentralized bridges and swap protocols. If the blockchain analytics tool in use doesn’t support the specific chains involved in the transfer, the trail goes cold. No tool can provide full coverage of every blockchain, making cross-chain movements a persistent blind spot.
Second, to investigate cross-chain transactions requires a special understanding of EVM chains and smart contracts. Even with this expertise, manually tracing funds across multiple chains is time-consuming, which can result in lost trails and missed recovery windows.
The Ronin hack also illustrates a turning point: it wasn’t until the private sector stepped in with advanced analytics that law enforcement was able to seize over $30 million. While this represents only a fraction of the total stolen, it underscores how critical cross-chain tools are for tracing illicit funds in a fragmented blockchain ecosystem. Without real-time cross-chain analytics, investigations stall, recovery windows close, and both public agencies and businesses are exposed to regulatory, financial, and reputational risk. In today’s multi-chain environment, these capabilities are no longer optional—they're foundational to effective action.
One of the most costly errors law enforcement can make is failing to properly seize digital assets during an investigation. The most infamous example remains the Mt. Gox case back in 2014, where law enforcement failed to secure over 200,000 BTC from the bankrupt exchange—assets that later resurfaced in a previously “forgotten” wallet. Failure to seize funds—whether digital or analogue—can significantly delay asset recovery, the return of victim funds, and even the successful prosecution of suspects.
But seizure is only half the battle—secure storage is just as critical. Storage-related failures are rarely covered in headlines, but they occur far more often than most realize. For instance, Thomas Hamlett, a Crypto Investigations Specialist with Binance and former FBI agent, recently recounted a troubling incident when law enforcement successfully investigated a case and coordinated with Binance to freeze a victim’s funds. A seizure warrant was obtained, and the assets were transferred to a law enforcement-controlled paper wallet. However, within two hours, the funds vanished. It was later discovered that the wallet had been created using an insecure online generator—likely exposing the private keys, which were scraped and exploited.
This case highlights the need for clear, standardized procedures not only for identifying and seizing digital assets, but also for safely storing them afterward. Law enforcement agencies must be trained to search for crypto assets systematically and, once seized, store them in wallets generated offline or through trusted channels like reputable exchanges.
Despite the growing prevalence of crypto-related crime, many law enforcement agencies remain unprepared. In fact, according to Cointelegraph, 74% report feeling under-equipped to handle crypto investigations. Relying solely on accumulated case experience is not a viable strategy. Unlike traditional crimes—where methods often remain static for years—crypto crime evolves rapidly, with new technologies, platforms, and laundering techniques constantly emerging.
To keep pace, law enforcement must take a proactive approach to skills development. This means not only collaborating regularly with blockchain analytics providers but also seeking out structured learning and professional development opportunities to build domain expertise and sharpen investigative skills.
To support this, Merkle Science offers a Crypto Investigator Certification designed for professionals with some prior exposure to blockchain investigations. The course equips investigators with the knowledge and tools needed to trace cryptocurrency transactions across multiple blockchain networks. It covers essential topics such as blockchain fundamentals, crypto asset tracing, and standard investigative techniques. Participants receive access to an on-demand course, exam administration, instructor support, and a digital certificate and badge upon completion.
In an evolving crypto crime landscape, avoiding these common pitfalls requires more than ad hoc solutions—it demands the right partners, tools, and training. Merkle Science offers law enforcement agencies a truly end-to-end solution through its Tracker investigation platform and Institute training programs.
Whether you're tracing complex cross-chain flows, securing seized assets, or building long-term investigative capacity, Merkle Science provides the technology and expertise to support every stage of a crypto crime investigation. By combining cutting-edge analytics with continuous education, we help agencies stay ahead of bad actors—and ensure crypto investigations are both effective and resilient in the face of change.
