[03:02] The Criminal Side of IRS
Rachael: Joining us today is Jarod Koopman. He's the acting executive director of cyber and forensic services for the internal revenue service Criminal Investigation. Welcome, Jarod.
Jarod: Thank you. It sounds like you guys have way too much fun on this podcast, so I’m looking forward to it.
Eric: I'm glad you're in the part of the IRS that I never deal with.
Rachael: For the benefit of our listeners though, I would love if you can give us a quick kind of overview of what the criminal investigation group does.
Jarod: Absolutely. There’s a very big distinction between the civil and criminal sections within IRS. IRS civil is the function that most folks obviously interact with when you're filing your taxes or have some type of a tax issue. Even the IRS is conducting an audit of individual businesses.
The criminal side, however, is the law enforcement arm of the treasury and of the IRS. They investigate tax violations as well as money laundering and violations of the big secrecy act. Those are our mission, our priorities, and that can take a lot of different forms because as you can imagine, money laundering as well as taxes. It really includes the financial flow of any crime. So that could be the organized crime, drugs, and terrorism financing are what we're going to talk about here today with some cybercrime.
Rachael: The bank secrecy act was actually something new to me. What does that all cover? It sounds intriguing.
Crypto Crimes and Other Known Criminal Activity
Jarod: It was really more the filing aspects by financial institutions to provide data and information back to law enforcement when there's some type of suspected or known criminal activity trying to take place using the financial marketplace or financial sector, that entire ecosystem.
That becomes pretty important because they have a lot of visibility into the transactions that are occurring and when they have information that should be shared with law enforcement to potentially stop threats or of some wrongdoing that's provided to us. There's a whole section of the federal code title 31 that oversees all the bank secrecy acts.
Eric: With the advent of cryptocurrency, are you seeing more activity? Are you busier than you've ever been, or did the adversary just move? I say adversary, but did they just move to cyber now?
Jarod: We'll talk about a little bit of how that kind of genesis and evolution has occurred, but you're absolutely right. I think we're now just dealing with a new wave or new environment that criminals are now exploiting. It’s much easier to sit behind a computer and conduct criminal activity versus having to run around to different banks and to different locations. It's the same type of crime. They just now take on a little new form and steal in a new environment.
Eric: Since the beginning of time, people have been invading the tax person essentially. This is just a new mechanism, a new way of doing it and we're evolving to protect the treasury from that.
Jarod: I've been fortunate enough to be in this position since stood it up. I was brought to stand up on this section for IRSCI.
The Components of a Traditional Tax Ecosystem
Jarod: In the very early days, the first four to five years, we were dealing mostly with money laundering, dark net services, and some of these areas that we'll talk about. In the last two to three years, we've seen an advancement toward more of the traditional tax evasion and some of the components that are now starting to bleed into the traditional tax ecosystem.
So yes, we're now dealing with that and then still trying to keep up with everything else going on.
Eric: You're probably deeply involved in ransomware too.
Jarod: Yes, that's one sub-component of the money laundering aspects that we deal with.
Eric: I was reading an article over the weekend that basically said cryptocurrency is probably the number one reason for ransomware taking off the way did. It's just easy.
Rachael: There's been discussions and Jarod, I'd be interested in your perspective here, that if we just regulated cryptocurrency more then we could mitigate the ransomware payment schemes or what have you, I don't know if that's just dreamland or what.
Jarod: Ransomware is definitely a new fraud or a new criminal act that's been created because of this kind of environment. I don't know how much you're going to be able to regulate your way out of that.
It's criminals taking advantage of the technology to really exploit vulnerabilities, lock things down and then require payments for that data to be turned back over. That's the criminals being able to really leverage their capacity. I don't know what, if anything, would be stopping that completely.
How Do You Trace Crypto Crimes?
Rachael: No, but how do you trace? I'm not interested in specific techniques, but I think one of the things, the idea of cryptocurrency being this black box of you need a login. If you lose the hard drive, then you lose all your money. But yet you look at things like Colonial Pipeline and they were able to claw back some of the ransomware that they had paid. So how could you even trace cryptocurrency payments and then on top of that be able to get it back? It blows my mind that that's even possible.
Jarod: It certainly is possible. This is what our whole section does and really focuses on. We utilize very close partnerships with a lot of third-party attribution tools. There's a lot out there and we use pretty much all of them, whether it's TRM Labs, Chain Analysis, Cipher Trays, Elliptic, you name it.
They all slightly have different algorithms and heuristic modeling to make attribution and risk scoring and all these things. We typically will start with a wallet address, some crypto address that we're working with and that may be the only factor that we have. With that, we usually use those tools to use their ability to trace out the financial flow of that crypto through whatever possible hops.
Hops art is a term for one specific point of a transfer to another wallet or an address. What we're looking for is making these types of connections between either a traditional financial sector or an off-ramp where they may change to a different cryptocurrency and then go through an exchange to try to cash out.
[10:23] Crypto Crimes: Crypto Mixing and Crypto Laundering
Jarod: Ultimately, these criminals have to get their cash or get their proceeds in a manner that they can use them. They want to spend it. We have to find that point where they're trying to access it, take it out, and try to use it. That's where we can usually make attribution, that's our goal.
Rachael: You're hearing a lot about crypto mixing. To that point, it's been coming up a bit more in the last six to nine months or so. I think about it as money laundering for cryptocurrency.
Jarod: For our listeners, let’s define crypto mixing first. To be honest with you, we reference the same thing as that mixing and tumbling services are really laundering for cryptocurrency. What it is doing is usually these entities reside on the dark net around the dark web. They have a reserve of cryptocurrency in their possession, and they will facilitate actors to come to their site, and deposit their tainted cryptocurrency.
So they've done something illegal. They have cryptocurrency. This is typical, there are always outliers of examples that don't follow within this. But they have tainted cryptocurrency.
They deposit it with this entity and the entity will give them the same equivalent amount in clean cryptocurrency minus their fee. Then they have the tainted. Now they're basically responsible for trying to get rid of that tainted crypto, but now it's not in the hands of the criminal. It breaks the chain for us to follow that financial flow all the way through the completion.
There are folks that certainly use mixing services to remain anonymous for legitimate purposes. However, from what we see, it's very few and far between.
Legitimate Examples of Crypto Crimes
Eric: What would a legitimate example be?
Jarod: The one we always use, same thing with most of the anonymity enhanced type activity, would-be whistleblowers. Somebody that's fearful for either payment or for information that they're trying to divulge. They want to remain anonymous for some safety concerns.
Eric: That makes sense to me. But basically, if you've seen the show Ozarks on Netflix, crypto mixing is essentially the brides. They're just not sticking it in a funeral home, in a floating casino that doesn't float and everything. They are just doing it online.
Rachael: I haven't seen the last season of Ozark though, so please, no spoilers.
Eric: No problem. Who was I talking to that compared cryptocurrency to dating? They basically said with cryptocurrency, it's like having a transaction record of every date you've ever been on. You can see what's happened. I imagine that through, you mentioned Chain Analysis and the like, you can still track pretty effectively even through a crypto mixer?
Jarod: There are definitely ways to trace through mixers. To your point, if it's a cryptocurrency that's distributed on a public blockchain, all of that information captured is available. There's a recording and a historical gathering of all that data.
So there's an immense amount of data that we can use and run through a lot of those tools to be able to still trace through and have options on where to go even after a mixer. That's really the benefit of a lot of these tools and being able to look back and then mix a lot of other things.
Tracing Tools For Crypto Crimes
Jarod: It's not just those tracing tools. We use a lot of open-source intelligence tools and data where they're aggregating mass amounts of publicly available data that may reside on the dark web or on the clear web that becomes extremely valuable data to mix with the financial flow. It helps go hand in hand to really paint a full picture together.
That's really all that mixed with our internal data, which you could only imagine how much internal data the IRS has. It just allows us to really be very effective in what we do.
Eric: The analogy was, if you and I go on a date and you have a bad experience, you're aware of that bad experience.
But cryptocurrency would be the equivalent of you being aware of every bad date I've ever been on, even though you weren't there. It's traceable, it's trackable to a decent extent. I don't think a lot of people understand that the blockchain is out there and you can trace it back many times.
Rachael: I think that's a good point because you do. You think nobody would ever know, but there are ways to know.
Eric: I have one last question around currency laundering, maybe the better way of doing it. Is it easier to do in the physical world with a stable currency, like a U.S. Dollar or is it easier online? Online seems easier, but it also seems easier to track than if I hit the local Atlantic City Casino and drop $100,000 there on the card table.
An Easier Process for Crypto Crimes
Jarod: From our perspective, we have visibility into both. If you're trying to launder hard currency USD, Fiat currency, there's still the sense that you have, especially with large amounts. You have to get it into some aspect. If it's a casino, the casinos are responsible for oversight and reporting through currency transaction reports.
But if you're trying to go through a bank, the banks are monitoring their transactions and trying to make those connections. As you said, the cryptocurrency, you have this much easier process online, but the benefit to that is that you could move significant amounts of money.
We have cases that are in the billions that are being completed and it could be done globally within seconds. That's a little different than carrying around billions in cash, which would not be feasible to o do something at that speed, yet, we have the visibility into some of the transactional details. So yes, there's a payoff there.
Eric: A trade-off. The velocity has to be incredible. That's good. I'm just happy the IRS is collecting money everywhere they can when it's not appropriately reported and being used. As a taxpayer, I feel good. I am one of the taxpayers who believe don't raise my taxes, just collect properly from everyone.
I’d put a ton of money into the IRS. I would probably take some from the defense if I could because I think we'd make money on that investment.
Rachael: The thing that's fascinating to me is the more explosive use of cryptocurrency and more for kind of mainstream. I think PayPal, I could send payment in crypto. Twitter, I think you could buy ads in crypto and people are using crypto to buy some of those NFTs.
[18:33] Another Interesting Space for Crypto Crimes
Rachael: I'm not sure I understand NFTs, but what are the implications when you start getting into things? If you buy your own NFT, you sell your own stuff, then how does that work? Is there a criminal element there? I'm just trying to think of all these new ways to buy things and jack up prices.
What are you guys seeing on that front?
Jarod: NFTs are another interesting space. They're an area that a lot of folks hear, but they're not quite sure what it means or how it should be dealt with. It's funny going back to the analogies I've heard that cryptocurrency is everything we don't know about technology mixed with everything we don't know about investing or finding.
But to your point, the NFTs are non-fungible tokens. Breaking that down, just simple terms, anything both physical or digital can be tokenized. It means that it's represented by a single token and the best way to think about that is stocks. If you have something and you buy a stock of something, you have ownership of it. It could be physical, it could be a pair of sneakers or it could be digital like some of these artworks that we see that are sold as NFTs as artwork.
Eric: I'm just getting old because I just don't get it.
Jarod: I'll give you a great example because my kids play video games and things like that. This is where it stemmed from some of this digital artwork. But a lot of these games offer skins, skins to play in a video game.
Exploring the Concept of NFT
Eric: I have $1,000. I shouldn't tell the IRS this. My 14-year-old has at least a thousand bucks into different skins. So, I can relate. His money, not mine.
Jarod: The concept here is that you could create an NFT collection and those collections could be both an investment for a collection. But then, some of these companies will sell the NFTs with an expectation that they're going to have a game that comes out after. Or they'll have some other type of benefit that those digital art forms or digital skins or digital whatever they're selling, could be used for some other benefit.
Whether it's the next release on a new music album or some game that they put out in the future that you're going to have now better benefits in the game, whatever it may be. Culture creates what we say is traditional fraud to occur now in this new environment. NFTs, one of the biggest ones we see, is like a pump and dump scheme, or even a wash trading and things like that.
I think getting to your point with if you're buying and selling your own NFT amongst two different accounts or addresses that people don't know you own both but I'm just starting to pump up that volume, pump up that pricing. I'm selling my same NFT over and over to myself between multiple different wallets and addresses and it jumps from $5,000 to $10,000 to $20,000 to $100,000. Now somebody's coming in saying, "This looks like a great investment. It's selling for tons of money. It's increasing in price so much. I'm going to jump in and buy this for $100,000.
Wash Trading In Its Simplest Form
Jarod: All of a sudden, that poor individual just got taken in because now they have a $100,000 investment that's worth $100. That's wash trading in its simplest form. There are a lot of other ones that pop up where folks are just doing non arm's length transactions or trying to really promote something of value.
In fact, they really offer nothing as part of that NFT sale. Then most recently, we just worked an investigation out in New York on the Frosties. It was an NFT collection, which was a rug pool where they offered all these NFTs.
They had about, I want to say little under 9,000 Frosties for sale. They’re about $100, $150 each. So they made a significant amount of money, about $1.1 million. The expectation was that there was going to be a game that came out. Then your Frosties would be incorporating the game and you got all these benefits. Ultimately, those individuals took off with the $1.1 million. It's called a rug pull.
They tried to launder their money through different mechanisms, peel chains, and different things of that nature. Ultimately, we identified them and arrested them to hold them accountable, but those are the type of crypto crimes that occur in this space.
Eric: I thought you were describing a Kickstarter campaign there for a minute. I've had a number of those that went nowhere. They took the money in would you call it a rug pull? I feel like they pulled the rug out in a few cases.
Jarod: Your kick Kickstarter ones were other crypto frauds, like the ICO fraud and initial coin offerings, very similar.
Eric: Those are illegal, and the IRS will go after and prosecute those also.
IRS Is Looking into the Intent for Crypto Crimes
Jarod: Absolutely. When the intent is there to criminally deprive and do something wrong and money's involved, we're looking into it.
Eric: As the IRS, and I want this to come out in a positive light here. You're dealing with a long history of regulations and laws that I would assume are pretty antiquated in this fast-moving new world we're in. Now we're dealing with non-fungible tokens, we're dealing with cryptocurrency. I don't think we've rewritten laws. How do you deal with that? Is that hard, or does it work?
Jarod: I think when it comes to the regulation and some of the legal proceedings that follow along with the space, we on the criminal side have the necessary laws in place. It's very ambiguous to laundering of funds or proceeds. Small adjustments have been made to what a monetary instrument is. It can include now cryptocurrency and things of that nature.
The taxation of different components is a separate issue. These are things that the civil side of the IRS is still working to identify how NFT should be taxed and how these things have different changes, how that stuff takes place. But yes, we feel pretty confident in having a good legal structure to go after these criminals.
Eric: I can't imagine the first time you go in front of a judge with a criminal case. You're talking about nonfungible tokens and they're like, "Can you define that for me please and I need a law clerk here to help me understand." It's got to be bizarre.
[25:22] A Case Precedent Setting
Jarod: That is a good point because almost every case that we've been involved in CI since the 2014 timeframe is case precedent-setting. So you're trying to bring the best cases and you better have good evidence. You better have a good theory and a good practice behind what we're bringing because it's setting case law for infinite mount forward.
Rachael: Is this something that they teach in law school? Is this becoming a course that people can take?
Jarod: Yes, there are actually a lot of colleges now offering not only blockchain technology but cryptocurrency classes as well as the legal aspects around this. There are a ton of schools and some are very mature in that curriculum. They're pushing out a lot of great students and graduates. We always are looking to them for additional folks that hopefully will come on board and join the team U.S. Government.
Eric: The good news is, they're using, they're buying cryptocurrency, they're probably paying for things with cryptocurrency. They're not coming at it coldly, even if they haven't taken a degree program or a program that has educated them. To me, as the next generation comes up, this is just their common language, almost. They're common currency in some ways.
If you talk to somebody who's 70, they probably have no idea what an NFT is. They may have heard of Bitcoin. I know I'm stereotyping here. With a population set of 100, I bet a small handful of 70-year-old have cryptocurrency investments right now. But if you go to a bunch of 25-year-old, I think that number's probably a little higher. That'd be my guess. So they're more knowledgeable.
Alternative Payment Platforms and Systems Incorporating Crypto
Jarod: I think with the accessibility like you were getting at earlier with PayPal and Venmo and some of these other alternative payment platforms and systems now incorporating crypto. It's just becoming more of a way of traditional financial aspects. Internally to CI, a lot of us that are really engaged in this space got into it for different reasons, and several years before it was actually more popular. We have a little bit more of an invested interest than just kind of our development over time.
Eric: What's the craziest thing you've seen? We had Greg Crabb on, he was a postal inspector from the post office, U.S. Postal Service. He told us this one story, we actually titled the show One Night In Bangkok and it was a great story of just criminal stupidity. Do you have anything without giving us details that could take you back to the case or anything?
What's the most ridiculous story you have?
Jarod: I think it is publicly known now, but the welcome to video case, which one of my good friends worked that investigation. It was a complete dark net marketplace that sold child exploitation and sexual material. We were investigating that because it was all crypto-based.
The criminal, actually, one of the main needles in the haystack, as we say, was him getting in a car accident and chipping his tooth and posting his photo to a bunch of his friends and submitting it to the insurance company. It ultimately gave us his ID and attribution from his search warrant that we executed on his email account. That was a very happy day when we identified who the real guy was.
A Good Story
Eric: This guy's making, I'm assuming, millions of dollars on child exploitation and he gets caught trying to file an insurance claim for dental insurance for a chipped tooth. That's a good story.
Jarod: One of the main ways that we identified who he was, and he was actually in South Korea.
Eric: Do the criminals usually do something stupid like that eventually to get caught? I got to think they do.
Jarod: We're hoping and banking on that because it helps us. It does truly help us tie a lot of things together. We have a lot of things pointing at them, but then eventually they make that one mistake where they didn't use a VPN, they didn't hide their IP. They didn't take the necessary measures to get on tour.
Different technical components that were open allowed us to really make attribution and find out exactly who they were. I say this almost every presentation, but for 20 years of my career, we always knew the individual and we're proving the crime. It's now with crypto, we know the crypto crimes and we're trying to prove the individuals.
Eric: It's almost totally flipped then.
Jarod: It's completely a dynamic flip on the way that we operate.
Eric: This is why I'm not a criminal. I make so many stupid mistakes every day, that I'd be busted in five minutes. One of the many reasons I should say.
Rachael: Cryptocurrency, correct me if I'm wrong, is it the only truly global currency out there today?
Jarod: Global in a sense of the ability to move it globally. A lot of countries have different views, regulations, and stances on how cryptos are involved in their own traditional financial markets.
Crypto Crimes are Globally Available
Jarod: But yes, globally, it's available and easily able to shift money anywhere in the world within a matter of minutes.
Rachael: When you are then tracing, I think, these criminals when they make funny mistakes, does that require some international cooperation? How does that even work then when you're starting to get across country lines and different regulations. As we know, sometimes certain countries do like to Harbor their cyber criminals and give them a little protection.
Jarod: It really does come down to the relationships that we build and the treaties that we have from a global standpoint. We work very closely with a lot of countries and a lot of partners. IRSCI has a little under a dozen foreign posts where we have special agents that are in foreign countries that work with those foreign agencies to actually assist on casework.
We put them in the main areas where we have a lot of activity. Those are the relationships that we build so that we can work on joint cases.
We work a lot of cases with many of the Euro pole agencies so that if it's us that initially got the information, but we see something hitting into any European country, we're working with that country to resolve and to hold them accountable.
Certainly, there are countries that don't want to work with the U.S. and don't respond favorably to any of our requests. We have to deal with that in a separate manner. It's almost like some of them are black holes. We can't get information, we can't get criminals to be extradited, but then there are others that we build great relationships with, and we work very closely. It ends up giving us a far reach.
[33:39] Where Criminals Need a Jurisdiction
Eric: Are there, you don't have to name any countries, of course, regions of the world that you're more active in? I would think Africa would be a big place where you have a lot of problems, probably Eastern Europe.
Jarod: Anywhere. These criminals need a jurisdiction that either affords them the capability to commit their crime, or they live in very nice areas to spend their money. They're they don't want to live in a dump to make noise.
They want to spend their money, they want to go out to cities, and live a lavish lifestyle. So, they're typically residing more in the first world type countries that are affording them that type of lifestyle. We have great relationships with most of those. The ones that you can imagine we don't are the typical ones that we always hear about and deal with.
Rachael: When you look at the next five years and cybersecurity is moving so fast, and the criminals are moving so fast. What keeps you up at night?
Jarod: I always say that it's the devil we don't know. It's that area that we're not really visible to that is providing some capability to the criminals. What keeps us off is trying to stay on top of the new advancements in technology. As I said, I got involved in this space back in the 2012 timeframe when it was really more of just an interest in the area. We were dealing with virtual currencies, not so much crypto yet. It was there, but not really dealing with it yet.
Then the advancements of now where we're seeing just these wallets, techniques and technologies for cross-chain to anonymity enhanced coins to all this type of activity.
An Awareness Piece on Crypto Crimes
Jarod: It takes us a significant amount of time and effort to stay on top of us from just an awareness piece. So, it really requires us to not only stay sharp, but also bring in good folks that have that background in this space and are interested in retaining that type of education and knowledge base, and then work with our private sectors because these folks live and breathe this every day. They're the ones that are on the front line of development, on technology, and how it is used.
We work right beside them to try to make sure we're staying sharp as well. But yes, it's a challenge.
Eric: How do you bring people in? What's the right profile for an agent on your team?
Jarod: It's one of those ones that's just developed over the years. I call them a unicorn.
Eric: It sounds easy to fill.
Jarod: That's right. It's somebody that has an understanding of financial investigations. That's what our last 100, years our agency's been built around, being the finest financial investigators. It doesn't matter what base criminality is, but then you have to add the technology and the crypto side. Usually, get one or the other.
You either get the tech-savvy folks that don't really understand tax and finances, or you get the financial folks that don't really have the tech and crypto side. It's one or the other, and we're trying to balance having both. If you can find somebody that has all of that combined, that's my unicorn.
A Valuable Background Needed to Combat Crypto Crimes
Eric: Is that somebody who has a financial degree like you do? I looked at your profile. You've got one heck of a degree resume there. They've got a financial accounting or finance type degree along with computer information systems or some tech degree.
Jarod: If somebody has that type of background, it's extremely valuable to us because they're coming in with a complete understanding of everything we do. It's like, you can hit the ground running on both the tech side and also the financial components, the financial investigative component.
Eric: If they don't, how do you enable them? Is it OJT, how does that work?
Jarod: We have on-the-job training. We've developed, and built in-house training around this space, mainly around the crypto and technology space. Everybody that's coming into IRS criminal investigation based on our job requirements, you either have a tax or a finance background. It's really the tech side that we're trying to add on or build on.
The last question was that the space continues to evolve so fast that it's more of us trying to keep pace with it. We offer training, we partner with the private sector to help them offer training, and then try to find good folks coming out of some of these programs. Maybe it's a financial background, accounting, or finance background, but they've taken classes in crypto and blockchain analytics. Something like that at certain educational or schooling that they've taken those type of classes, is extremely beneficial.
A Plea Agreement
Eric: I almost feel like this is an area where, as you come to a plea agreement or you lock some guilty party up, their good time in prison should be educating and teaching on the latest techniques and trends that they're using. Is that a stretch? It just seems like this is so fast-moving, you can't wait for the school, the education system to learn it and teach it.
Jarod: That would be interesting. It's, take the old informant type aspect.
Eric: We'll give you 20 years, or we'll give you 20 years plus four off for education and good behavior, but you got to educate for 18 of those 20 years or whatever's relevant. It just seems like it would be a workable trade.
Rachael: All right, quantum computing, concerned, not concerned?
Jarod: Concerned in a sense that at some point it will likely get here. You got a lot of folks looking or some form or fashion of that and I think folks are going to get there. I think we're still far off, but it is a concern. It breaks a lot of the encryption aspects that are really offering the security around a lot of the built components, whether it's finance and crypto to communication and secure online communication.
I think there are a lot of things that those challenges. But again, I think we're far from that, but for the immediate. But I think it is inevitable that we'll get to a certain point where technologies advance further.
Eric: Will it allow the adversary to move faster or launder and hide their assets more effectively?
[41:25] A Technology for Tracking Crypto Crimes
Jarod: I'm sure. If you're getting to that level of computing, it definitely will. What we're going to have to do is then use the same type of technology to be able to have ways to find them. That cat and mouse game will never go away and it's just something that we have to continue to advance.
Eric: I always feel like new technology can always be used for good or evil. Then conversely, the defenders, yourself, the police, and the FBI, can use it to help dig them out and stop bad behaviors.
Jarod: In the wrong hands, the good technology is just as bad. A great example of that is pretty much all the dark net and everything that really stemmed from that, being a great platform for secure communication for the military turns into a platform for everything illegal to be conducted. It's just a challenge.
Eric: If you're making a ton of money, don't file your dental claim. Figure something else out. We've learned about rug pulls, peel chains, and pumping dump schemes.
Rachael: I'm doing all the things. I'm going to go meet some people for dinner tonight and just start dropping some knowledge.
Eric: You'll sound cool until you tell them how miserable you were in Cabo for 12 days. Then you'll lose your audience. J
arod, what else should we be asking? What else should we be worried about? Have we missed any? This is not our area of expertise, but fascinating.
Jarod: I think the only thing that's a hot topic right now is the volume that crypto is being exploited and used in criminal activity. We've seen an infinite increase over the last three to four years, which has just been really staggering.
Alarming Crypto Crimes Due to the Increase in the Value of Crypto
Jarod: It's alarming. A lot of it is due to the increase in the value of crypto, mainly Bitcoin and some of the other main coins. But to that degree, we, as an agency, saw spikes from seizing several hundred thousand in one year to $137 million to $3.5 billion. Then to date this year, we're pushing upwards of $7 billion in seizures. It's incredible to see that amount of criminal activity taking place.
Eric: $7 billion in seizures? What do you estimate you're not getting?
Jarod: That's exactly why I say the devil we don't know. There's been a lot of talks in terms of the percentage of what it is, criminal and nature. It's all probabilistic modeling on what that actually is. I don't know.
Eric: I'm telling you, put money into the IRS. The more criminal behavior we stop, the more money we make. It's a good national investment.
Jarod: We could use the additional personnel.
Rachael: It sounds like an awesome job. I'm not a numbers person, so I'd be a terrible hire for you. But for the right person, that could be a lot of fun.
Eric: Jarod, we appreciate the education. This has been a fascinating conversation.
Jarod: Absolutely. It's always good to talk about some of the stuff that the agency's doing and the hard work all the employees are certainly putting in.
Eric: It's for all of us, you're helping us. By the way, I pay my taxes on time every single year as I'm supposed to. If that helps in any way, you can help Rachael out there also and we will get you, we'll try to help you on the recruiting side.
What the IRS is Looking For
Eric: So financial mindset, tech-savvy, blend it together, have an interest in serving your country, that mission-oriented, "We're going to stop bad behaviors across the land." That's really what you're looking for.
Rachael: Jarod, I've learned so much talking to you today. It's exciting to think of all the hard work that you guys are doing, and all the movement that you're making forward, as well. It is always heartening to see the pace right of advancements for the good guys, as the bad guys continue to move forward as well. I'm always hopeful that we're going to get ahead of them at some point.
Eric: Not happening since the beginning of time. We've always had cops and robbers. I think the robbers came before the cops.
Jarod: I would guess so, as well. They have a lot more time to think about what to do.
Eric: I certainly don't have a criminal area of expertise in my background. I had one course in college, but I think the robbers came before the cops, and then we needed some cops. So we wish you the best.
Rachael: Everyone, thank you so much again for joining us this week and joining Jarod Koopman for our conversation.
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About Our Guest
As the Acting Executive Director, Jarod Koopman is responsible for the establishment of the newly formed HQ section - Cyber and Forensics Services. As such, IRS-CI aligns the existing sections of Cyber Crimes, Digital Forensics, and the National Forensic Lab to create necessary efficiencies and streamline the investigative efforts. Jarod oversees all global operations involving Cyber and Forensic activities, including policy, procedures, budget, and investigative services. In addition to this role, Jarod will lead the establishment of a new centralized facility - the Advanced Collaboration and Data Center (ACDC), which will act as a mission-centric hub for cyber projects, crypto compliance efforts, training, and investigative support, and concentrated knowledge. Jarod and his team will look to dismantle cyber-criminals through innovative tradecraft.