On July 15, numerous Twitter accounts belonging to high-profile figures like Bill Gates, Elon Musk and Barack Obama were hacked, with the perpetrators using them to promote a Bitcoin scam. On July 17 an article on Forbes.com laid out how Valega Chain Analytics just hours after the scam became known could analyze the Bitcoin transactions originating from one Binance address (= Bitcoin account), cascading through a spiderweb of transfers involving other addresses and exchanges to finally try to launder those Bitcoin through e.g. gambling companies. Kauppalehti, a major Finnish business news outlet reported on the incident and the swift action by this young Finnish Start-up two days later. A whole week later, on July 25, the well-known German news brand Zeit Online ran an article on fraud and money laundry forensics on the Bitcoin network and reported from a discussion with the CEO of a UK based competitor and major player in the cryptocurrency Anti-Money-Laundry (AML) business that investigations are still ongoing.
Time is of the essence to maximize the chances for investigators to catch cryptocurrency fraudsters in such donation scams, but also in human trafficking, terror financing, illegal weapon trading, ransom ware and numerous other illegal cases. Valega Chain Analytics operating on the real-time Blockchain, the underlying technology of cryptocurrencies such as Bitcoin, Ether, Ripple, Litecoin and many others is well positioned to quickly react and serve with their SaaS service offerings such forensic investigations.
Valega Chain’s other and potentially even larger use-case is automated API based AML monitoring. Regulation e.g. in the Nordics, in Germany, in Switzerland requires financial institutions to know of their customers’ crypto assets and to have basic monitoring and transaction analyzing capabilities. The European Commission is currently establishing those rules on an EU scope. Even more advanced analytics capabilities in those financial institutions and meta-data attached to the transactions themselves is planned to be required by the next Anti-Money-Laundry directive, AML D6 coming to EU member states by the end of 2020. Crypto exchanges, payment providers, financial institutions providing crypto holding are the obvious regulated partners. Moreover, non-financial companies such as credit scoring or accounting service providers will want to expand their services including cryptocurrencies.
Valega Chain Analytics’ founding team Sven Martinsson (SWE/BRA), Jonathan Pallares (SWE), Jorge Santos (POR) and Jens Herzog (GER) have started to work on monitoring Bitcoin transactions and classifying addresses approximately two years ago. The Helsinki based company and its AML services are thus based on a rather comprehensive foundation that reaches back to the very first Bitcoin transactions.
“We entered the virtual currency sphere during the ICO craze and quickly realized that there were a lot of scams and illicit activities happening leading to distrust from financial institutions, regulators and the general public. We saw that there were a few companies monitoring transactions but none who really catered to the masses and SME’s thus not allowing for future mass adoptions. This is when we decided to pivot our business and create a compliance platform to safeguard those who transact on blockchains as well as provide the means of investigating illicit activities.” – Sven Martinsson, Founder & CEO outlines Valega Chain’s motivation.
An investor consortium led by the Finnish Business Angel Network (FiBAN) and Accelerator Frankfurt was well convinced and closed on September 10th with the company a seed round with an investment of 300k EUR. “The beauty of a decentralized digital infrastructure, the efficiency it provides for financial services combined with the recent exponential growth of the audience for and total value locked in decentralized finance (DeFi) assets – also driven by regulation – composes a fertile ground for building Valega Chain Analytics into a great European company with Nordic roots.” says Mikko Rieger, leading the FiBAN investment syndicate.
Ram Shoham heading the Accelerator Frankfurt program in which Valega Chain Analytics was part of the Spring 2020 batch sees “the Valega team is one of the strongest teams we have seen since founding the accelerator in 2016. Combined with a the right market timing, Valega’s technology will prove to be a breakthrough solution for mass adoption of virtual assets with proper regulation and transparency”. The seed round was successful, actually over-subscribed, thus ending at the upper limit of the raised capital target range.
Meanwhile, the method in the Twitter Hack to get control over the said user accounts – calling up Twitter staffers and, using false identities, tricking them into giving up credentials – has spread after the July occurrence to dozens of companies, including banks, cryptocurrency exchanges, and web hosting firms as Wired reported. Most often the aim is to steal large amounts of cryptocurrency. Valega Chain Analytics is happy to help (again).