Cryptocurrency Investigation Field Guide – In-Depth Analysis

In the evolving landscape of digital crime, understanding how to investigate cryptocurrency has become a critical skill for law enforcement and digital forensics professionals. As decentralized financial systems grow in popularity, so too does their misuse in illicit activities. This guide provides a structured, practical approach to identifying, extracting, and securing cryptocurrency evidence during investigations—covering wallet types, forensic tools, and secure asset handling.

Understanding Cryptocurrency Wallet Types

Cryptocurrency wallets are essential for storing, sending, and receiving digital assets. Each wallet type presents unique challenges and opportunities during forensic examination.

Desktop Wallets

Desktop wallets are among the most common methods for storing cryptocurrency. These applications typically offer intuitive user interfaces for managing transactions and are relatively easy to develop and use. Well-known examples include Electrum, Armory, Bitcoin Core, and MultiBit-HD. During device seizure, investigators should search for installed programs with “wallet” in the name or associated file signatures. A quick system-wide search can reveal hidden or renamed applications.

Mobile Wallets

Mobile apps such as Mycelium, GreenBits, breadwallet, Jaxx, and Airbitz allow users to manage crypto on smartphones. Many of these apps include PIN protection or biometric locks, requiring additional authentication before access. When examining a seized mobile device, checking for the presence of these apps is a primary indicator of cryptocurrency usage.

👉 Discover how modern forensic tools streamline mobile crypto investigations.

Online (Hot) Wallets

Online wallets, often provided by exchanges like Coinbase, GDAX, Gemini, and Kraken, require login credentials and typically support two-factor authentication (2FA) for enhanced security. These platforms function similarly to stock trading services, enabling users to buy and sell cryptocurrencies using fiat currency. Importantly, all four exchanges listed require verified identity (KYC compliance), making account tracing more feasible.

Notably, Coinbase and GDAX have a documented history of cooperation with law enforcement. With proper legal authorization (e.g., search warrants), they have previously disclosed customer data and transaction patterns—providing vital leads in criminal investigations.

Cold Storage Wallets

Cold storage represents the most challenging form of cryptocurrency to trace. By design, cold wallets keep private keys offline—away from internet-connected devices—making them resistant to remote hacking but difficult to detect during seizures.

Private keys are the sole means of authorizing cryptocurrency transfers. In cold storage, these keys may exist as:

• Printed paper backups
• Encrypted files on USB drives
• Memorized recovery phrases (e.g., BIP-39 seeds)

The BIP-39 standard simplifies key management by converting complex private keys into 12–24 human-readable English words known as a recovery seed. For example:

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If investigators recover such a seed phrase—whether written down or stored digitally—they can import it into compatible wallets like Coinbase or Electrum to access funds immediately.

Digital Forensics: Locating Cryptocurrency Evidence

When examining seized devices, follow a systematic process:

1. Review browser history for visits to exchange sites (e.g., Coinbase, Kraken).
2. Search for bookmarks or cached login sessions indicating recent activity.
3. Scan for wallet software using file name patterns or known signatures.
4. On mobile devices, check app lists for known crypto wallets.

If no active wallets are found, suspect cold storage usage. Investigators must then look for physical clues: handwritten notes, encrypted files, or USB drives containing wallet data.

Leveraging Cellebrite Cloud Analyzer in Crypto Investigations

Current forensic tools can extract limited data from mobile wallet apps—such as balance information—but compatibility varies across devices and app versions.

When direct access fails, Cellebrite Cloud Analyzer offers a powerful alternative. It enables cloud-based extraction of data from services like Coinbase, retrieving Bitcoin addresses, transaction histories, and timestamps—even when local app data is encrypted or deleted.

Once extracted, analysts can visualize transaction timelines alongside other digital evidence (e.g., call logs, messaging records), revealing patterns that link cryptocurrency flows to criminal behavior.

Real-World Case Example: Cloud Data Breaks Drug Trafficking Case

Law enforcement suspected a suspect of selling drugs to high school students but lacked tangible financial evidence. Despite multiple arrests and device seizures, no cash or traditional money trails were found.

During a recent search, investigators recovered the suspect’s phone and identified a cryptocurrency wallet app. While the balance was visible, the private key remained inaccessible. Using Cellebrite Cloud Analyzer, they extracted transaction records from the suspect’s linked Coinbase account.

By aligning transaction timestamps with known drug sale dates and cross-referencing phone call records, authorities established a clear financial link between crypto movements and illegal activity. Further analysis revealed transactions occurring near school zones—aggravating sentencing factors that led to enhanced penalties.

This case underscores how cloud-based crypto forensics can turn invisible digital trails into actionable evidence.

Using Cellebrite PC Collector for Desktop Investigations

For seized computers, Cellebrite PC Collector helps extract saved credentials from web browsers. Once login details for exchange accounts are recovered, investigators can use them with Cloud Analyzer to pull cloud-stored transaction data—extending visibility beyond local device storage.

👉 Learn how integrated forensic platforms enhance investigative efficiency.

Securing Seized Cryptocurrency Assets

Simply discovering cryptocurrency during an investigation does not equate to securing it. Without prompt action, suspects or accomplices with access to private keys can transfer funds instantly and irreversibly.

Agencies must establish clear protocols for handling seized digital assets.

Key Elements of a Cryptocurrency Management Policy

• Designate authorized personnel for seizure and transfer operations
• Notify relevant internal and external stakeholders upon discovery
• Follow strict chain-of-custody procedures for digital evidence
• Maintain an official agency wallet with published public address

Upon discovery, investigators should transfer funds to the agency’s secure wallet as quickly as possible to prevent loss.

Best Practices for Storing Confiscated Cryptocurrency

Stolen or illicitly obtained cryptocurrency must be stored securely to prevent theft or misuse.

Storage Options

• Online (Hot) Storage: Exchange accounts (e.g., Coinbase), web wallets, or vaults
• Offline (Cold) Storage: Hardware wallets (Ledger Nano S, TREZOR), encrypted USBs, or printed private keys

While hot storage offers convenience and traceability (especially with KYC-compliant platforms like Coinbase), it remains vulnerable to cyberattacks. Cold storage is more secure but introduces risks related to key management—particularly if only one person holds access.

Blockchain security hinges on protecting the private key. Storing your key on a computer is like hiding a gold bar in your fireplace—it might seem safe until someone finds it.

Institutional Solutions

The Cyber Crime Unit of the National White Collar Crime Center (NW3C) recommends using Coinbase as an official repository for seized assets due to its strong security record and cooperation with U.S. law enforcement.

For agencies seeking greater control, localized cold storage solutions—featuring multi-signature authorization and biometric verification—can mitigate insider threats and unauthorized transfers.

👉 Explore secure custody solutions designed for institutional crypto holdings.

Frequently Asked Questions (FAQ)

Q: Can deleted cryptocurrency wallets be recovered?
A: Yes, through forensic disk imaging and file carving techniques. Deleted wallet files may remain recoverable until overwritten.

Q: How do I verify ownership of a seized cryptocurrency wallet?
A: Ownership is proven via control of the private key or recovery phrase—not possession of the device alone.

Q: Are blockchain transactions truly anonymous?
A: While pseudonymous, transactions are publicly recorded. With sufficient data (e.g., IP logs, exchange KYC), identities can often be linked.

Q: What happens if we lose the private key to seized crypto?
A: The assets become permanently inaccessible. Robust backup and access control policies are essential.

Q: Can hardware wallets be hacked?
A: Direct physical compromise is rare, but phishing attacks targeting recovery phrases remain a major risk.

Q: Is it legal to transfer seized cryptocurrency?
A: Yes, if done under proper legal authority and documented within the chain of custody.

This guide equips investigators with the knowledge and tools needed to navigate the complex world of cryptocurrency forensics—ensuring both evidentiary integrity and asset security in modern criminal investigations.