Chainalysis

Type: Private

Industry: Cryptocurrency, blockchain analysis, data platform

Founded: 2014

Founders: Michael Gronager, Jonathan Levin, Jan Møller

Headquarters: New York, NY, USA

Area served: Worldwide

Key people: Michael Gronager (Chief Executive Officer, Co-Founder), Jonathan Levin (Chief Strategy Officer, Co-Founder)

Products: Chainalysis Reactor, Chainalysis Know Your Transaction (KYT), Chainalysis Kryptos, Chainalysis Market Intel

Revenue: Undisclosed

Employees: 250 - 500

Website: chainalysis.com

Contents

• History
• Products and services
  • Chainalysis Reactor
  • Chainalysis KYT
  • Chainalysis Kryptos
  • Chainalysis Market Intel
  • Chainalysis Business Data
• Funding and growth
• Government Cases
• Controversies
• References
• External links

Chainalysis is a blockchain data platform who provides data, software, services, and research to government agencies, exchanges, financial institutions, and insurance and cybersecurity companies in over 60 countries. Founded in 2014, Chainalysis is headquartered in New York, with additional offices in Washington D.C., London, Copenhagen, Australia, Tokyo, Korea, and Singapore.

History

Chainalysis is a privately held company founded in 2014 by Michael Gronager, Jonathan Levin and Jan Møller. That year, the company was hired to be the official investigators for the Mt Gox hack. Chainalysis now works with governments and businesses across the world and was valued at over $4 billion in the most recent fundraising round in March 2021.

Products and services Chainalysis products are built upon the company’s proprietary blockchain dataset, which maps the services that control the hundreds of millions of cryptocurrency addresses and account for over $10 trillion of value transferred. Chainalysis adds over 100 new illicit and non-illicit services to its data set every week, including scams, darknet markets, exchanges and more.

Chainalysis has five products: Chainalysis KYT (Know Your Transaction), the real-time transaction monitoring solution for compliance professionals; Chainalysis Reactor, the investigations software; Chainalysis Business Data, the on-chain customer intelligence for cryptocurrency businesses; Chainalysis Kryptos, the risk management software for financial institutions; and Chainalysis Market Intel, the cryptocurrency market intelligence platform. These products work together to allow the private and public sectors to understand the entities on the blockchain and their activity.

Chainalysis Reactor

Launched in 2014 Chainalysis Reactor is a blockchain investigation tool used in investigating exchange hacks, darknet markets, ransomware, terrorist financing, and other illicit activity. It also lets users annotate their findings and keep notes to help identify reappearing offenders, or share data with their internal teams.

Chainalysis KYT

Chainalysis KYT was launched in 2018 to help companies doing business with cryptocurrencies comply with regulatory requirements globally. It reduces manual workflows through automated counterparty risk screening.

The company supports over 100 coins including Ether, Litecoin, Bitcoin Cash and Tether. With the expansion of its KYT offering to stablecoin issuers, Chainalysis KYT became the first solution of its kind for these cryptocurrencies, which are designed to minimize price volatility. Chainalysis provides a real-time, anti-money laundering (AML) compliance solution to monitor stablecoins across the full lifecycle of every transaction, including issuance and redemption.

Chainalysis Business Data

Chainalysis Business Data helps cryptocurrency exchanges and other fintech companies that offer cryptocurrency services better understand their users, tailor their product offerings, and identify new revenue streams. Business Data uses Chainalysis’s proprietary data, which cryptocurrency businesses across the world use for compliance.

Chainalysis Market Intel

In July 2020, Chainalysis launched Market Intel, a public website with live cryptocurrency data designed to help asset managers and regulators understand cryptocurrency markets.

In 2021, Chainalysis expanded Market Intel to provide paid access to real-time data and insights on cryptocurrency usage and the health and growth of cryptocurrency markets. Chainalysis customers have access to custom reports and analysis, enabling businesses to remain compliant with regulators who are leveraging the same dataset and make better investment decisions.

Chainalysis Kryptos

Chainalysis Kryptos was launched in 2019 and is designed to allow users to quickly understand the cryptocurrency industry. The software provides profiles of cryptocurrency businesses and other entities transacting on the blockchain.

Built on the Chainalysis reference data set, Kryptos provides transparency into cryptocurrency markets and players so financial institutions can allay compliance concerns, better understand their current risk exposure, and build foundations for expansion into the asset class.

Funding and Growth

Series A

In April 2018, Chainalysis raised a $16 million Series A round of funding led by Benchmark Capital in a move to ramp up its sales efforts and expand the number of cryptocurrencies it tracks.

Series B

In 2019, Chainalysis announced its $36M Series B round funding led by Accel, with participation from Benchmark, Sozu, and MUFG, . The company extended its Series B in July 2020 to $49 million.

Series C

In November 2020, Chainalysis announced it raised a $100 million Series C round led by Addition, with participation from previous investors, at a $1 billion valuation.

Series D

In March 2021, Chainalysis announced it raised a $100 million Series D round led by Paradigm, with additional backing from the investment fund, Time Ventures. Existing shareholders Addition and Ribbit also increased their holdings, putting Chainalysis at over a $2 billion valuation.

Series E In June 2021, Chainalysis announced it raised a $100 million Series E round led by Coatue. This round of funding set the company’s valuation at over $4 billion.

Acquisitions

Exygent

On October 5, 2021, Chainalysis announced the acquisition of Exygent, a specialized professional data firm that assisted government agencies with cybercrime investigations, data processing, and lead generation.

The companies had collaborated n the past on high-profile cyber cases such as the seizure of more than $1 billion in cryptocurrency connected to the darknet market Silk Road, the shutdown of the largest child abuse site, and the Twitter hack that compromised approximately 130 Twitter accounts pertaining to politicians, business leaders, and celebrities.

Reports

Annual Crypto Crime Report

Chainalysis publishes a yearly report which examines the previous year’s criminal activity via cryptocurrency usage. The report aims to provide context around cybercriminal trends, understand how the ecosystem is impacted by external factors, and provide original research and case studies to a wide audience. The report has become a go-to source for reporters discussing cryptocurrency and is cited throughout each year.

The 2021 Crypto Crime Report denoted 2020 as the “Year of Ransomware,” due to the copious amounts of ransomware schemes throughout the pandemic, with an over 300% increase in attacks compared to 2019. The report also makes known that less than 1% of all cryptocurrency transactions are connected to illicit activity, working to dispel the myth that the digital technology is being used primarily by bad actors.

Geography of Cryptocurrency

Chainalysis, in 2020, published a first-of-its-kind report examining and measuring cryptocurrency usage in different geographical locations. The report breaks down cryptocurrency activity by region, inter-regional trading patterns, the state of regulation by region, cryptocurrency in high-risk jurisdictions and trends in cryptocurrency-related crime by region.

The report featured a Global Crypto Adoption Index, highlighting global trends among in cryptocurrency usage across 154 countries via a methodology using on-chain cryptocurrency value received by a country, on-chain value transferred, number of on-chain cryptocurrency deposits and peer-to-peer exchange trade volume. The data was weighted by the purchasing power parity per capita and number of internet users in each country.

In 2021, the Global Cryptocurrency Adoption Index ranked all 154 countries according to each of the metrics with Vietnam, India and Pakistan listed among the top three.

The 2021 copy of the Geography report also includes an industry-first DeFi Adoption Index, detailing global trends among DeFi usage across 154 countries. Chainalysis’ methodology uses on-chain cryptocurrency value received by DeFi platforms weighted by PPP per capita, total retail value received by DeFi platforms, and individual deposits to DeFi platforms to rank countries on a scale of 0 to 1. The closer the country’s final score is to 1, the higher the rank.

In 2021, the DeFi Adoption Index ranked all 154 countries according to each of the metrics with the United States, Vietnam and Thailand listed among the top three.

The Crypto Maturity Model In May 2021, Chainalysis released their Crypto Maturity Model, an iterative roadmap for cryptocurrency product rollout, which provides financial institutions the ability to evaluate market opportunities while addressing compliance requirements

The model defines four levels of cryptocurrency adoption for financial institutions. Each level is an overview that acts as a reference point for professionals as they continue building out their digital asset offerings. The levels include:

Level 1: Open for business Level 2: Synthetic cryptocurrency products Level 3: Custodial services Level 4: Beyond custody .

Key Players Report

In June 2021, Chainalysis released their report titled Key Players of the Cryptocurrency Ecosystem which outlined the entities behind the majority of cryptocurrency transactions, the risks associated with different types of cryptocurrency services and organizations, and emerging trends and potential dangers to avoid.

Government Cases and Investigations

Suex

In October 2021, the U.S. Treasury’s Office of Foreign Assets Control (OFAC) announced that Russia-based cryptocurrency Over The Counter (OTC) broker Suex was designated pursuant to Executive Order 13694 and added to the Specially Designated Nationals and Blocked Persons (SDN) List, thereby prohibiting Americans from doing business with the company.

Chainalysis’s investigations tools were used to identify $13 million in bitcoin transactions sent through Suex directly tied to ransomware attacks. In addition to the ransomware activities, scammers sent $24 million in bitcoin and another $20 million were tied to Hydra and other darknet markets.

Investigation Into Jan. 6 U.S. Capitol Insurrection

Following the January 6, 2021, storm on the U.S. Capitol Building Chainalysis found evidence that many alt-right groups and personalities, including Nick Fuentes, received large Bitcoin donations cumulatively worth over $500k in a single transaction that occurred one month before the riot on December 8.

Chainalysis research found the source of the funding appeared to be a computer programmer based in France.

NetWalker

In January 2021, The U.S. Department of Justice (DOJ) worked on a coordinated international law enforcement action to disrupt the NetWalker ransomware, including the seizure of nearly half a million dollars in cryptocurrency, disablement of a dark web resource used to communicate with NetWalker ransomware victims, and arrest of a Canadian national, Sebastien Vachon-Desjardins, who obtained tens of millions of dollars by acting as a NetWalker affiliate.

Chainalysis investigative tools helped officials track and trace the ransomware funds.

Hansa

In the fall of 2016, Dutch police discovered a trail of the popular dark-web marketplace, Hansa. Law enforcement led Operation Bayonet, in which after having shut down AlphaBay, users flocked to another similar market called Hansa. Unbeknownst to those buyers, Dutch police were also in total control of that site. And now many of their usernames and passwords, as well as their addresses, were in the hands of police.

Using tools from Chainalysis, Dutch officers were given full transparency into a Bitcoin payment provider located in the Netherlands.

Welcome to Video

In October 2019, Chainalysis products provided assistance to investigators in the shutdown of Welcome to Video, the largest ever child abuse site by amount of material stored, along with the arrest of its owner and operator. Chainalysis software, including Chainalysis Reactor, helped analyze the website’s cryptocurrency transactions that ultimately led to the arrests.

With the site’s listed Bitcoin address, law enforcement used Chainalysis Reactor to analyze transaction activity and build a graph showing the flow of funds in and out of the WTV address. When law enforcement shut down the site, they seized over 8 terabytes of child pornography, making it one of the largest seizures of its kind. The site had 1.3 million Bitcoin addresses registered. Between 2015 and 2018, the site received nearly $353,000 worth of Bitcoin across thousands of individual transactions.

Twitter Hack

In July 2020, Chainalysis assisted the law enforcement in the investigation of a massive hack of prominent figures’ Twitter accounts. The hackers displayed tweets telling followers to send Bitcoin to a specific address. The incident also brought Twitter's stock price drop by more than 5% the same day. The takeover saw about $120,000 in Bitcoin flow through the address according to a Chainalysis report, though the total amount sent to the hackers remains unclear.

Three people were charged for the attack on July 31 including a 17-year-old from Florida, who the authorities claimed was the “mastermind,” a 22-year-old from Florida and a 19-year-old from the United Kingdom. A 16-year-old from Massachusetts is also suspected to have been a part of the hack but, while law enforcement has searched the teen’s home, no indictment has been made.

al-Qaeda and Hamas Terrorism Financing Campaigns

In the beginning of 2019, terrorist group al-Qaeda and other affiliated groups, largely based out of Syria, began operating a bitcoin money laundering network using Telegram channels and other social media platforms. Soliciting donations from their audiences, they purportedly acted as charities -- one post from a charity sought donations to equity terrorists with weapons.

Using Chainalysis Reactor, authorities were able to identify the BitcoinTransfer Office in Idlib, Syria as the hub described in the criminal complaint that had facilitated several other financing campaigns associated with al-Qaeda.

US Federal agents, with judicial authorization, covertly operated a website to receive these bitcoin donations as part of their investigation. This lead to the largest ever seizure of cryptocurrency assets related to terrorism financing, totaling more than $2 million.

$1 Billion in Cryptocurrency Connected to Infamous Darknet Market Silk Road

In November 2020, U.S. Department of Justice officials seized more than $1 billion of bitcoins and other digital currencies that had been associated with the Silk Road online drug bazaar. This was the largest seizure of cryptocurrency in the agency’s history.

The seizure was the result of an investigation that began earlier that year by the Justice Department and Chainalysis software was enlisted to track down the nefarious crypto activity.

Controversies

Crypto Lark Podcast On April 25, 2020, in an interview on The Crypto Lark Podcast, Andreas Antonopoulos, well-known British bitcoin advocate and educator, claimed Chainalysis and others are anti-privacy and providing the world's worst dictators and regimes, either directly or indirectly, with information that violates the civil rights of millions of people. In the same interview, Antonopoulos deemed it immoral to work for Chainalysis. Chainalysis responded to Antonpoulos’ commentary by stating:

“As a general rule, Chainalysis does not work with dictatorial governments.”

“Is Chainalysis Evil” In April 2020, Peter McCormack, host of the What Bitcoin Did Podcast invited Chainalysis CSO on the show to discuss freedom of information and whether bitcoin is “evil.” McCormack is notorious for his sharp dislike toward Chainalysis, tweeting out against the Company on multiple occasions.

References

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