In a brazen betrayal of public trust, a law enforcement officer's attempt to steal Bitcoin from a seized crypto wallet ultimately led to their downfall. Paul Chowles, a former officer with the UK's National Crime Agency (NCA), was sentenced to five and a half years in prison after stealing 50 Bitcoin from a wallet seized during an investigation into Silk Road 2.0.
In 2014, Thomas White, a British national, launched Silk Road 2.0, a dark web marketplace for illegal goods and services, shortly after the FBI shut down the original Silk Road. White was arrested, and authorities seized 97 Bitcoin from him. Chowles, then an NCA crypto analyst, was responsible for extracting and managing White's cryptocurrency.
Between May 6 and 7, 2017, Chowles transferred 50 Bitcoin from White's "retirement wallet" to various accounts. He split the cryptocurrency into smaller amounts and routed it through Bitcoin Fog, a mixing service designed to obscure transaction trails. At the time, the stolen Bitcoin was worth approximately 60,000 British pounds (around $79,000). However, by the time Chowles was caught, the value had surged to over 4.4 million pounds (around $5.9 million). Currently, with Bitcoin close to $120,000, the stolen coins are now worth around $6 million.
Initially, investigators suspected White had somehow regained access to his funds while in custody. However, White consistently denied any involvement, and by the end of 2021, the missing Bitcoin was deemed undetectable. White then pointed out that only someone from the NCA could have accessed his wallet, since the investigating team held his private key.
A fresh investigation was launched, and blockchain analysis firm Chainalysis was brought in to track the funds. Despite Chowles's efforts to cover his tracks using Bitcoin Fog, investigators were able to trace the stolen Bitcoin. They discovered that Chowles had withdrawn the funds to Wyre and Crypto.com accounts, services that allow users to spend cryptocurrency using a regular debit card. These companies require Know Your Customer (KYC) verification, which exposed Chowles as the owner of the accounts.
Further investigation revealed that Chowles had notebooks in his office containing usernames, passwords, and statements related to White's cryptocurrency accounts. He was arrested in May 2022 and ultimately pleaded guilty to theft, transfer of criminal property, and concealing criminal property. In addition to his prison sentence, Chowles was also fired from the NCA. Approximately £470,000 of the stolen Bitcoin has been recovered.
Another case of a law enforcement officer stealing seized Bitcoin occurred in Australia. William Wheatley, an Australian Federal Police officer, faced charges of stealing 81.616 Bitcoin from a crypto wallet seized from drug traffickers in January 2019. The theft was discovered on February 14, 2019, by Cyber Crime Squad Detective Sergeant Deon Achtypis. The Bitcoin, worth approximately $450,000 at the time, was transferred to two other wallets. Authorities initially suspected an accomplice of the drug traffickers, but the case was reopened in 2021. New tracing tools suggested that a member of the Australian Federal Police was responsible. A cryptocurrency investigator discovered as many as 28 transactions from a third-party wallet to undisclosed crypto trading platforms and that a portion of the funds had been transferred to Wheatley's accounts between 2019 and September 2022.
