The Use of Crypto Assets in Child Sexual Exploitation: A Disturbing Trend

Recently, a scandal involving child pornography in Taiwan's entertainment industry has sparked widespread public concern. It is reported that a forum named "Creative Private Room" started operating in 2012, selling a large number of hidden camera videos featuring minors. The site allegedly has over 200,000 illegally recorded sexual images of minors and allows members to use Crypto Assets for payment. Among the members are new tech elites, doctors, teachers, and individuals from various professions, totaling more than 5,000 people.

This article will delve into the flow of crypto assets behind this event, revealing the potential on-chain risks involved.

Analysis of Creative Private Funds Flow

Although Crypto Assets have a certain degree of anonymity, the flow of funds can still be tracked through on-chain analysis. By visualizing the analysis of blockchain transaction records, we can clearly show the flow of funds between relevant addresses.

According to public information, we have obtained four collection addresses related to illegal image trading. The total fund flow of these addresses reached 3.582 million USDT between November 30, 2021, and April 10, 2024. By analyzing transactions of specific amounts (such as 248.98 or 250.01, etc.), we found that these four addresses received 341, 1439, 815, and 401 remittances, respectively.

These data indicate that, despite criminal gangs constantly changing their payment addresses and posting new messages to evade detection, there is still a steady flow of anonymous customers and a large number of transactions occurring.

Further analysis revealed that five addresses received amounts exceeding 20,000 USDT from the creative private address, with a maximum of 67,700 USDT. These addresses are likely to belong to the actual profit recipients. Tracking shows that these addresses are associated with multiple centralized trading platforms, indicating that these platforms may have been exploited by criminals.

Trends in the Application of Crypto Assets in Child Exploitation Materials

While privacy in the Crypto Assets field is crucial, the entity identity behind addresses becomes particularly important when it comes to illegal funds. Although many countries are beginning to develop relevant regulations to prevent the use of Crypto Assets in illegal areas such as child sexual exploitation materials, the relevant laws and regulatory measures are still far less mature than those in the traditional payment sector.

In traditional payment systems, such transactions typically involve bank accounts or other financial institutions, with detailed transaction records that are easy for law enforcement to track and monitor. However, Crypto Assets provide a certain degree of anonymity for these transactions, especially through the use of privacy-enhancing technologies, making it more difficult to trace the entities behind the transactions.

Crypto Assets not only reduce the risk for buyers (by using mixers and crypto ATMs to hide payments), but also provide providers with convenient ways for money laundering and cashing out (by converting earnings into fiat currency through peer-to-peer transactions). This has led to an increasing number of criminals turning to the use of convertible Crypto Assets to hide illegal transactions.

According to data from the Internet Watch Foundation (IWF) in the UK, the number of child sexual abuse image websites offering Crypto Assets payment has nearly doubled each year. In 2021, among the 250,000 websites identified by the IWF that contained child sexual abuse content, 1,014 websites allowed criminals to access or purchase videos and images of child sexual abuse and rape using virtual coins.

The report from the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury is even more shocking. Between 2020 and 2021, financial institutions submitted thousands of suspicious activity reports involving Bitcoin, related to online child sexual exploitation and human trafficking crimes. Among these reports, 95% specifically pointed out the transaction of child sexual exploitation materials, with over 1,800 unique Bitcoin wallet addresses suspected to be linked to these criminal activities.

These data not only expose the prevalence of Crypto Assets in child sexual exploitation crimes but also highlight the significant challenges faced by regulatory agencies in combating such criminal activities.

Conclusion

Crypto Assets, as an important innovation in financial technology, offer convenience to the global economy with their anonymity and decentralization features, while also facilitating certain illegal activities.

To address this risk, industry members should proactively leverage professional knowledge and technical tools to identify related risk activities. Specific measures include: enhancing awareness of financial risk control, fulfilling responsibilities for monitoring and managing abnormal customer transactions, and promptly reporting violations and risk situations; establishing cooperation with law enforcement agencies and accessing threat intelligence services provided by security vendors; encouraging individuals to actively report suspicious activities.

Only through the joint efforts of the industry, regulators, and individuals can the abuse of Crypto Assets in illegal areas be effectively curbed, maintaining the healthy development of the financial system.