It was two years ago when an unknown company to the public called Chainalysis and its CEO, Jonathan Levin, testified in front of the U.S. Financial Services panel. The good thing was that they were not in trouble, on the contrary – they’ve just found the missing 650,000 Bitcoin that were stolen from Mt. Gox, which for the time was the biggest cryptocurrency exchange.
Levin’s discovery unveiled $1.2 billion in Bitcoin, which at the rates nowadays would be around $6.5 billion. After this discovery, Chainalysis found their niche, providing a tool to solve cryptocurrency-related crime. Of course, this was not a random act, as Chainalysis was founded with the idea to study people’s cryptocurrency usage habits.
In 2014 Levin Co-Founded Chainalysis in New York aiming to understand what leads people to move assets without the use of a bank or other official institution. In the beginning they were occupied with recognizing criminal practices like crypto theft and drug purchases through the black market.
With time Levin discovered patterns that help more than just tracking down a theft post-factum. Chainalysis launched a tool that helps all kinds of money processors to comply with the requirements of regulators like proving the source of the client’s funds.
With this new business achievement Chainalysis managed to reach a revenue of $8 million in 2018. They also received funding from Benchmark and Accel and were the first cryptocurrency company to make it to Forbes’ latest Next Billion-Dollar Startups list.
Levin, who is a honoree of Forbes’ 30 Under 30 List for Europe, commented on their work:
“We’re now helping banks understand how they can build programs to allow cryptocurrency businesses to access banking services but also make sure there’s no illicit activity going on.”
Chainalysis reported that hackers made $1 billion by hacking exchanges last year while the research company Fundstrat Global Advisors noted that cryptocurrency holders evaded around $25 billion in U.S. tax liabilities.
Chainalysis’ success lead to the emergence of a couple of companies with similar business goals. For example, the California-based CipherTrace raised $18 million while London-based Elliptic – $12 million.
Nowadays, Chainalysis’ work is divided between crypto crime prevention and administrative compliance. According to Levin, the company receives half of its revenue from working with regulators and state governments along with the Federal Bureau of Investigation and the Internal Revenue Service. Chainalysis also provides software to the Bank of Montreal to prevent human trafficking. Other big clients are Europol and the United Nations Office on Drugs and Crime which use their software against online crime and child abuse. They have tracked down $1.1 million that were connected with distribution of images containing child abuse, leading to the arrest of 300 people.
In April 2018 Chainalysis launched the Know Your Transaction (KYT) tool which aids clients to comply with international financial regulations. It has 110 clients in 35 countries and Barclays is one of them. Jonathan Levin states:
“We are spending a lot more time thinking about how corporations, social networks, and financial institutions are going to be able to safely enter the space.”
Nowadays Chainalysis employs 160 people that work towards compliance services and crime-fighting in offices in Washington, D.C., New York, Copenhagen and London.