Chainalysis taps IRS exec who took down Hydra dark web

Blockchain forensics firm Chainalysis has appointed James Lee, the former chief of the U.S. Internal Revenue Service (IRS) Criminal Investigations, as its Global Head of Capacity Building.

Lee, whose last day with the IRS was March 31, brings nearly three decades of experience in criminal investigations to his new role at the New York-based blockchain analytics firm.

In his capacity, Lee will be responsible for guiding law enforcement, regulatory bodies, and other organizations in using Chainalysis’s tools and data to combat financial crimes involving cryptocurrencies. He will report to Bas Lemmens, the company’s Senior Vice President of Global Revenue, and collaborate with teams around the world.

During Lee’s time with the IRS Criminal Investigations, there were notable achievements, such as taking down the Hydra dark web marketplace. Hydra was implicated in laundering ransom payments from the Colonial Pipeline ransomware attack in May 2021, an incident that resulted in fuel shortages along the U.S. east coast. Under Lee’s leadership, IRS-CI also played a crucial role in the takedown of other criminal enterprises, including a marketplace for child sexual abuse materials that accepted crypto payments.

In a blog post on Chainalysis website, Lee highlighted the dual nature of cryptocurrency as both a future financial mainstay and a potential avenue for crime.

“As Global Head of Capacity Building, I’ll be working to better enable the men and women in law enforcement to thwart many threats in parallel — just like I have been for the last 29 years — and will primarily focus on helping international agencies develop solutions against cryptocurrency-based crime to start,” Lee said in an official release.

“I’ll also have the chance to help crypto businesses and financial institutions in the private sector build and maintain robust compliance programs,” he added.

Earlier in October, Chainalysis laid off 15% of its workforce, marking its second round of job cuts in 2023. The company, which specializes in analyzing and tracking cryptocurrency transactions for risk-management purposes, previously axed around 40–50 employees as part of a reorganization in response to challenging market conditions. Prior to these layoffs, the company had roughly 900 employees.

The startup, which has offices in New York, Washington DC, Copenhagen, Singapore and Tokyo provides financial institutions, cryptocurrency exchanges and law enforcement with a platform to detect and investigate cryptocurrency money laundering, fraud and compliance violations.

Additionally, Chainalysis is selling its bitcoin-tracing technology and compliance software to banks and brokers to monitor and link digital identities to cryptocurrencies.

US authorities disclosed that they leveraged Chainalysis investigative assistance to seize more than $1 billion worth of bitcoin associated with Silk Road, the shady dark web marketplace that it took offline in 2013.

Chainalysis raised $170 million two years ago in a Series F funding round that values it at $8.6 billion. The decent valuation came less than two years after the NYC-based company first attained the ‘unicorn’ title back in November 2020.