Analysis of the Application of Crypto Assets in Child Sexual Exploitation

Recently, Taiwanese artist Huang Zijiao was revealed to hold underage pornographic video materials, causing widespread public concern. These videos originated from a forum called "Creative Private Room" in 2012, which sold a large number of secretly filmed videos involving minors. It is reported that the website has over 200,000 illegally filmed underage sexual videos and allows members to purchase them using Crypto Assets. Among the members are individuals from the technology, healthcare, and education sectors, totaling more than 5,000 people.

This article aims to analyze in depth the flow of crypto assets behind this event and reveal the associated on-chain risks.

Creative Private Address Analysis

Although Crypto Assets have a certain level of anonymity, they are not completely untraceable. Through on-chain analysis, we can transform blockchain transaction records and anonymous addresses into meaningful information, achieving visual tracking and clearly demonstrating the connections between transactions.

According to public information, we have obtained the following addresses used for illegal image transaction payments:

• TA2G85LLXqtbcMwwZUKn4gDdQ9EkoHRp8V (currently in use)
• TJxBDgdAmD1NPy6ih4E6RBM4YQWZRACakZ
• TPbRDKYYi5qT3Ayutw6NV31bvNX9zGivZx
• TUQbf1PgWvxKethbrYLFY842UL6Z41RiKC

The data shows that these 4 wallets had a total fund flow of 3.582 million USDT between November 30, 2021, and April 10, 2024. By analyzing the transaction patterns, we found:

• Address ending with 8V: received 341 remittances
• kZ ending address: received 1439 remittances
• Zx ending address: received 815 remittances
• KC ending address: received 401 remittances

This indicates that criminal gangs evade detection by frequently changing their collection addresses and creating new posts, while still maintaining a stable stream of anonymous customers and a large volume of transactions.

Further analysis revealed that five addresses received amounts exceeding 20,000 USDT from Creative Private House, with the highest amount reaching 67,700 USDT. These addresses are likely to belong to the actual beneficiaries of the sale of child sexual exploitation images. Tracking shows that these five suspected profit addresses are associated with multiple centralized trading platforms, indicating that these platforms may have been exploited by criminals.

Crypto Assets in CSAM Application Trends

Although privacy in the Crypto Assets field is important, the entity identity behind the address becomes crucial when it comes to illegal funds. While many countries are beginning to formulate relevant regulations to prevent the use of Crypto Assets in illegal areas such as CSAM, the relevant legal and regulatory systems are still far less mature than those in the traditional payment sector.

In traditional payment systems, CSAM transactions typically involve bank accounts or other financial institutions, where these transactions are well-documented and easily traceable and monitored by law enforcement agencies. However, Crypto Assets provide a certain degree of anonymity for CSAM transactions, especially through the use of privacy-enhancing technologies, making it difficult to trace the entities behind the transactions.

The application of Crypto Assets in CSAM not only reduces the risks for CSAM buyers (such as using mixers and crypto ATMs to conceal payments) but also facilitates the laundering and monetization of illegal proceeds for CSAM providers (such as converting crypto earnings into fiat currency through peer-to-peer transactions). This has led to an increasing number of CSAM criminals turning to the use of convertible Crypto Assets to hide illegal transactions in order to evade law enforcement scrutiny.

According to data from the UK IWF (a non-profit organization dedicated to eliminating illegal online content), the number of child sexual abuse image websites that offer Crypto Assets payment has "almost doubled every year." In 2021, among the 250,000 websites containing child sexual abuse content identified by the IWF, 1,014 websites provided criminals with the option to access or purchase child sexual abuse videos and images using virtual coins.

A report from the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury indicates that between 2020 and 2021, financial institutions submitted thousands of suspicious activity reports involving Bitcoin, which were related to online child sexual exploitation and human trafficking crimes. More shockingly, 95% of these reports specifically mentioned the trafficking of Child Sexual Abuse Material (CSAM), with over 1,800 unique Bitcoin wallet addresses suspected to be associated with CSAM and human trafficking activities.

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

Conclusion

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

Industry insiders believe that members of the industry should actively use their professional knowledge and technical tools to identify the funds associated with such risky activities, which is an important means of mitigating risks. Specific measures include:

1. Industry institutions should strengthen the awareness of fund risk control, fulfill the responsibilities of monitoring and managing client abnormal transactions (KYT), and report illegal transactions and risk situations in a timely manner.
2. Actively establish cooperation with local law enforcement agencies and integrate threat intelligence services provided by security vendors.
3. Individuals should also actively take action to report any suspicious activities.

Only with the joint efforts of the whole society can we effectively curb the abuse of Crypto Assets in illegal fields and maintain the healthy development of the financial system.