The former Chief of IRS-Criminal Investigation, Jim Lee, has found a new home. Lee has announced that he was joining Chainalysis as their Global Head of Capacity Building.
“After nearly three decades with the IRS-CI, helping solve some of the world’s largest financial crimes, I am thrilled to start this new chapter with Chainalysis,” notes Lee.
Chief Jim Lee
Lee began his career in 1995 as a special agent with IRS-CI in Detroit, Michigan. He has served as the special agent in charge of the New Orleans Field Office and the executive special agent in charge of the Chicago Field Office. Lee has also served in other executive roles for CI, including director of strategy, director of northern field operations, director of southern field operations, and deputy chief. In October 2020, he was named Chief.
“Over the course of my career in law enforcement,” he says, “the illicit world has become increasingly more complex, with allied governments today confronting a myriad of threats from both a criminal and national security standpoint. But one thing has remained constant: Virtually all forms of crime are financially motivated.”
“That means,” he explains, “that any technological advancement in how we interact with money will inevitably become a tool for virtually all those involved in nearly all forms of crime, even if that advancement is net beneficial to humanity. Criminals are adaptable and always on the lookout for the next way they can exploit the public.” Lee says that crypto has brought greater transparency and efficiency to finance. But criminals have also been quick to go digital.
Notable Cases
He points to three cases he worked on in his career at IRS-CI:
- The takedown of Hydra Market, touted as the world’s largest darknet market. Hydra was launched in 2015 and, according to the Department of Justice, enabled users in mainly Russian-speaking countries to buy and sell illicit goods and services, including illegal drugs, stolen financial information, fraudulent identification documents, and money laundering and mixing services, anonymously and outside the reach of law enforcement. According to the Department of Justice, in 2021, Hydra accounted for an estimated 80% of all darknet market-related cryptocurrency transactions, and since 2015, the marketplace has received approximately $5.2 billion in cryptocurrency.
- Conducting the largest-ever crypto seizure connected to terrorism financing in an operation against Hamas’ al-Qassam Brigades
- Work on Welcome to Video. The site, considered the largest dark web child pornography site in the world, was taken down as part of a collaborative effort. For its part, IRS-CI was able to trace bitcoin transactions on the site to people all over the world who were uploading and downloading this material, as well as find the location of the site administrator. By analyzing the blockchain and de-anonymizing bitcoin transactions, the agency could identify hundreds of predators worldwide even though those users thought they could remain anonymous. In addition to arrests and seizures, the operation was also responsible for the rescue of at least 23 minor victims residing in the U.S., Spain, and the United Kingdom, who the users of the site were actively abusing.
All of those cases involved the use of cryptocurrency in a wide range of nefarious activities. That, Lee says, will continue as cryptocurrency becomes bigger and more mainstream.
Something else those cases have in common? Lee notes that Chainalysis played some role in all three of the cases, whether by providing tools that aided the case directly or by alerting the public to criminal activity.
In 2023, Chainalysis partnered with IRS-CI to train 70 Ukrainian law enforcement officials on blockchain analytics skills, was used by the Israel’s National Bureau for Counter Terror Planning to identify and seize cryptocurrency from Hezbollah, and partnered with U.S. local law enforcement agencies to trace payments for illegal fentanyl sales.
This is why, Lee says, he chose to continue his mission at Chainalysis. “The company has led the way from the private sector in making cryptocurrency safe, just as I and my colleagues in law enforcement have done from the public sector,” he says. “No other organization in the industry has more firmly placed itself on the side of justice, and I can’t think of a better place to continue my life’s work.”
Chainalysis
Chainalysis—a blockchain forensics firm headquartered in New York—uses on-chain data to trace crypto transactions and identify scams, hacks, fraud, and illicit activity involving digital assets. According to Forbes, which named Chainalysis to its Fintech 50 list earlier this year, the company was valued at $8.6 billion as of May 2022. The list features fintech companies with headquarters or substantial operations in the U.S. and are not part of a public company. In addition to New York, the firm has offices in D.C. and Copenhagen.
Co-founders Michael Gronager and Jonathan Levin were also included in Forbes’ Next Billion-Dollar Startups List in 2019.
Gronager, who holds a Ph.D. in quantum mechanics, co-founded the cryptocurrency exchange Kraken before leaving in 2015 to launch Chainalysis. Gronager was inspired to start Chainalysis when he saw how the cryptocurrency space struggled to become part of the financial system. Today, he serves as CEO.
Levin serves as the company’s CSO. An economist by training, Levin felt entrepreneurship was the best way to answer the most fundamental questions about how and why people move money around the world.
Today, Chainalysis works to build trust in blockchains with investigation and compliance solutions. Lee should fit right in—with his new role, he’ll work with law enforcement, tax agencies, financial institutions, and regulators to help build their capacity to fight financial crimes
“Chainalysis is at the forefront of the private sector, pioneering efforts to help ensure a safer crypto ecosystem,” says Lee. “This commitment parallels the tireless efforts of my colleagues and my work in the public sector, and I couldn’t think of a better place to carry on this important work.”
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