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For a quick analysis see the FAQ here tohonesty.com
I sometimes get asked this question by smart people genuinely interested in how the method works. It's about trying to understand how we can still recover your assets easily, even after a thief spreads your stolen assets out so widely, it feels like it's now impossible to recover.
The answer is the same in all cases. Because crypto in the eyes of the law is identical in every way to all other forms of property, the recovery method will use the same existing well known techniques. One does not have to go into the precise mechanics of it, legal experts and analysts already know.
The question is really about 'money laundering' and how to overwhelm the attempt by bad actors to hide the stolen assets from the law. Money laundering has been a scam method since the dawn of time. So any remediation will be the same as has been used since the dawn of time too.
The way to treat this question is about 'having a change of mind'. That's to say, there is absolutely nothing fundamentally different in the law, between crypto and any other financial asset that has ever existed. If you can change your mind, stop believing the crypto narrative and look at this question free from that blindfold, you will get it, immediately.
The answer to Bitcoin asset recovery must then be: do whatever has always been done to remediate lost and stolen assets which have been widely dispersed in an attempt to hide them. That is all.
The only difference between crypto and everything else across history, is superficial - crypto is easier to disperse by 'mixing' more finely. It's not difficult to spread the assets over thousands of wallets or even hop into a different blockchain, quickly.
Many wallet holders will have a good idea these particular assets are the proceeds of crime or are likely to be a risk. Many others will not know. And many more somewhere in between. But in the end, it really does not matter.
Crypto transactions, ironically, are not encrypted. All transactions are merely encoded in clear text and can be decoded by anyone using a free online tool. Therefore every Bitcoin transaction ever sent on chain, can be traced. Paper and metal cash can potentially be traced too but its much easier with crypto. Digital deposits can also be traced electronically, but who will be tracing them and who will allow it? The law is very good at tracing with the help of highly skilled analysts. The only challenge to tracing crypto is the horse power needed. The greater the mixing the more cpu scale is needed to trace it out. And the drive to make a trace all depends on who the law believes is the culprit and the amount in question.
Why is even tracing at scale not really a problem? Well, why bother tracing a fraudulent coffee transaction? But for a multi $million transaction, yes, the lawcor the recovery team, would be very committed to spending money on it. The cost will be paid for out of the inevitable recovered proceeds or sometimes upfront on conditional terms. And when the attacker is identified and if they can be restrained within their jurisdiction, the law will step in for free and probably send them quickly to jail.
But that is not our concern at Tohonesty. All costs are priced into the asset recovery method way ahead of the game. And our method is a process of civil litigation alone. If the law wants to step in subsequently and call out a criminal offence, that is entirely a matter for the law. You have to remember that we recover lost as well as stolen assets. Often there is no crime.
To top it all off, the thief is moot to us. If using the digital asset recovery method (DAR) once traced and with your court order in hand, miners must re-assign your assets back to a wallet you have the keys for, else face contempt of court and potentially the shutting down of their $100 million business. Even if some still resist, a fork will be created in the blockchain and it will be just a matter of time before the illegal chain fails to maintain its hash rate, due to reputation, and their business will have wasted millions on electricity creating useless blocks.
Even a nation state attack which forks the chain would be difficult to succeed with because that nation would effectively raise a 'tariff wall' for crypto on their own border harming themselves firstly and mostly. The only thing remaining to worry about is 'second order effects' where the nation state says no anyway in spite of the harm that will bring upon itself and though this has been known to happen historically it is far rarer than a globalist conspiracy theorist will openly admit to. And in that extreme case there will be far bigger problems to worry about than a lost transaction - a sensible person will be planning to migrate their family by then.
Back on planet earth, the blockchain does not need to be modified, just amended with a new re-assign transaction indicating the original one is now invalid. In the same way accountants have been doing for centuries on their books. Often, even if there is a bad actor identified, who cares? They will not keep their ill gotten gains anyway and there will be nothing they can do to hold onto it, except to commence their own litigation which would be rather foolish. Using civil law, rather than criminal law, is a far more efficacious way of restitution - the state can be kept at arms length, unless it is their assets being recovered.
Yes, there is the question about tainted assets, where a bona fide person sells say, their car for tainted Bitcoin. In this case the taint remains with the asset. So the car now is tainted and that asset must now be followed. And the Bitcoin is cleansed. So yes, this can make things tricky if its been a long time since the Bitcoin was first mixed. This is the law in many jurisdictions as far as I know.
Talking about the state, most crime gangs are constituted largely of regular people. They believe the crypto narrative like a religion. Which says "put the proceeds of crime onto the network - on chain, and you are safe". Curiously, this is a public network, anyone can scan, which cannot be modified and the transactions are in clear text. But the crypto narrative has convinced people that crypto is censorship resistant, 'decentralised', and if you're not in possession of the keys you are no longer the owner of the coin, so cannot be touched by the law.
This belief system is a 100% fallacy. Do not fall for this powerful narrative. Most of any recovery effort is saved because so many people believe a false crypto narrative.
To sum up, it is easy to trace your assets for recovery, relative to other kinds of financial assets. It is simply a matter of taking the public blockchain address, using age old money laundering tracing techniques, just at scale. No decryption is needed. The answer to the question in hand is simply to do things the way they have always been done. And that is the end of it.