New Threats to Cryptocurrency Holders: The Industrialization of Physical Violence Crime as Seen in the $11 Million Robbery

A Real-World Robbery Reflects the Fragility of Virtual Assets

This weekend’s theft in San Francisco has once again brought the physical security risks faced by cryptocurrency holders into the spotlight. An individual posing as a delivery person entered a residence in Dolores Mission District on the morning of November 22, took control of the residents, and stole their phones, laptops, and approximately $11 million worth of crypto assets. As of now, the San Francisco police have not announced any arrests, nor have they disclosed the specific blockchain network or token category involved in the stolen assets.

This is not an isolated incident. Over the past year, physical attacks targeting cryptocurrency investors have been numerous—such as a $4.3 million home invasion in the UK, a kidnapping and torture in New York’s SoHo district to force victims to hand over Bitcoin wallets, and a surge in crypto-related kidnapping cases in France. These cases collectively point to an unsettling trend: criminal groups are systematically shifting their focus toward individuals holding large amounts of crypto assets.

Physical Violence Becomes a New Entry Point for Money Laundering

Unlike traditional financial crimes, robberies in the crypto space open a new pathway for illicit fund flows. Data from the FBI’s Internet Crime Complaint Center shows that in 2024, total losses from cybercrime and scams reached $16.6 billion, with crypto investment scams increasing by 66% year-over-year. The so-called “wrench attack”—using violence or threats to obtain crypto assets—is gradually evolving into an organized crime pattern, often combining home invasions, SIM swapping, and social engineering techniques.

The modus operandi demonstrated in the San Francisco case is typical: intrusion → coercing victims to transfer funds or export private keys → quickly dispersing funds on the blockchain → testing withdrawal channels for feasibility. This process has become the standard operating procedure for criminal groups. Blockchain security firms like TRM Labs have begun tracking trends related to such coercive thefts, indicating that the systemic and professionalized use of physical violence in crypto crimes is accelerating.

Stablecoins Become the New Favorite for Money Laundering and a New Tracking Mechanism

When stolen funds enter the blockchain, the originally open and transparent nature of the technology becomes an advantage for law enforcement. Chainalysis’s latest 2025 crime report reveals a startling shift: in 2024, stablecoins accounted for about 63% of total illegal transactions, while previously dominant laundering channels like Bitcoin and Ethereum are declining.

USDT, in particular, has become central to this “race.” Once stolen funds are converted into stablecoins, large issuers collaborate with law enforcement and data analytics partners to blacklist involved wallet addresses, effectively blocking transactions at the token level. A report from T3’s Financial Crime Department indicates that since late 2024, through cooperation among token issuers, blockchain networks, and data analytics firms, the industry has frozen hundreds of millions of dollars in illicit assets.

The effectiveness of this mechanism depends on the time window. When intermediary funds enter exchanges that require KYC (Know Your Customer) procedures, centralized platforms become additional “interception points.” According to the Internet Crime Complaint Center’s procedures, if funds flow into regulated exchanges, a “asset preservation order” can typically be issued within 7 to 14 days to freeze relevant accounts.

New Tools for Tracking in California’s New Law

California’s Digital Financial Assets Law, effective July 2025, grants the Department of Financial Protection and Innovation authority to license and enforce regulations on certain crypto exchanges and custodians. This means that any “off-ramp” services (converting crypto to fiat), OTC brokers, or storage providers with business ties to California, if involved with stolen funds, will be subject to this regulatory framework and compelled to cooperate with law enforcement.

While this does not directly recover custodial assets, it significantly impacts the counterparties used by thieves to cash out crypto. This largely closes the last mile for criminals to withdraw funds.

Adjustments in the Mixer Ecosystem and New Tracking Challenges

On March 21, 2025, the U.S. Treasury removed Tornado Cash from the sanctions list, changing compliance requirements when interacting with its codebase. However, legal analysis from Venable LLP points out that this does not legalize money laundering nor reduce the analyzability of on-chain transactions.

In fact, Europol warns that organized crime groups are leveraging artificial intelligence to upgrade their methods—shortening money laundering cycles and automating fund splitting across multiple blockchains and platforms. If stolen funds are transferred through traditional mixers or cross-chain bridges to stablecoins before withdrawal, tracing the origin remains a critical challenge in investigations.

The Golden Window for Tracking

Based on the 2025 market structure and regulatory landscape, exchanges should plan response strategies around three core fund transfer pathways.

Initial 24 to 72 hours: Focus on early fund consolidation and transfer. If involved addresses are exposed and contain stablecoins, immediately notify issuers to initiate blacklist reviews; if funds are in Bitcoin or Ethereum, monitor mixers, cross-chain bridges, and whether they are converted to USDT.

Mid-term 7 to 14 days: If funds flow into regulated exchanges requiring KYC, law enforcement typically issues “asset preservation orders” and freezes relevant accounts during this period.

Later 30 to 90 days: If privacy coins are involved, investigations will shift to off-chain clues, including device forensics, communication records, and related scam traces. Fund tracing efforts by organizations like TRM Labs will also advance during this phase.

Wallet-Level Defense Upgrades

In 2025, crypto wallet design is undergoing a security revolution. Multi-party computation wallets and account abstraction wallets are expanding their functionalities, adding features like policy controls, seedless recovery, daily transfer limits, and multi-factor approval processes. These designs reduce the risk of private key “single points of exposure” during physical coercion—meaning private keys are less likely to be leaked via a single device or step.

Contract-level “time lock” mechanisms and “spending limits” are especially important. These features slow down high-value transfers and can provide valuable time windows for alerts to issuers or exchanges if a wallet is compromised. While these protections do not replace basic device security and home safety practices, they significantly lower the chances of successful theft when thieves access phones or laptops.

Critical Factors in Case Follow-up

The San Francisco Police Department has yet to release a dedicated statement on this case. The subsequent development will depend on two main factors: whether the target address involved will be disclosed to law enforcement and industry, and whether stablecoin issuers or exchanges have received review or intervention requests.

For investors holding large amounts of crypto assets, this case serves as a wake-up call—the importance of physical security is now on par with key management. For exchanges and service providers, establishing efficient asset freezing and tracking mechanisms has become an essential part of countering emerging criminal threats.