Elliptic, a blockchain intelligence company with offices in London and New York, announced Monday it has raised $5 million in a Series A funding round led by Paladin Capital Group.
Participants in the round include Santander InnoVentures, Digital Currency Group, KRW Schindler and existing investor Octopus Ventures.
In an interview with the Telegraph, Elliptic co-founder and CEO James Smith said the company’s software, which uses artificial intelligence to scan the bitcoin network, makes it easier to identify questionable behavior and trace it back to the source. According to TechCrunch, Elliptic now has about five U.S. law enforcement agencies along with a few others across Europe using its software.
Smith told TechCrunch that suspicious patterns might initially be spotted by a (human) compliance office, employed by one of Elliptic’s clients, with its machine learning algorithms then utilizing that data to identify variations and multiple instances of the same patterns.
“By looking at the patterns of transactions and how they interact, over time we can start building up a picture of which transactions are associated with which entities,” said Smith to TechCrunch. “You can start to build up a real view of how real world entities are interacting with each other within this ledger. And that’s quite a powerful tool.”
He added, “Our focus is on particularly criminal entities within this world. And so we do a lot of data gathering to start to identify who those transactors are – so we go and gather a lot of information from the dark web particularly, but also from the clear web and other sources — to start building up data points that help us label that view of the world that we have. And then we can start saying ok now I see that that entity there is really the Silk Road and I can see that the funds flow from the Silk Road to this guy, to that guy, to a few different places and then they’ve tried to cash out at an exchange.”
Smith told TechCrunch the funds will be allocated to team expansion, with key hires intended for the product and technology units. The money will also be used to give Elliptic 1.5 years’ worth of runway, which Smith said he hopes with be enough time to create applications for the technology beyond bitcoin.
Image via BusinessWire press release