Benchmark just funded Chainalysis, the crypto intelligence company that helped crack the Mt. Gox case

When the virtual currency exchange Mt. Gox collapsed into bankruptcy in 2014 following the disappearance of hundreds of thousands of bitcoins and tens of millions of dollars, those who lost money were understandably furious.

For a small group of people, however, the theft — likely masterminded, we now know, by a Russian cybercrime suspect who was arrested in Greece this past summer — would prove auspicious.

Specifically, Michael Gronager, who was then chief operating officer of the Kraken bitcoin exchange, spied an opportunity to team up with a new friend, Jonathan Levin, a post-graduate economist from Oxford who’d written academic works on crytpocurrencies. The two were already discussing intelligence software that could trace specific transactions on the blockchain and be sold to law enforcement. Before long, their young company, Chainalysis, was the official investigator on the Mt. Gox case, hired by its bankruptcy trustee to find all those missing coins.

Its small team “cracked the case probably two months in,” Levin says now.

It was a far bigger credit than most companies start off with, and Chainalysis smartly ran with it, signing up customers like the Federal Bureau of Investigations, the Drug Enforcement Administration, the Internal Revenue Service and Europol. They pay the company a monthly fee in exchange for access to its software which ostensibly helps catch cryptocurrency-using criminals.

But Chainalysis — which now employs 75 people and has offices in New York, Washington, and Copenhagen — isn’t interested in forensics alone. It has much bigger ambitions to apply its intelligence to what’s happening in real time, and to working with the world’s financial institutions, both big and small.

Mainly, it wants to help them detect fraud and prevent money laundering, and it aims to do this with a new product called KYT — for Know Your Transaction — that Levin says provides real-time feedback on the underlying purpose of blockchain transactions and feeds into exchanges’ transaction processing engines. Compliance personnel can also use Chainalysis’s dashboard to generate alerts on risky customers and export suspicious activity reports.

A small group of early customers has already been using the product, whose cost Levin declines to say publicly. Starting today, it says its opening up the product to any financial institution wanting to use it.

For its law enforcement and government customers, Chainalysis is launching investigation tools around 10 more currencies, in addition to Bitcoin. The first of these: Bitcoin Cash, a fork of Bitcoin that was launched last summer following a longstanding disagreement in the crypto community about how to scale Bitcoin. The other cryptocurrencies are to be determined, says Levin, adding that as far as Chainalysis is concerned, “The different blockchains that power different cryptocurrencies are all part of the same machine.”

Chainalysis has competitors, including Elliptic, a London-based rival that similarly runs investigations related to cryptocurrency and has raised $7 million in funding to date, including from the bank Banco Santander and Octopus Ventures.

It may be harder than ever to catch Chainalysis, however. To wit, in addition to announcing its new product for financial institutions and it plans to support more cryptocurrencies, the company is today announcing that it has landed $16 million in Series A funding from Benchmark, one of the best venture firms in the business.

That’s going to mean something to industry watchers, given that Benchmark hasn’t made a crypto related investment in several years. One of its only bets, in fact, was to invest in 2014 in Pantera Capital, the hedge fund operator that buys and sells virtual currencies.

That may well change with Benchmark’s newest general partner, Sarah Tavel, who led the deal in Chainalysis and has joined its board. Tavel has been tracking the industry for several years, including as a VC at her prior firm, Greylock, and it’s a “space I continue to spend time in. “There will be some short-term noise and pain, but I long term believe in it,” she says.

As for Benchmark’s interest in Chainalysis in particular, Tavel suggested that it was a no brainer. It’s a “meat and potatoes company,” she says. “All these regulated institutions want to participate [in cryptocurrency transactions] but they need to understand with whom they are transacting and where their funds are originating. We’d solved these traditional compliance requirements in the fiat world.” With Benchmark’s newest portfolio company, suggests Tavel, the cryptocurrency world has its solution now, too.