Why it matters: Cryptocurrency is among the hottest subjects in tech, mainly due to its increase in popularity as a financial tool over the last few years. Some people view cryptocurrencies as the key to freedom while others see them as the perfect opportunity to create scams and do their money laundering. Regulators are worried this could easily get out of hand, so they’ve increased their oversight of virtual assets to prevent fraud.
Judging by the latest Cryptocurrency Anti-Money Laundering report by security research firm CipherTrace, crypto criminals are likely to loot an estimated total of $4.3 billion in crypto funds through fraud and theft throughout 2019, which is almost four times the total amount of losses registered last year.
The analysis shows that just in the second quarter of 2019, hackers stole almost $125 million in Bitcoin, Ethereum, and alternative coins from exchanges. It’s worth noting that these numbers are based on the value of the digital assets had when they were stolen. In the meantime, the value of assets like Bitcoin has tripled, and if you add to that other scams and dark market shutdowns, the total losses are much higher as a result.
A notable example of this was revealed back in May, when Binance — the world’s biggest cryptocurrency exchange — was the target of a sophisticated attack that used a mix of viruses and phishing methods to steal 7,000 Bitcoins and a large number of personal user details such as API keys and two-factor authentication codes.
Researchers have identified an even more worrying trend called the “exit scam.” Hackers were able to steal $227 million from exchanges, but several of these exit scams that are under investigation may have generated losses of $3.1 billion, and an additional $874 million in misappropriated funds.
The report also includes an update on the QuadrigaCX situation that we came to light in June. In short, the latest report from a court-appointed bankruptcy monitor says the founder of Canada’s largest exchange has funneled a total of over $200 million in crypto assets over the years, before allegedly dying at the age of 30.
On the other side of the ocean, an effort led by German authorities led to the seizure of around $11 million in crypto funds from the world’s second largest darknet marketplace, Wall Street Market. CipherTrace researchers note that Bitcoin remains the most popular choice for crypto-related cybercrime, despite the many alternatives that are popping up with the promise of superior privacy or anonymity.
CipherTrace also mentions an unconfirmed exit scam that involves a South Korean exchange and crypto wallet PlusToken. Chinese police have arrested six key people in June over suspicions of running a Ponzi scheme that may have brought them $2.9 billion in crypto assets from ten million investors.
Regulators are increasingly concerned about blockchain’s implications in the world economy, and have already started assessing the risks. Recently, Facebook’s plans to create its “global cryptocurrency” Libra were scrutinized by US legislators, who asked the company to put its development on hold.
The Financial Action Task Force created a new “travel rule” that will require transactions made in its 39 member countries to include personal information about the sender and the receiver, similar to how the international bank wire works.
Earlier this month, a leaked U.N. report revealed another worrying aspect of cryptocurrency theft and fraud, which has helped countries like North Korea evade sanctions and fund their weapons of mass destruction programs. The country was able to draw around $2 billion in crypto assets over the years, which is why world governments are trying to regulate them as quickly as possible.