Security & Fraud

Report: Criminals Netted $1.4B From Crypto Crimes

Criminals Netted $1.4B From Crypto Crimes

In the first five months of the year, cryptocurrency thefts, hacks and frauds totaled $1.4 billion, and could exceed the 2019 loss of $4.5 billion by year’s end, according to a new report. 

Crypto intelligence company CipherTrace’s “Spring 2020 Cryptocurrency Anti-Money Laundering and Crime Report” revealed the thefts have escalated in the wake of the COVID-19 pandemic and ensuing global economic crisis.

The largest contributor to this high number is a Ponzi scheme by Wotoken in China, CipherTrace found. The scam promised investors incredible returns using nonexistent algorithmic trading software. Ultimately, Wotoken stole an estimated $1 billion in crypto from more than 715,000 victims, with one operator having ties to the $118 million PlusToken Ponzi scheme earlier this year 

The study found that coronavirus-inspired fraud typically happens by luring victims from legitimate platforms into chat rooms, where payment in bitcoin can be requested. Phishing sites were found to be the most popular COVID-19-related products sold on the dark web, the survey revealed.

As governments provided resources to ease the health and economic impacts of the pandemic, criminals took advantage of the lack of oversight, researchers wrote. 

COVID-19-related fraud took the form of impersonations of the Red Cross to solicit personal information or cryptocurrency payments, which claim to support victims but actually spy on users. It also includes the fraudulent sale of PPE, supposed treatments and testing kits. 

Finnish exchanges had the highest percentage of criminal bitcoin received for the third consecutive year, with 12 percent of all bitcoin funds coming directly from criminal sources. 

CipherTrace researchers found that 74 percent of the bitcoin moved in exchange-to-exchange transactions was cross-border. That finding, the study’s authors wrote, highlights the need for exchanges to adopt cross-border controls to ensure compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) protocols.

On average, U.S. bitcoin ATM users sent more funds to high-risk exchanges than low-risk exchanges in 2019. The percentage of funds sent to high-risk exchanges from those ATMs has doubled every year since 2017. About 88 percent of funds that U.S. bitcoin ATMs sent to exchanges last year went overseas.

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