CipherTrace Research Shows $1.7 Billion in Cryptocurrency from 2018 Thefts and Exit Scams Needs Laundering

New research released today in the CipherTrace
2018 Q4 Cryptocurrency Anti-Money Laundering (AML) Report reveals
that $1.7 billion in cryptocurrency was stolen and scammed in 2018 — a
dramatic rise in criminal activity despite a slump in the market.
Criminals need to launder all these funds in order to cash out before a
wave of regulations go into effect in 2019.

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Theft from cryptocurrency exchanges accounted for the majority of the
criminal activity: more than $950 million was stolen by hackers in 2018,
representing 3.6 times more than in 2017.

On top of these thefts, the research found investors and exchange users
lost at least $725 million in cryptocurrency in 2018 to exit scams such
as fraudulent ICOs, phony exchange hacks, and Ponzi schemes. A
cryptocurrency exit scam is a confidence game where the promoters of a
cryptocurrency ICO or other venture fails to execute — or executives of
exchanges say they cannot return users’ assets — and then abscond with
the money. This finding indicates that a new breed of cybercriminals are
shifting their techniques from hacking to insider jobs.

Interestingly, even with the downturn in the prices of many
cryptocurrencies, the total dollar value of tokens stolen and scammed
was much higher in 2018 than 2017, which further points to the increase
in security threats against exchanges and sophistication of online
criminals.

The report, which provides the industry’s most in-depth
state-of-the-market look at cryptocurrency crime and AML regulations by
jurisdiction, outlines the impacts of the coming wave of global
regulatory enforcement and emerging money laundering schemes. By 2020
most modern economies — including the US, EU and G20 as well as
Gibraltar, Bermuda and Malta — will have deployed strict cryptocurrency
AML and Know Your Customer (KYC) regulations. Cryptocurrency money
laundering services are getting around these regulations by obscuring
the original source of funds with new and innovative money mixers,
unregulated crypto-to-exchanges, and privacy coins.

“Cryptocurrency criminal activity continues to evolve and accelerate.
Fortunately, pending global legislation will hamstring many criminals,
global gangs, and terrorist groups by greatly reducing their
opportunities to launder,” commented Dave Jevans, CEO of CipherTrace
and co-chair of the Cryptocurrency Working Group at the APWG.org.
“These tough new laws will drive bad actors to not only innovate but
also flock to jurisdictions with weak regulatory oversight, as we have
shown in earlier research. CipherTrace’s blockchain intelligence and
anti-money laundering technology helps exchanges, financial services
firms, regulators, and law enforcement work together to create trust in
the crypto ecosystem.”

For the first time, CipherTrace has also identified the Top 10
Trending Crypto Threats, providing actionable threat intelligence
for anyone dealing with cryptocurrency:

1. SIM swapping: An identity theft technique that takes over a
   victim's mobile device to steal credentials and break into wallets or
   exchange accounts to steal cryptocurrency.
2. Crypto dusting: A new form of blockchain spam that erodes the
   recipient's reputation by sending cryptocurrency from known money
   mixers.
3. Sanction evasion: Nation states that use cryptocurrencies to
   circumvent sanctions and that has been promoted by the Iranian and
   Venezuelan governments.
4. Next-generation crypto mixers: Money laundering services that
   promise to exchange tainted tokens for freshly mined crypto, but, in
   reality, cleanse cryptocurrency through exchanges.
5. Shadow money service businesses (MSBs): Unlicensed MSBs that
   bank cryptocurrency without the knowledge of host financial
   institutions, thus exposing banks to unknown risk.
6. Datacenter-scale cryptojacking: Takeover attacks that mine for
   cryptocurrency at a massive scale and that have been discovered in
   datacenters, including AWS.
7. Lightning Network transactions: Enabling anonymous bitcoin
   transactions by going "off-chain" and now scaling to $2,150,000.
8. Decentralized stable coins: Stabilized tokens that can be
   designed for use as hard-to-trace private coins.
9. Email extortion and bomb threats: Mass-customized phishing
   email campaigns by cyber-extortionists using old passwords and spouse
   names and that demand bitcoin. Bomb threat extortion scams spiked in
   December.
10. Crypto robbing ransomware: New malware distributed by
    cyber-extortionists that empties cryptocurrency wallets and steals
    private keys while holding user data hostage.

To download the report, visit https://ciphertrace.com/crypto-aml-report-2018q4.

About CipherTrace

CipherTrace develops cryptocurrency Anti-Money Laundering,
cryptocurrency forensics, and blockchain threat intelligence solutions.
Leading exchanges, banks, investigators, regulators, and digital asset
businesses use CipherTrace to trace transaction flows and comply with
regulatory anti-money laundering requirements, fostering trust in the
cryptocurrency economy. Its quarterly CipherTrace Cryptocurrency
Anti-Money Laundering Report has become an authoritative industry data
source. CipherTrace was founded in 2015 by experienced Silicon Valley
entrepreneurs with deep expertise in cybersecurity, eCrime, payments,
banking, encryption, and virtual currencies. The U.S. Department of
Homeland Security Science and Technology (S&T) and DARPA initially
funded CipherTrace, and it is backed by leading Silicon Valley venture
capital investors. Visit www.ciphertrace.com
for more information or follow the company on Twitter: @CipherTrace and
LinkedIn: /company/CipherTrace

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