Crypto Crime Trends Evolving as Users Wise Up: Exchange Hacks, Darknet and Money Laundering

Crypto Crime Trends Evolving as Users Wise Up: Exchange Hacks, Darknet and Money Laundering


Two prominent research papers have shed light on the latest crime trends affecting the cryptocurrency community over the past two years.

Crypto analytics companies Chainalysis and CipherTrace released reports at the end of January that unpack some interesting data on the methods that criminals have used to steal and defraud users within the cryptocurrency and blockchain space.

These reports paint an interest picture of the ever-changing cryptocurrency landscape and provides some food for thought about the use of crypto in criminal activity around the world.

Exchange hacks and darknet trading still a threat
As Chainalysis outlines in its January 2019 report, cryptocurrency-related crime has actually decreased over the past few years, only accounting for 1 percent of all Bitcoin transactions in 2018.

With that being said, the report shines a spotlight on exchange hacks that have seen billions of dollars siphoned off by criminals, darknet market activities generating millions of dollars in revenue for criminals, and elaborate scams that have fleeced unsuspecting investors.

Chainalysis examines the trends of exchange hacks by tracing the movements of hacked funds from exchanges to their exit points, providing new data on the patterns of transaction activity in the weeks and months after a hack has taken place. The information could become pivotal in helping recover stolen funds in future.

The report notes the resilience of darknet markets amid a global crackdown, identifying the trends in the way new platforms are created and run in the aftermath of previous operations being shut down.

Exchange hacks
Exchange hacks have been the most lucrative modus operandi for cyber criminals in 2018, having generated close to $1 billion in revenue. Chainalysis identified two major hacking groups that are responsible for the majority of these crimes in 2018.

Hackers waste no time cashing out stolen cryptocurrency, usually within three months after the initial attack.

Taking a deeper dive into data, these two prominent hacking groups stole an average of $90 million per hack.

Following the initial hack, stolen funds are then moved to a plethora of wallets and exchanges to cover the tracks from the initial theft. These efforts are elaborate, as hackers will move funds up to 5,000 times.

Hackers then lay low, leaving funds untouched for six weeks or more until interest in the initial theft has died down. At the right time, at least half of the stolen funds are cashed out using various conversion services within 112 days. Three-quarters of the funds are cashed out within 168 days.

Chainalysis notes differing tactics between these two hacking organisations.

The first prominent group is identified as a tightly controlled organization. The hackers shuffle funds around meticulously to avoid being caught by authorities. Data from a traced hack noted up to 15,000 movements of stolen funds.

The second organization is less thorough in their approach, biding their time before converting stolen funds to clean money. According to Chainalysis, the group will sit on funds for six to 18 months before quickly cashing out 50 percent of funds within days on a single exchange.
Bitcoin Exchange CEX.IO