Cryptocurrency Crime Losses Surge By 400 Percent

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Scams and fraud involving cryptocurrencies rose to £1.3bn last year – in spite of an 80 percent drop in crypto-asset values

Thefts and scams involving cryptocurrencies soared 400 percent to $1.7 billion (£1.3bn) last year, according to new figures.

The sharp rise in the US dollar value of such crimes in 2018 over the previous year comes in spite of the fact that most cryptocurrencies dropped sharply in value during the same period, according to Menlo Park, California-based researhcer CipherTrace.

The bulk of the $1.7bn was made up of thefts from infrastructure such as cryptocurrency exchanges, which amounted to more than $950m worldwide, up 3.6 times the 2017 figure, CipherTrace said.

Most of these thefts affected users in Korea and Japan, at 58 percent.

bitcoinCrypto fraud evolves

Another $725m was lost through exit scams such as fraudulent initial coin offerings, phony exchange hacks and Ponzi schemes.

Such scams amounted to only $56m in 2017, CipherTrace said.

“This finding indicates that a new breed of cybercriminals are shifting their techniques from hacking to insider jobs,” CipherTrace stated.

It said the figures represent only the losses the company was able to validate.

“We have little doubt that the true number of crypto asset losses is much larger,” the firm said in its Anti-Money Laundering report for the fourth quarter of 2018.

Thefts by hackers dominated the first three quarters of the year, shifting to inside jobs and fraud in the fourth quarter.

The firm said the sharp rise in the dollar value of cryptocurrency crimes pointed to an increasingly hostile environment for exchanges and the rising sophistication of online criminals.

Value drop

Cryptocurrency values dropped sharply last year, with the market capitalisation of more than 1,600 such currencies standing at a total of $112bn in January 2019, down more than 80 percent from the previous January, according to Reuters figures.

CipherTrace said that most developed economies are set to have strict regulations in place to govern cryptocurrencies by the end of 2019, and that as a result criminals are swiftly developing money laundering schemes for virtual assets.

“Cryptocurrency criminal activity continues to evolve and accelerate,” said CipherTrace chief executive Dave Jevans in a statement. “Fortunately, pending global legislation will hamstring many criminals, global gangs, and terrorist groups by greatly reducing their opportunities to launder.”

He said new laws are likely to send many bad actors into jurisdictions with weak regulatory oversight.

The company’s report also outlines a number of emerging cryptocurrency threats, including data centre-scale cryptojacking, in which large-scale server resources – including Amazon Web Services instances – are hijacked to produce crypto assets.

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