Crypto scams, theft increase in 2018, says AML report

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The volume of stolen and scammed cryptocurrency rose dramatically to $1.7bn (€1.5bn+) in 2018, despite a slump in the market, CipherTrace’s 2018 Q4 Cryptocurrency Anti-Money Laundering (AML) Report reveals. To cash out these funds, criminals need to launder them before a wave of regulations kicks in as of 2019.

The most common criminal activity last year comprise of theft from cryptocurrency exchanges. Hackers stole more than $950m (€840m+), a 3.6 times growth as compared to 2017, the report finds.

Users and investors also fell for fraudulent ICOs, phoney exchange hacks, and Ponzi schemes in 2018, losing at least $725m (€640m+) in cryptocurrency. “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 is shifting their techniques from hacking to insider jobs,” the press release announcing the report says.

Despite the downturn in the prices of many cryptocurrencies, the total American dollar value of falsified tokens was higher in 2018 than the preceding year. According to the report, this talks of the sophistication of cybercriminals, as well as the increasing need for better online security.

The report also compiles 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,” the press statement says. However, the report notes that cryptocurrency laundering activities can bypass these regulations by obscuring the 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,” says 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,” he adds.

CipherTrace develops cryptocurrency anti-money laundering, cryptocurrency forensics, and blockchain threat intelligence solutions. Its CipherTrace Cryptocurrency Anti-Money Laundering Report is published quarterly. CipherTrace was founded in 2015 by Silicon Valley entrepreneurs involved in cybersecurity, eCrime, payments, banking, encryption, and virtual currencies. The US 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.