A research report by the blockchain and cryptocurrency analytics firm CipherTrace has lifted the lid on the state of cryptocurrency crimes in the first five months of 2020.
The newly-released Spring 2020 Cryptocurrency Anti-Money Laundering and Crime Report is a collection of data reflecting on trends in cryptocurrency crimes that will influence the regulatory frameworks affecting financial institutions.
In a nutshell, the report found that criminals netted $1.4 billion in cryptocurrency thefts, cyber-attacks and fraud-related crimes, an aspect that strongly signals that the year 2020 is set to record the second-highest value in crypto crimes in recent history.
Importantly, the report acknowledged the influence of the coronavirus pandemic in affecting the scale and nature of crypto crimes. A number of COVID-19-themed crypto crimes were seen to expand to take advantage of the health and economic ramifications of the global crisis.
In the context of regulations, CipherTrace discovered that 74% of the Bitcoin cryptocurrency transferred from one crypto exchange to the other occurred across international boundaries. The proliferation of such cross-border transactions exposed the need for crypto exchanges to stay vigilant in the wake of a high rate of crypto crimes.
Specifically, the need to implement the necessary cross-border controls will enable the compliance of these exchanges to Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) standards.
The Key Findings
According to the report, stats for the first five months of the year 2020 may easily outdo those of the year 2019 – where thefts, hacks and frauds saw criminals making $4.5 billion in cryptocurrency crimes.
CipherTrace reported that the biggest contributor to the $1.4 billion net returns made by cryptocurrency criminals was the billion-dollar WoToken ponzi scheme. The scam, which started two years ago in China, is said to have promised investors huge financial gains by collecting crypto via a fictitious algorithmic trading software. In the end, the ponzi scheme led to the theft of an estimated $1 billion in digital coins from more than 715,000 people.
The findings of the report also highlighted the state of cryptocurrency exchanges and darknet marketplaces in spring 2020.
The research found a drop in the international average of direct illicit funds received by cryptocurrency exchanges by 47% in reflection of 2019’s figures. This observation highlights an important trend in which a 3-year low for exchanges have been recorded across the globe, with a mere 0.17 percent of monies received by exchanges in 2019 being connected to criminal sources.
Otherwise, the report showed that Finnish cryptocurrency exchanges led the list of platforms that recorded the highest percentage of criminal cryptocurrency that was received in the study period, with 12.01 percent of all digital currencies received being associated with illicit channels. LocalBitcoins, which boasts of being among the biggest peer-to-peer crypto markets, received more than 99 percent of the illicit funds.
Influence of the COVID-19 pandemic
Still, under the classification of frauds and thefts, the report revealed that the coronavirus pandemic has seen a spike in fraud cases that were inspired by widespread fear amid the crisis. These scams also contributed immensely to the net returns gained by criminals in the first five months of 2020.
It was found that victims of fraud were lured off genuine sites into platforms where cryptocurrencies were solicited. Phishing attacks were common mechanisms in which coronavirus-related products were advertised and sold via dark web platforms, with sales involving counterfeit COVID-19 personal protection equipment being observed.
This reality indicates the rather worrying actualities that the criminal underworld has been taking advantage of the present circumstance to rip unsuspecting victims off. The ability for criminals to impersonate legitimate entities for cryptocurrency should instigate urgent oversight and action against the threats.