Just because cryptocurrency is having a bad time of it doesn’t mean crypto thieves aren’t thriving: On the contrary, they’ve managed to nab at least $1.2 billion in the first quarter of this year alone, according to CipherTracecybersecurity firm. That figure includes outright theft from crypto exchanges and complicated digital scams.
If you break it down, theft alone was $356 million for Q1 2019...the rest was fraud.
Even more specifically, exit scams in which crypto company founders steal everything accounted for $195 million in losses.
CiperTrace CEO Dave Jeans blames inadequate regulations and enforcement, noting that “insider issues such as fraud or theft have grown mostly due to operations outside of the U.S. where regulations are poor, or simply due to greed and mismanagement by young management teams at these cryptocurrency companies that are managing hundreds of millions or even billions of dollars”.
For last year, CipherTrace noted in its Q4 Anti-Money Laundering Report that $1.7 billion in “stolen and exit scammed crypto needs laundering”. That figure represented a 3.6-fold increase over 2017 thefts, even though token prices were lower.
The most high-profile exit scam went down in Canada, when an estimated 90,000+ investors on the largest crypto exchange, QuadrigaCX, were left high and dry after the CEO and owner, Gerald Cotten, passed away and took his passwords with him to the grave. Perhaps it wasn’t an outright scam, but it does speak to the crypto exit vacuum that investors have to deal with in this little-known and little-understood digital world. All told, these investors lost around $190 million in fiat and digital tokens that have since been rendered to the black hole.
It was a one-man show that took everyone down with it.
Last summer, Chinese police busted a group of hackers who had allegedly stolen around $87 million in cryptocurrencies in what was the highest-value crypt heist in China so far.
During that same period, South Korea-based Bithumb, the sixth-biggest exchange in the world, revealed that it had lost $30 million to hackers, leading to a temporary shut-down of its services.
And just last week, the New York Attorney General said that over $850 million in crypto had been “misplaced” by Bitfinex. Last Thursday, crypto markets lost a whopping $10 billion in a single hour after New York Attorney General Letitia James accused Bitfinex and Tether of rigging the market in order to hide an $850-million loss. James aid that Bitfinex used up to $700 million in stablecoin Tether’s cash reserves to cover up the losses.
And on the theft side of things, new techniques are popping up at breakneck speed, with crypto thieves using methods. One such method involves “SIM swapping”, a fraud that tricks a provider “into transferring a subscriber’s phone number to a SIM card controlled by someone else”, according to Reuters. And then it’s just a matter of emptying their wallet.
The wider picture, though, is that this is a major global--and even geopolitical problem because it’s the new heart and soul of money-laundering and terrorism financing. From CipherTrace’s perspective, then, it’s a gold mine as it flaunts its AML and ATL wares for the crypto world. With that in mind, CipherTrace is now expecting a whirlwind of new global regulations aimed to make crypto less amenable to the underworld.