Two new reports from CipherTrace and Chainalysis highlight a nefarious side of crypto currency
According to a new report from CipherTrace, 1.7 billion worth of crypto currency was stolen by hackers in 2018. Another report by Chainalysis says $1 billion of that was stolen by just two highly sophisticated groups of criminals, and was taken from exchanges.
As prices of crypto currencies fell in 2018, the value of the stolen cryptos was less, but the volume of coins stolen in 2018 was 3.6 times higher than it was in 2017 and seven times what it was in 2016, according to the report. Dave Jevans, CEO of CipherTrace has been quoted stating that these figures are only based on the loot from crypto crimes that CipherTrace has been able to validate; there is little doubt that the true number of crypto asset losses is much larger.
In addition to losing money as prices erode, the possibility of getting hacked is still one of its biggest challenges to mainstream adoption and acceptance of crypto currency. This report underscores the massive risks in the new asset class.
Crypto currency payments are recorded on an open ledger known as Blockchain. These ledgers are visible to anyone, but it is difficult to track the parties that sent and received the money. The firm also scans the black market and criminal forums for data, and chat rooms that advocated targeting crypto and Blockchain start-ups that raised massive amounts of money at the height of the price bubble.
In the beginning of the year, the crypto crime scene was dominated by exchange hackers, but in the last quarter of 2018, the report showed a rise in “inside jobs” or fraud. In addition to outright thefts, almost $750 million was lost from threats such as “exit scam”.
In addition to CipherTrace, another report this week from Chainalysis echoes those findings. In fact, Philip Gradwell, chief economist at Chainalysis, said the $1.7 billion number was validated by their research as well, and their own findings too indicated that criminal activity has “grown significantly” in the past 18 months. The firm tracks crypto currency transactions and provides insights to governments, law enforcement and some hedge funds to help them comply with anti-money-laundering laws.
The two hacker diverge in strategy. One group, which the report labels “Alpha,” is more sophisticated and complex, making elaborate effort to hide its tracks. For that, the group moves the stolen crypto currency 15,000 times before they sell it on exchange. Their objective, according to the report, seems to be as much to create havoc as to maximize profits.