on the crypto
It has been a billion dollar spring for cryptocurrency criminals, according to CipherTrace. On Tuesday, the blockchain analytics firm said that scammers, hackers and thieves accumulated $ 1,36 billion in cryptocurrencies in the first five months of 2020.
CipherTrace released the results in its June 2020 anti-money laundering and crypto crime report. This puts 2020 on track to become the second most expensive year in cryptocurrency history, after the record high of $ 4,5 billion in 2019. .
The Wotoken affair
This year's total loot comes largely from a single fraud: Wotoken. China's massive multilevel marketing system stole $ 1,09 billion in 2018 and 2019, but only came to light last month.
"It was a classic pyramid scheme," said John Jeffries, chief financial analyst at CipherTrace. Claiming to have a "magic algorithm", Wotoken continued to grow, reaching 715.000 users, until it "collapsed under its own weight," said Jeffries.
The alleged scam authors are now on trial in China. The Wotoken affair points out that the continuous increase in fraud is perhaps the biggest criminal threat in the crypto sector, much bigger in terms of stolen value compared to hacker attacks and thefts, which represent only 2% of the total according to an estimate of 2020 by CipherTrace.
The new trend of fraud
The meaning of this trend changes according to the point of view chosen. Jeffries noted that "it shows the maturation of the sector". As more exchanges strengthen their security systems, fewer hackers are able to break them.
The fraud highlights the need for tighter regulation of cryptocurrency activities, Jeffries added, adding: "If Wotoken had been asked to really reveal how their plan worked," it would have failed much faster.
Evolving criminals
Criminals are evolving their offensive tactics. In a week of observing transactions between darknet wallets and exchanges like Bitcoin systemCipherTrace found that over 30% of transfers had an intermediate step, while just under 10% of transfers were direct.
Those additional steps, although traceable, help to mask the sources of the cryptocurrency and increase the risk of money laundering, said CipherTrace. Transfers made by US-based bitcoin ATMs to "high-risk" exchanges continue to grow at an exponential rate.
The travel rule
Crypto is a global industry and so are its exchanges: 74% of exchange-to-exchange bitcoin transactions crossed international borders in 2019. This could become a problem with the June 2020 deadline of the Financial Action Task Force ( FATF) for crypto companies.
Jeffries said that the technology created to help exchanges comply with the so-called FATF Travel Rule is ready for implementation. However, the countries charged with applying the standard are not. Few jurisdictions are truly ready, with full regulations in place, he said.
