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Crypto Crime Mooned In 2018

Crypto-related crime spiked massively last year, according to the latest report from AML firm CipherTrace. Digital crooks made off with some $1.7 billion worth of crypto assets in 2018.

Some $950 million of the ill-gotten riches were siphoned off exchanges and related crypto infrastructure, growing more than threefold from the previous year. Only $266 million were stolen from exchanges in 2017.

While the dollar value of the losses dropped in Q4, the figure was significantly distorted by the overall drop in crypto capitalization over the same period. There were also fewer high-volume heists, like those committed earlier in the year in Japan and Korea.

Exchange thefts grew massively last year.

Via CipherTrace

Instead, inside jobs and exit scams replaced hacks as the predominant forms of crypto-crime in the last quarter of the year.


Does Crime Threaten Adoption?

The CipherTrace report compiles a list of trending crypto threats, some of which are not only surprising, but could cause obstacles for crypto scaling and mass adoption.

Lighting Network transactions are an unexpected addition to the “list of shame,” right next to newly developed swindles such as SIM-swapping and crypto dusting. Sanction evasion and crypto mixers are back in the top 10, together with less conventional methods, like bomb threats and ransomware.

Some of these methods, like SIM-swapping, also give the perpetrators access to the victims’ legacy bank accounts, but crypto crooks “are predominantly interested in targeting cryptocurrencies for the ease with which these funds can be laundered through online exchanges, and because the transactions can’t be reversed,” according to Lieutenant John Rose of the Silicon Valley REACT Task Force, who is quoted in the report.


Running Out Of Places To Hide… And Launder….

Always a few steps behind, global and national regulators have begun clamping down on crypto-to-crypto operations, drawing up new definitions, rules and enforcement guidelines.

In the US, FinCEN was the tip of the regulatory spear in 2018. The SEC has also flexed its muscle, insisting on the need for AML in crypto asset trading. In Europe, several countries have already adapted their laws to the EU’s 5th AML Directive, and the remainder are expected to follow suit within a year.

In the meantime, the global Financial Action Task Force has put forth a series of AML/CTF-related recommendations, which are mandatory for member countries. The deadline for the implementation of these guidelines is June, 2019.

With regulatory dogs beginning to bark, even pure anonymity and decentralization holdouts, like Erik Voorhees’ ShapeShift, submitted to the changing environment by introducing mandatory KYC policies. Crypto thieves may have had a field day in 2018, but they will find it more difficult than ever to launder and enjoy the proceeds of their machinations.


The author is invested in digital assets. 

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