Criminal activity in digital currency markets reached alarming proportions during 2018, with perpetrators extracting roughly US$1.7 billion through coordinated thefts and deceptive schemes, new resear
Criminal activity in digital currency markets reached alarming proportions during 2018, with perpetrators extracting roughly US$1.7 billion through coordinated thefts and deceptive schemes, new research from CipherTrace reveals. The onslaught intensified despite a precipitous market collapse, underscoring how digital assets continue attracting sophisticated criminals.
Organized breaches of trading platforms inflicted the heaviest damage. Hackers plundered exchanges for more than US$950 million last year—a 3.6-fold increase from 2017 levels. The damage concentrated heavily in Asia, where Korea and Japan accounted for 58% of documented exchange heists throughout the period.
Outright scams generated substantial returns for fraudsters. Deceptive token offerings, fake exchange compromises, and Ponzi operations produced approximately US$725 million in criminal proceeds. Korea's Pure Bit exemplified this trend, accumulating nearly US$3 million for a purported Ethereum-powered exchange before management vanished with investor capital. The founders later reversed course, pledging refunds. Vietnam-based Modern Tech executed a more brazen disappearing act, raising US$660 million during an ICO before its developers abandoned the project entirely.
These criminal enterprises flourished despite brutal conditions. The broader cryptocurrency ecosystem lost 84% of total market value throughout 2018. Bitcoin deteriorated significantly, plummeting 81% from its December 17, 2017 zenith of US$19,600 to approximately US$3,500 as February commenced. Ether experienced even steeper declines, shedding 92% since its January 13, 2018 high of US$1,360 and now trading around US$106.
"Cryptocurrency criminal activity continues to evolve and accelerate," according to Dave Jevans, CipherTrace's chief executive and co-chair of the Cryptocurrency Working Group at APWG.org. "Fortunately, pending global legislation will hamstring many criminals, global gangs, and terrorist groups by greatly reducing their opportunities to launder. These tough new laws will drive bad actors to not only innovate but also flock to jurisdictions with weak regulatory oversight, as we have shown in earlier research."
Regulatory responses remain inconsistent worldwide. Progressive nations implemented comprehensive anti-money laundering and counter-terrorism financing standards, while permissive jurisdictions continue attracting illicit operators and fraudulent schemes. This fragmentation shapes where criminal networks concentrate their activities.
Contemporary attack methodologies have evolved considerably. SIM swapping enables thieves to commandeer phone numbers and access cryptocurrency accounts. Crypto dusting sends blockchain transfers from money-mixing services to legitimate wallets, poisoning their reputations. Unregulated money service businesses operate covertly beyond institutional detection. Coin-mixing operations launder suspicious tokens by converting them into legitimately sourced cryptocurrency. Extortionists deploy mass-customized phishing messages using leaked passwords and personal information to solicit ransom payments. Specialized malware simultaneously empties wallets, harvests private keys, and seizes encrypted user data hostage.
