Since the arrival of bitcoin over a decade ago, the competition has been between governments and regulatory bodies to meet the ever-developing sophistication and ambition that cyber criminals have shown in order to launder money, scam their targets out of funds, defraud investors, and to ensure a covert payment mechanism for their ransomware. In 2019, according to a report issued by CipherTrace, found that the total cost of cybercrime exceeded $4.5 billion, an increase of almost 160% since 2018.
This year has already proved that there are vulnerabilities for digital criminals to exploit; the first five months saw over $1.4 billion worth of cryptocurrency-related thefts, hacks and fraud. Of this, $1 billion of the proceeds were derived from a Ponzi scheme operated by Wotoken in China. The scam allegedly assured investors of impossible returns, which could be derived from a ‘trading algorithm’ which did not exist. Scammers also appeared to capitalise on the enduring COVID-19 pandemic, preying on distracted and unsuspecting individuals with an assortment of cryptocurrency-based phishing campaigns, as well as deploying ransomware and fraud through the dark web.
Criminals have sought to evolve their methodologies to stay ahead of regulatory bodies, though they are never far behind. As governments have been distracted, trying desperately to diminish the impact of the pandemic, criminals have exploited the lack of oversight. Taking advantage of the decentralised system, cyber groups abused the lack of demand issued by regulatory agencies for audited financial statements, which enabled Ponzi schemes such as Wotoken to steal $1 billon from under the noses of 700,000 individuals. After the introduction of the technique of ‘mixing’ cryptocurrency, combining sums with multiple users in an attempt to confuse and shield anonymity, arrived on the ledger, it seemed impossible to many that funds would ever be traced back to the criminal. This fear has become more acute as a result of the sheer abundance of Bitcoin-to-fiat offramp facilities.
Yet, the forensic recording of transactions on the blockchain means that one slip up can expose a criminal’s entire crypto loot, not only their most recent thefts – but the entire history of their cryptocurrency theft. Unlike cash, which is anonymous and cannot be traced, blockchain technology appears as an infinite, immutable, data ledger which lists every single cryptocurrency transaction which has ever occurred. Once they have been made, there is no way for a third party to reverse transactions. As soon as a criminal de-anonymises themselves – aliases may be identified and traced back to a real-world identity, patterns of cryptocurrency movement may be analysed or the criminal may even be exposed whilst attempting to convert their criminal proceeds into fiat currency.
In order to stop the proliferation of crypto theft, an armoury of tools must be employed, from Know Your Customer checks, to focused end-to-end fraud investigation. The development of technology will inevitably offer new opportunities to prevent cryptocurrency theft. In tandem, criminals will seek out new methods to exploit their victims. Ultimately, it will be up to governments and regulatory bodies to facilitate an environment where this kind of crime is prevented in the first place. Until this is the case, Quintel have the ability to carry out cryptocurrency investigations using the latest software combined with vast experience in real world asset tracing, this can be used to identify the exchanges where the transactions occur, enabling appointed law firms to target them with disclosure orders.
On this website there is a wider discussion piece which reviews the future of cash post pandemic. It demonstrates the importance of keeping abreast of criminal tactics since cryptocurrency shows no signs of declining.
Global Risk Investigations
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+44 (0)203 948 1988