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Gate.io Blog 2023 Trends: Crypto Crime Declines, Chainanalysis Report

2023 Trends: Crypto Crime Declines, Chainanalysis Report

31 January 11:48

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## [TL; DR]
Crypto crimes decreased by about 40% in 2023.

Sanction-related payments comprised the highest proportion of illicit activity.

Although romance scams are underreported they cause much emotional damage to the victims.

## Introduction
2023 was a remarkable year for cryptocurrency due to the sector’s recovery from the debilitating effects of the winter crypto that started in 2022. During that year many crypto projects closed down or filed for chapter 11 bankruptcy to facilitate restructuring. The other harsh reality of 2022 was the high number of crypto crime incidents that include pig butchery, crypto frauds, ponzi schemes, crypto scams and crypto shifting.

Nonetheless, apart from the impressive crypto recovery in 2023 the number of illicit crypto activities decreased significantly. In this article, we analyze the type of crypto crimes that occurred during 2023. We shall also assess the reasons why crypto crimes decreased during that year.

## Crypto Crime Falls in 2023
The total value lost through illicit activity in 2023 was over $24B, a decline of about 40% from that of 2022. However, according to [Chainanalysis](https://www.chainalysis.com/blog/2024-crypto-crime-report-introduction/ "Chainanalysis"), a crypto analytic firm, that figure is still provisional since other criminal activity in crypto that occurred during 2023 may be discovered later.

The same scenario occurred in 2022 when there was a provisional figure of $20.6 billion at the time the crypto report was compiled. Nonetheless, the number of digital addresses associated with illicit activity increased with time. As a result, the revised value of stolen crypto funds rose to $39.6 billion by the end of 2023.

In fact, in its report [Chainanalysis stated](https://www.chainalysis.com/blog/2024-crypto-crime-report-introduction/ "Chainanalysis stated"), “One year from now, these totals will almost certainly be higher, as we identify more illicit addresses and incorporate their historic activity into our estimates.”

Also, according to Chainanalysis, the report may not show all the crypto crime trends as it only focuses on on-chain activity. Pertaining to this aspect the report stated, “Typically, we only include measurable on-chain activity in our estimates for illicit activity.”

## Ransomware and Darknet Crypto Revenues Surge 
Chainanalysis analyzed the illicit crypto activity based on established categories which include ransomware, darknet market sales, sanctions-related crypto transactions and romance scams. The illicit activity increased in some of these activities but decreased in the others.

The report shows that there was an increase in ransomware and darknet market sales as compared  to 2022. Incidentally, ransomware extortion and darknet market sales were previously prevalent on the <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> blockchain but that changed in 2023.

However, there was a decrease in some crypto crimes that were previously associated with bitcoin such as scamming and sanction related payments. These are now more prevalent with stablecoins than before.

When cases of ransomware decreased in 2022 Chainanalysis concluded that it was a result of cybersecurity improvements on the part of crypto firms. Sadly, in 2023 there was a resurgence of such cases.

There was a similar development with darknet market revenue. It decreased in 2022 but increased in 2023. The 2022 Chainanalysis report concluded that the shutdown of Hydra, a platform associated with the darknet market, led to such crypto crime down. As a fact, Hydra used to
account for around 90% of the darknet revenue.

What might have led to the rise in ransomware extortion and darknet market sales in 2023 could be the adaptation of the cyber criminals to the recent security improvements in the crypto sector. The malicious actors could have discovered ways to circumvent some of the newly devised security measures.

## Sanction-Related crypto transactions dominated in 2023
Sanctions-related payments contributed much to the crypto crime amount. Basically, these crimes formed 61.5% of that amount, estimated to be $24.4 billion. The $14.9 billion, attributed to such illicit cryptocurrency activity came from crypto payments in jurisdictions such as Russia that do not enforce the United States sanctions.

Garantex, a Russia-based exchange, sanctioned by OFAC and OFSI in the United Kingdom, has been cited as one of the leading entities that facilitate money laundering on behalf of cybercriminals. It seems that it does not have an approved anti-money laundering (AML) program.

The sad reality, though, is some of these payments were made by innocent people who live in sanctioned countries like Iran. Nevertheless, most of these transactions are carried by sanctioned entities and groups such as terrorists that do not have much direct access to the United States dollar. Notably, most of these transactions are conducted using stablecoins.

## Crypto scamming and hacking
The total value stolen through crypto scamming and hacking decreased by 29.2% and 54.3% during 2023. Many crypto scammers used romance tactics, or pig butchery, to steal crypto from unsuspecting victims. Often, these scammers create a strong relationship with the crypto victims.

Once the scammers create a strong bond with the victim they promote fake crypto programs. Since the scammers and the would-be-victims would have created a strong relationship the unsuspecting individuals often invest in the crypto projects as they are advised to do.

Unfortunately a crypto scheme like pig butchery is damaging to the victim who would have emotionally invested in the perpetrator. Such crypto fraud is more distressing than other crimes.

On this, [Chainanalysis commented](https://www.chainalysis.com/blog/2024-crypto-crime-report-introduction/ "Chainanalysis commented"), “Of course, the impact of romance scams on individual victims is devastating and should not be understated.”

It continued, “And while increased reporting – at least in the U.S. – is a good sign, we still believe insights into romance scams in particular suffer from underreporting.”

## Important Crypto Definitions
Pig butchery: This is a type of crypto scam that involves online romance relationships , invitations to high return investment and human trafficking. Usually, the victims end up investing in fake projects.

Crypto fraud:  This is a planned scheme to steal cryptocurrencies from unsuspecting individuals.  Examples of crypto frauds include pig butchery, crypto phishing and rug pulls.

Ponzi scheme: This is a form of an investment fraud where the investors are promised larger returns for their invested funds. Usually, the schemes pay high returns to early investors to lure more people to invest their funds in the fake businesses.

Crypto scam: A crypto scam is an initiative to get cryptocurrencies from investors through cheating. The perpetrators often get information from the victims which enables them to steal their digital assets.

## Conclusion
Crypto crime decreased by 40% in 2023, a period in which the industry recovered from the effects of the 2022 crypto winter. Sanction-related payments contributed 61.5% of the crypto crimes. Ransomware and darknet market sales also increased during the year. However, there was a decrease in crypto scams and hacks during the period.

## FAQs about Crypto Crimes
### What is cryptocurrency crime?
Crypto crimes refers to theft of cryptocurrencies that occur online. The criminals can use phishing, romance tactics, hacking and ponzi schemes, among others to steal cryptocurrencies from other people and organizations.
### What criminal activity is using crypto?
There are several Examples of crypto illicit activities that include ransomware, darknet market, scamming, romance tactics, hacking and phishing. The best way to prevent some of these activities is to refrain from getting crypto investment advice from people you do not physically  know.
### How are most crypto crimes committed?
Bad actors use scamming, ponzi schemes, romance tactics, hacking and phishing to steal cryptocurrencies from unsuspecting people. However, there was a decline in crypto crimes in 2023. 
### Is crypto used for money laundering?
At times cybercriminals use cryptocurrencies for money laundering. They steal cryptocurrencies using different means like ponzi schemes, hacking, romance tactics, scamming and use it for illegal activities such as funding terrorism and drug trafficking.

<div class="blog-details-info">
<div>Author:** Mashell C.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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TL；DR

Introduction

Crypto Crime Falls in 2023

Ransomware and Darknet Crypto Revenues Surge

Sanction-Related crypto transactions dominated in 2023

Crypto scamming and hacking

Important Crypto Definitions

Conclusion

FAQs about Crypto Crimes

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