The Five Most Common Crypto Crimes

BeginnerMay 06, 2024
This article discusses various crimes in the cryptocurrency world, ranging from scams to money laundering, to ransomware and computer hijacking, helping users understand and avoid various scams.
The Five Most Common Crypto Crimes

Billions of dollars of illicit cryptocurrency transactions take place every year through different crypto crimes. This transaction is quite different from traditional finance.

Although illicit transactions also occur in traditional finance. But these transactions are more difficult to track than cryptocurrency transactions. Thanks to the power of blockchains, transparency.

Here are the five most common crypto crimes that criminals use to make illicit transactions.

Crypto Scams

All crypto users are aware of this term, and why not? This method is most commonly used in illicit transactions.

A crypto scam is defined as fraudulent activities in the cryptocurrency space that are intended to deceive or defraud people.

Although billions of dollars are stolen every year through various scams, But in the past two years (2019 and 2021), users have lost more than $20 billion, which shows scams are not going away soon.


Source: Chainalysis

Among the scams, investment scams are the most popular. If we look at the top 10 investment scams of 2022, then TheHyperVerse.net is at the top with $1.2 billion, while CashFXgroup.com is in tenth place with $145 million.

Crypto scams can take various forms, including Ponzi schemes, fake initial coin offerings (ICOs), phishing attacks, and fake investment opportunities. Here are some of them.

NFTs Scam: Scammers trick users into buying fake NFTs. Wash trading is another part of the NFT scam, where scammers buy the same NFT from different addresses to manipulate the price of NFT.

Investment Scams: Investment scams are the most common and easiest scams. Scammers offer a low investment, high return scheme. They usually target new users in cryptocurrecy.

Giveaway Scams: It is like an investment scam but with an instant return. Scammers pretend to be famous people and demand to send cryptocurrency and promise to send double back in return.

Romance scams: The majority of victims of this scam are widows and elders. Scammers pretend to be the sole mate of the victim. And trick them into sending money by moving the discussion from a relationship to a business investment. In 2022, a single victim sent,on average, $15,000 to scammers.


Source: Chainalysis

Crypto money laundry

This is the biggest reason for cryptocurrency being banned in a country. The main goal of crypto money laundry is to move funds to different addresses and eventually cash them out.

The original address is difficult to locate because criminals move crypto to so many different addresses before cashing out.


Source: Chainalysis

To successfully cash out illicit cryptocurrency, it typically involves two on chain services.

  1. Intermediary services: This includes any legal or illegal services such as wallets, mixers, and darknets. Launderers use these services to temporarily hold the assest or convert it by using defi protocall.
  2. Fiat off ramp: Services that allow to exchange cryptocurrency into fiat are called fiat off ramp. This is the most crucial part of crypto money laundering after this coin cannot be tracked on blockchain analysis. Most fiat off-ramps are centralized exchanges, especially those that have P2P services.

From 2015 to 2022, a total of $68 billion worth of cryptocurrency was moved via crypto money laundering activity. And its value is rising every year.

The most common destination used by launderers is centralized exchanges, followed by DEX and high risk exchanges. Centralized exchanges receive more than 50% of illicit transactions, while DEX receives more than 15%.

For illicit transactions, the choice of P2P is falling (now less than 1%), which is good but mainly because of restrictions by many countries. On the other hand, the DEX percentage is rising, which was only up to 1% in 2019 and is now more than 15%, which shows launderers using DEX to convert their crypto into other coins because DEX doesn’t allow cashing out in fiat.

It is worth noting that other illicit cryptocurrency transactions are decreasing, but crypto money laundering is increasing at full capacity, which is not good for the entire cryptocurrency ecosystem.


Source: Chainalysis

Ransomware

It is also called digital kidnapping. Ransomware is a type of software designed to block access to devices until a sum of money, or ransom, is paid.


Source: Chainalysis

After blocking the device, ransomware shows a message (crypto address and instructions) asking for cryptocurrency to unlock the device. After the ransom is paid, the victim receives a decryption key to unlock the device.

Ransomware attacks are increasing year by year, but victims are refusing to pay. Also, the lifespan of ransomware is falling drastically. In 2012, the average lifespan of ransomware was 3907 days, and in 2022, it fall to only 70 days. Not just its lifespan; its overall ransomware revenue is also falling. In 2019, 76% of victims paid their ransom money, while 24% did not. In 2022, only 41% of victims paid ransom, while 59% did not. This shows people becoming aware of digital attacks.

Pump and dump

This scam is common in both traditional finance and cryptocurrency. The social media trend is a classic example of a pump-and-dump scheme.

In this scam, holders of coins heavily promote the coin on social media. To gain popularity, holders use misinformation and misleading statements, causing the price to rise rapidly as new investors buy.

To perform this scam, newly issued coins are introduced on a well-known DEX. Creaters offers a huge return and perk for buying their coin. After reaching their desired price (overvalue), holders sell their huge amount of coin, causing the price to fall and leaving new investors with low value coins.

Pumps and dumps especially happen on DEXs because this is the only way to modify the smart contract permission. The most recent example of a pump-and-dump coin is “Squide Game.”

In 2022, about 40,000 tokens were launched and gained a sufficient price. But the price of about 10,000 coins fell 90% within a week, showing possible pump and dump activity.

The best way to avoid pump-and-dump is to not follow social media trends and do some research before investing.

Stolen fund

The biggest threat for crypto entities and investors It includes hacking, phishing, and unathorized access to crypto accounts. Like crypto money laundering, the value of stolen funds is also increasing.

Stolen funds refer to cryptocurrencies like Bitcoin, Ethereum, or others that have been unlawfully acquired through illicit means.

The biggest victims of hacking are the Defi protocol and centralized exchange. These both cover more than 90% of stolen fund revenue. The funny thing is that stolen funds from crypto users are less than 1%, which shows users are maintaining their wallet security well.

In 2021 and 2022, a total of $7.1 billion was stolen via different activities, with more than 500 attempts. The majority of hackers were linked to North Korea and stole more than $1.7 billion in just one year.


Source: Chainalysis

How can you protect your wallet from hacking?

There is nothing much you can do to protect your wallet except increase wallet security.

  1. Utilizing hardware wallets or cold storage solutions can mitigate the risk of unauthorized access to wallets.
  2. Implementing additional layers of security, such as two-factor authentication, adds an extra barrier against unauthorized login attempts.
  3. Conducting thorough research and exercising caution when investing in cryptocurrencies can help identify potential red flags and mitigate the risk of falling victim to scams.

Research shows cryptocrime is dropping

At least the report by Chainalysis says so. But not because people have become wise, but because sanctions imposed by various countries, especially the USA, are showing their effect.

Office of Foreign Assets Control (OFAC), which is a USA agency. It targets countries, individuals, and entities that are considered threats to national security and foreign policy.

OFAC imposed its first cryptocurrency related sanctions in 2018 on two Iranian nationals associated with the SamSam ransomware strain. Since then, it has sanctioned more than 35 entities and cryptocurrency addresses.

OFAC is sending a clear message that there will be consequences for those who engage in illegal cryptocurrency transactions.


Source: Chainalysis

Conclusion

Scammers can target anyone, but countries with high per capita incomes face more attacks than those with low per capita incomes.

For example, investment and NFT scams are more common in the UK, Canada, USA, Australia, France, and Germany than in other countries. While the giveway scam is popular in African and Asian countries,.

As the popularity of cryptocurrency continues to rise, it is important for governments to remain vigilant in monitoring and regulating its use to prevent further exploitation by malicious actors.

Author: Abrajbhar
Translator: Sonia
Reviewer(s): Edward、KOWEI、Ashley
* The information is not intended to be and does not constitute financial advice or any other recommendation of any sort offered or endorsed by Gate.io.
* This article may not be reproduced, transmitted or copied without referencing Gate.io. Contravention is an infringement of Copyright Act and may be subject to legal action.

The Five Most Common Crypto Crimes

BeginnerMay 06, 2024
This article discusses various crimes in the cryptocurrency world, ranging from scams to money laundering, to ransomware and computer hijacking, helping users understand and avoid various scams.
The Five Most Common Crypto Crimes

Billions of dollars of illicit cryptocurrency transactions take place every year through different crypto crimes. This transaction is quite different from traditional finance.

Although illicit transactions also occur in traditional finance. But these transactions are more difficult to track than cryptocurrency transactions. Thanks to the power of blockchains, transparency.

Here are the five most common crypto crimes that criminals use to make illicit transactions.

Crypto Scams

All crypto users are aware of this term, and why not? This method is most commonly used in illicit transactions.

A crypto scam is defined as fraudulent activities in the cryptocurrency space that are intended to deceive or defraud people.

Although billions of dollars are stolen every year through various scams, But in the past two years (2019 and 2021), users have lost more than $20 billion, which shows scams are not going away soon.


Source: Chainalysis

Among the scams, investment scams are the most popular. If we look at the top 10 investment scams of 2022, then TheHyperVerse.net is at the top with $1.2 billion, while CashFXgroup.com is in tenth place with $145 million.

Crypto scams can take various forms, including Ponzi schemes, fake initial coin offerings (ICOs), phishing attacks, and fake investment opportunities. Here are some of them.

NFTs Scam: Scammers trick users into buying fake NFTs. Wash trading is another part of the NFT scam, where scammers buy the same NFT from different addresses to manipulate the price of NFT.

Investment Scams: Investment scams are the most common and easiest scams. Scammers offer a low investment, high return scheme. They usually target new users in cryptocurrecy.

Giveaway Scams: It is like an investment scam but with an instant return. Scammers pretend to be famous people and demand to send cryptocurrency and promise to send double back in return.

Romance scams: The majority of victims of this scam are widows and elders. Scammers pretend to be the sole mate of the victim. And trick them into sending money by moving the discussion from a relationship to a business investment. In 2022, a single victim sent,on average, $15,000 to scammers.


Source: Chainalysis

Crypto money laundry

This is the biggest reason for cryptocurrency being banned in a country. The main goal of crypto money laundry is to move funds to different addresses and eventually cash them out.

The original address is difficult to locate because criminals move crypto to so many different addresses before cashing out.


Source: Chainalysis

To successfully cash out illicit cryptocurrency, it typically involves two on chain services.

  1. Intermediary services: This includes any legal or illegal services such as wallets, mixers, and darknets. Launderers use these services to temporarily hold the assest or convert it by using defi protocall.
  2. Fiat off ramp: Services that allow to exchange cryptocurrency into fiat are called fiat off ramp. This is the most crucial part of crypto money laundering after this coin cannot be tracked on blockchain analysis. Most fiat off-ramps are centralized exchanges, especially those that have P2P services.

From 2015 to 2022, a total of $68 billion worth of cryptocurrency was moved via crypto money laundering activity. And its value is rising every year.

The most common destination used by launderers is centralized exchanges, followed by DEX and high risk exchanges. Centralized exchanges receive more than 50% of illicit transactions, while DEX receives more than 15%.

For illicit transactions, the choice of P2P is falling (now less than 1%), which is good but mainly because of restrictions by many countries. On the other hand, the DEX percentage is rising, which was only up to 1% in 2019 and is now more than 15%, which shows launderers using DEX to convert their crypto into other coins because DEX doesn’t allow cashing out in fiat.

It is worth noting that other illicit cryptocurrency transactions are decreasing, but crypto money laundering is increasing at full capacity, which is not good for the entire cryptocurrency ecosystem.


Source: Chainalysis

Ransomware

It is also called digital kidnapping. Ransomware is a type of software designed to block access to devices until a sum of money, or ransom, is paid.


Source: Chainalysis

After blocking the device, ransomware shows a message (crypto address and instructions) asking for cryptocurrency to unlock the device. After the ransom is paid, the victim receives a decryption key to unlock the device.

Ransomware attacks are increasing year by year, but victims are refusing to pay. Also, the lifespan of ransomware is falling drastically. In 2012, the average lifespan of ransomware was 3907 days, and in 2022, it fall to only 70 days. Not just its lifespan; its overall ransomware revenue is also falling. In 2019, 76% of victims paid their ransom money, while 24% did not. In 2022, only 41% of victims paid ransom, while 59% did not. This shows people becoming aware of digital attacks.

Pump and dump

This scam is common in both traditional finance and cryptocurrency. The social media trend is a classic example of a pump-and-dump scheme.

In this scam, holders of coins heavily promote the coin on social media. To gain popularity, holders use misinformation and misleading statements, causing the price to rise rapidly as new investors buy.

To perform this scam, newly issued coins are introduced on a well-known DEX. Creaters offers a huge return and perk for buying their coin. After reaching their desired price (overvalue), holders sell their huge amount of coin, causing the price to fall and leaving new investors with low value coins.

Pumps and dumps especially happen on DEXs because this is the only way to modify the smart contract permission. The most recent example of a pump-and-dump coin is “Squide Game.”

In 2022, about 40,000 tokens were launched and gained a sufficient price. But the price of about 10,000 coins fell 90% within a week, showing possible pump and dump activity.

The best way to avoid pump-and-dump is to not follow social media trends and do some research before investing.

Stolen fund

The biggest threat for crypto entities and investors It includes hacking, phishing, and unathorized access to crypto accounts. Like crypto money laundering, the value of stolen funds is also increasing.

Stolen funds refer to cryptocurrencies like Bitcoin, Ethereum, or others that have been unlawfully acquired through illicit means.

The biggest victims of hacking are the Defi protocol and centralized exchange. These both cover more than 90% of stolen fund revenue. The funny thing is that stolen funds from crypto users are less than 1%, which shows users are maintaining their wallet security well.

In 2021 and 2022, a total of $7.1 billion was stolen via different activities, with more than 500 attempts. The majority of hackers were linked to North Korea and stole more than $1.7 billion in just one year.


Source: Chainalysis

How can you protect your wallet from hacking?

There is nothing much you can do to protect your wallet except increase wallet security.

  1. Utilizing hardware wallets or cold storage solutions can mitigate the risk of unauthorized access to wallets.
  2. Implementing additional layers of security, such as two-factor authentication, adds an extra barrier against unauthorized login attempts.
  3. Conducting thorough research and exercising caution when investing in cryptocurrencies can help identify potential red flags and mitigate the risk of falling victim to scams.

Research shows cryptocrime is dropping

At least the report by Chainalysis says so. But not because people have become wise, but because sanctions imposed by various countries, especially the USA, are showing their effect.

Office of Foreign Assets Control (OFAC), which is a USA agency. It targets countries, individuals, and entities that are considered threats to national security and foreign policy.

OFAC imposed its first cryptocurrency related sanctions in 2018 on two Iranian nationals associated with the SamSam ransomware strain. Since then, it has sanctioned more than 35 entities and cryptocurrency addresses.

OFAC is sending a clear message that there will be consequences for those who engage in illegal cryptocurrency transactions.


Source: Chainalysis

Conclusion

Scammers can target anyone, but countries with high per capita incomes face more attacks than those with low per capita incomes.

For example, investment and NFT scams are more common in the UK, Canada, USA, Australia, France, and Germany than in other countries. While the giveway scam is popular in African and Asian countries,.

As the popularity of cryptocurrency continues to rise, it is important for governments to remain vigilant in monitoring and regulating its use to prevent further exploitation by malicious actors.

Author: Abrajbhar
Translator: Sonia
Reviewer(s): Edward、KOWEI、Ashley
* The information is not intended to be and does not constitute financial advice or any other recommendation of any sort offered or endorsed by Gate.io.
* This article may not be reproduced, transmitted or copied without referencing Gate.io. Contravention is an infringement of Copyright Act and may be subject to legal action.
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