Cryptocurrency criminals have taken in an estimated $4.3 billion USD in 2019, according to CipherTrace.
CipherTrace, a cryptosecurity company based in Silicon Valley, has released its Q2 2019 Cryptocurrency Anti-Money Laundering (AML) Report, which is a detailed overview of major cryptocurrency thefts, scams, and fraud around the world. The firm’s Q1 report estimated that cybercriminals illicitly obtained more than $1.2 billion USD in cryptocurrency during the first three months of the year alone. To put the severity of these figure in context, last year’s total figure for crypto theft was $1.1 billion USD.
“These thefts only represent the losses that are visible. CipherTrace estimates the true number of crypto asset losses was much higher,” the company’s report notes. Included in the total figure is $850 million USD that iFinex—the company that operates the Bitfinex exchange and the stablecoin Tether—allegedly defrauded from its customers by handing over the funds to a Panama-based “bank” called Crypto Capital.
One of the most worrying threats to investors in cryptocurrency is the prevalence of “exit scams,” whereby scammers launch a new cryptocurrency based on a promising concept, then they raise the money from investors through an Initial Coin Offering (ICO) before mysteriously disappearing with investors’ funds. One of the most well-known involves QuadrigaCX, the cryptocurrency exchange in Canada that saw its founder—the only person with access to customer funds—mysteriously pass away in India, leaving investors unable to access their invested funds.
The world of cryptocurrency is also rife with pyramid schemes, with CipherTrace reporting that the biggest single loss of 2019 was the PlusToken scheme, which claimed to have developed a high-tech trading bot that yields 10% interest per month for investors. According to CipherTrace’s report, the PlusToken platform reportedly recruited over 100,000 users and raised over $189 million through membership fees between May 2018 and March 2019. The amount of money held by PlusToken is rumored to be over $2.9 billion.
How are the Authorities Responding?
Due to the intangible nature of cryptocurrency, cyber frauds are incredibly difficult for authorities to crack down on. However, in one significant example, the Financial Action Task Force (FATF) announced a new “travel rule”—which the G20 gave its full support for in June—that requires transactions between exchanges to include personal information about the sender and receiver of funds, much like international bank transfers.
Cryptocurrency regulation has now become a priority, particularly given Facebook’s announcement that it will launch its own currency Libra, and with political figures becoming increasingly concerned with blockchain’s potential for global financial disruption.
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