CipherTrace Reveals $4.4 Billion Lost Through Crypto Crime, Rising by 150% in 2019

  • In all of 2018, the reported losses from theft in the crypto industry was $1.7 billion.
  • Many crypto crimes involving less than $5 million in value are not reported, as authorities focus on greater threats.

Cryptocurrency, for quite some time, has been a volatile industry, and investors that have been involved with it for a while know that losses and gains come with the territory. However, the losses sustained this year have risen exponentially, due to cryptocurrency-related crimes, as told in a new report by CipherTrace. First reported by Reuters, the theft in 2019 has surged as criminals seek out bigger heists, resulting in a total loss of $4.4 billion by September this year. This is an increase of 150% from the $1.7 billion total stolen in the whole of 2018. Dave Jevans, the chief executive officer at CipherTrace, stated,

“The 150% increase in crypto theft and fraud reflects how criminals are adapting for bigger and better scores.”

He added that the funds in the cryptocurrency industry are “right here and ripe for the taking.” While exchanges often have adequate defense when it comes to small attacks, Jevans notes that the use of a targeted attack is “far more lucrative.”

Around the world, countries and governments have been working to establish regulations over the decentralized industry of cryptocurrency, due to the push by developers and participants to go mainstream. However, as they’ve struggled, two major thefts have managed to be primarily responsible for this year’s losses, PlusToken and QuadrigaCX.

The attack on PlusToken stole $2.9 billion from users and customers in an alleged Ponzi scheme. In the matter of QuadrigaCX, which has been highly publicized this year, a total of $195 million were lost from customer accounts, following the death of co-founder and CEO, Gerald Cotten. Jevans stated,

“Even without the two biggest thefts and scams, we are still witnessing many multi-million-dollar crimes. There is a relatively consistent increase in criminal activity, year over year, and we don’t expect that to change overnight.”

Jevans further points out that there’s an issue with underreporting these crimes when they are worth less than $5 million, since the authorities and even exchanges prefer to focus on the so-called bigger threats.

During the third quarter, CipherTrace reports that the quarterly thefts and scams totaled about $15.5 million. This is the lowest amount over a two-year period. Even though there are fewer reports of attack, Jevans added that the criminals are still managing to get out with “bigger wheelbarrows of cash.” After all, the attacks seem to be gravitating away from blatant thefts and moving on to exit scams and other insider-based fraud.

Jevans believes this transition is a sign that exchanges are becoming stronger in their defenses against hacking, giving criminals more of a challenge. He remarked,

“Today’s attackers are patient and willing to spend more time waiting for a payout. Not only have we seen more and more $100 million thefts and scams, those responsible are acting carefully, only cashing out small amounts to stay under the radar.”

Despite many countries having implemented know-your-customer protocols and requirements, the report revealed that 65% of the top 120 cryptocurrency exchanges around the world have relatively weak requirements. CipherTrace’s report surmised,

“It will no doubt have implications as regulators seek to have KYC information shared globally.”

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