- According to a Q4, 2019 survey by CipherTrace users have lost 4.5 billion in Ponzi scheme and fraud scams while hacking-related scams have significantly dropped
- Banks have also fallen prey as US banks unsuspectingly facilitate illegal transactions
Losses in 2019 shot up by 160% despite hacking crimes dropping by 66%, this was according to a 2019 Q4 report by CipherTrace, a cryptocurrency intelligence firm. Amounting to $4.5 million just in the previous year.
Dave Jevans, CipherTrace CEO, stated they had seen a major bump in crimes where the unsuspecting users were duped by Ponzi schemes, mainly set up by people inside the system. This would make investors pull the plug on the cryptocurrency investments that are hurting the systems built around digital assets.
“We noticed a significant uptick in malicious insiders scamming unsuspecting victims or leaching on their users through Ponzi schemes.”
A common use case is the crypto wallet and exchange PlusToken Ponzi scheme where unsuspecting clients lost $3 billion in a single scam. There has also been the Canadian Exchange, QuadrigaCX, clients lost close to $135 million after the founder of the company passed away suddenly.
Banks are Unsuspecting perpetrators
Banks have also been victims as they have unknowingly facilitated illegal cryptocurrency transactions of up to $2 billion in US banks alone. This could be mainly attributed to the fact that it has become harder for traditional financial systems to embrace emerging technology while steering clear of crypto relations. This is as banks globally continue to face fines levied by Anti-money laundering (AML) authorities of about $6.2 billion.
Jevans further explained that banks need to come up with alternative solutions of ridding their systems of illegal dealings that would finance terrorism as they had previously underestimated the percentage of digital assets that are to be found in their accounts and systems.
“Like them or not, banks have a lot more virtual assets lurking in their accounts and payment networks than most in the industry had previously thought.
Banks need new capabilities to ferret out illicit MSBs [Money Service Businesses], terrorist financing, and other major sources of risk.”
Illegal crypto merchants have also been key in funneling funds to terrorist fronts. They are usually connected to high-risk exchanges and hide the transactions by intentionally using the wrong merchant category codes (MCC) the report further read.