Cryptocurrency Fraud & Theft Soars to $1.2 Billion, 70% of 2018 in the Q1 of 2019


We are only 4 months in 2019 and it’s not just the price that has been making recovery. According to the latest report by cybersecurity firm CipherTrace, losses from the theft of cryptocurrencies from fraud-related activities and exchanges have surged to $1.2 billion in the first quarter of 2019 which is 70 percent of the entire such losses incurred in 2018.

Weakly Enforced Regulations Make Situation Worse

Last year, the value of losses from crime in the virtual currency sector has been $1.7 billion and we are already close to surpassing this in 2019. As price plunged and business activities stalled, cryptocurrency crimes only soared.

“Crypto crime has gotten worse because regulations are still weakly enforced. Europe broadly has not implemented its regulations yet and the cybercriminal community continues to grow,”

Dave Jevans, the chief executive officer of CipherTrace told Reuters.

When it comes to theft of digital currencies from exchanges and scams, in the first quarter of 2019 this amounted to $356 million. As for the losses from frauds and misappropriated funds, it totaled $851 million, revealed US-based CipherTrace in its quarterly report.

Mismanagement Plays An Integral Role As Well

Jevans who is also the chairman of a global organization Anti-Phishing Working Group that aims to help solve cyber crimes, further added that poor regulations and mismanagement in the firms are the reason behind the loss of these billions of dollars.

“I would also add that insider issues such as fraud or theft have grown mostly due to operations outside of the U.S. where regulations are poor, or simply due to greed and mismanagement by young management teams at these cryptocurrency companies that are managing hundreds of millions or even billions of dollars.”

These losses also included the ones incurred at Canadian digital platform QuadrigaX. The exchange has about C$180 million (US$134 million) in digital currencies frozen in user accounts after its founder, the only person to have the password to allow access died suddenly in December.

Using BTC To Store Wealth Offshore

The report from CipherTrace also stated that there was a major gap in the crypto regulatory environment when it comes to cross-border payments from US exchanges to offshore exchanges, that are beyond the purview of US authorities.

Per the analysis of 164 million Bitcoin transactions showed that these cross-border payments to offshore digital exchanges have grown 46 percent over the last two years. The report said this contributed to the $8.7 trillion or 11.5 percent of the world’s wealth that is hidden offshore.

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