Cryptocurrency Exchange Theft, Money Laundering Surges in the First Half of 2018

Francisco Memoria
  • Data security company CipherTrace revealed hackers managed to take over $760 million from cryptocurrencies exchanges this year.
  • The figure is three times bigger than last year's $266 million.
  • Money laundering has reportedly also surged this year.

A report published by data security company CipherTrace has recently revealed that three times more cryptocurrency was stolen from cryptocurrency exchanges in the first half of this year than in all of 2017, with money laundering reportedly following suit.

Per the report, $761 million worth of cryptocurrency have already been stolen from exchanges this year, compared to $266 million last year. Per the CipherTrace’s CEO, Dave Jevans, the results are based on things the company has “seen directly.”

While in the last two years the firm’s data suggest criminals have managed to steal $1.21 billion worth of cryptocurrencies from exchanges, it now estimates 2018’s figures could hit $1.5 billion. Jevans stated:

We have seen a dramatic increase in cryptocurrency money laundering in 2018 so far. We’ve already tripled 2017 and we’re only halfway through the year.

Dave Jevans

The CEO noted that his firm tracks cryptocurrencies through an anti-money laundering (AML) technology, which creates a visual interface showing blockchain transactions, and includes details such as countries associated with said transactions and exchanges where the funds went to.

He added, however, that criminals managed to hide their tracks using various techniques, one of the most popular being the use of bitcoin mixing services that see people “contribute funds into a combined pool that will scramble them up and try to use a different pool of liquidity that is not trackable on the blockchain.”

This way, Jevans said, there’s no way to create a link between senders and receivers. These services, he noted are “written by highly skilled people who may have Ph.D.’s that are actively trying to avoid tracing.”

Some of these services, he added, even ran ads on Google, which has since moved to ban cryptocurrency-related ads, to advertise their lucrative services

These guys are making quite a bit of money off these services. They typically charge around 3% to perform a laundering transaction.

Dave Jevans

Another method used involves cryptocurrency flipping services like ShapeShift.io, in which users can trade their bitcoin for ethereum, and then turn it into another crypto before getting back to bitcoin again, creating a “cross-currency monetary flip that is extremely difficult to correlate and track.”

The majority of cases, CipherTrace’s report notes, merely sees cybercriminals send their funds to cryptocurrency exchanges, reportedly not expecting them to conduct KYC/AML checks, in an attempt to eventually convert the funds to fiat.

Crypto Exchange Hacks

CipherTrace’s numbers shouldn’t be surprising, as this year Tokyo-based cryptocurrency exchange Coincheck suffered the ecosystem’s biggest hack yet after seeing criminals take over $500 million worth of NEM tokens from its coffers.

Recently, as CryptoGlobe reported, South Korean exchange Bithumb lost over $30 million in 11 different cryptocurrencies. Soon after, the exchange revealed it was working to recover lost funds, ultimately managing to recover $14 million.

A somewhat unknown cryptocurrency exchange, Coinrail, was also hacked last month, at a time in which the cryptocurrency market was falling. Its losses reportedly amounted to $40 million worth of cryptocurrencies.