Last year was the worst yet in regards to crypto crime, a new report reveals. The industry lost more than $1.7 billion to crypto crooks, three times the 2017 tally. In what has become an ever-evolving menace, the thieves have continued to refine their methods. Crypto exchanges are still targets of choice for the crooks. However, the landscape is slowly changing, with inside jobs becoming a significant new channel. Exit scams by ICO issuers and SIM swapping have also gained traction as the thieves diversify.
The Dark World of Crypto Heists
Since the days of Mt.Gox, the crypto industry has continued to be the victim of well-orchestrated heists. While the defense technology and the awareness have improved, it has done little to deter the criminals. They keep outsmarting us, and it’s getting worse every year.
Of the $1.7 billion stolen in 2018, $950 million was stolen from crypto exchanges. The attacks were concentrated on Japan and South Korea, two of the countries with the most active traders. Together, the two accounted for 58 percent of the attacks.
The heists in Q4 were the least in the year, owing to the lack of mega heists, the report by Ciphertrace stated. The dollar value of the heists was also lower given the low value of most cryptos towards the end of the year. Irrespective of this, 2018 saw a 360 percent increase over 2017 in which $266 million was stolen. It’s also a 700 percent increase over 2016 in which $152 million was stolen.
The report also revealed a rising number of exit scams which further compounded to the problem. In 2018, $250 million was lost to dishonest crooks in the name of ICOs. One of the recent ones was Pure Bit in South Korea in which a startup raised $3 million. The funds were meant to develop a crypto exchange. The developers vanished with the funds, but after media and regulatory scrutiny, they issued an apology and promised to refund the stolen funds. Vietnamese firms Modern Tech and Sky Mining also made off with millions of investors’ funds.
SIM Swapping Becomes Popular as Mixers Step Up
While hacking exchanges is still the most dominant crime, other new vices are gaining traction. One of this is SIM swapping, a practice that involves the stealing of a victim’s identity. Once the crook swaps the details of a victim’s SIM card to one which he holds, he then gets control of the victim’s accounts. These can be banking accounts as well as crypto accounts. However, given the ease of laundering cryptos, identity thieves target cryptos over bank accounts.
One of the most prominent cases was when an investor suffered a SIM swap and lost $23.8 million in cryptos. The investor immediately sued his service provider AT&T in excess of $200 million for damages. SIM swapping has also been used elsewhere including in California to defraud a crypto startup $14 million and in Bulgaria to steal $5 million.
The report also recognized the continued progress that crypto mixers have made. These services assist the thieves ‘wash’ their cryptos. However, some are going further than that. One of these is Bitmixer, a mixing service based in the Caribbean island of Curacao. The service engages in crypto dusting, a new tactic that forces a crypto user to inadvertently have to use the service. Bitmixer sends tiny fractions of cryptos to top addresses and in doing so, taints their reputation. They are then forced to use the service to ‘wash’ their cryptos.
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