Cryptocurrency crime losses more than double to US$4.5bil in 2019, report finds


  • TECH
  • Wednesday, 12 Feb 2020

Employees working on bitcoin mining computers at Bitminer Factory in Florence, Italy, in 2018. – Reuters

NEW YORK: Losses from cryptocurrency crime surged to US$4.52bil (RM18.7bil) last year, as insider theft soared even as hacking losses declined, according to a report from blockchain forensics company CipherTrace.

Last year's losses were up nearly 160% from 2018's total of US$1.74bil (RM7.2bil).

Blockchain, which first emerged as the system powering bitcoin, is a shared database maintained by a network of computers.

Cryptocurrency user and investor losses due to fraud and misappropriation in 2019 increased by more than five times, while hacks and thefts fell by 66%, the report showed.

"We noticed a significant uptick in malicious insiders scamming unsuspecting victims or leaching on their users through Ponzi schemes," Dave Jevans, CipherTrace chief executive officer, said. "Attacks from the inside of organisations lead to significant exits with major consequence to the crypto-ecosystem."

Since bitcoin's launch more than 10 years ago, governments and regulators around the world have grappled with the opaqueness and lack of transparency in the cryptocurrency market that has led to massive losses for investors.

Two large losses early last year were the main drivers for the surge, CipherTrace said.

Users and customers lost roughly US$3bil (RM12.4bil) from an alleged Ponzi scheme involving crypto wallet and exchange PlusToken.

The other significant loss was the almost US$135mil (RM558.5mil) that customers lost from Canadian crypto exchange QuadrigaCX following the unexpected death of its co-founder, according to CipherTrace.

The CipherTrace report also found illicit cryptocurrency money service businesses – including crypto exchanges – have transmitted funds on the payment networks of almost all the top 10 US retail banks.

Analysis further revealed that a typical large US bank processes billions of dollars annually in undetected cryptocurrency-related transfers.

"These clandestine operations create AML (anti-money laundering) compliance risks because criminals must find ways to launder ill-gotten crypto profits," CipherTrace said in the report.

CipherTrace research found that banks globally paid more than US$6.2bil (RM25.65bil) in AML fines in 2019. – Reuters

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