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Concentration of Crypto-crime Might Be a Blessing for Law Enforcement: Report

Cybercriminals have been found to rely heavily on a highly-concentrated number of laundering service providers, potentially providing an avenue of opportunity for law enforcement to make significant strides in thwarting cryptocurrency-based criminal activity, reads a new report from Chainalysis.

russia 1020934 640smallAccording to the report, 75% of cryptocurrency value that was sent from “illicit addresses” last year was handled by just 1,867 deposit addresses. Further, just 270 addresses took in 55% of the cryptocurrency value sent from nefarious sources. This concentration grew from 2019 to 2020.

“We believe the growing concentration of deposit addresses receiving illicit cryptocurrency reflects cybercriminals’ increasing reliance on a small group of [over-the-counter]brokers and other nested services specializing in money laundering,” reads the report. “ … Investigators could significantly damage cybercriminals’ ability to convert cryptocurrency into cash by going after these money laundering service providers, thereby reducing the incentives for cybercriminals to use cryptocurrency in the first place.”

The report notes that the “raw value” of illicit crypto moved through the 270 addresses mentioned above totals $1.3 billion. Narrowing that further, just 24 of those addresses took in more than $500 million of those ill-gotten gains.

“Overall, what the data makes clear is that most illicit funds travel to service deposit addresses for whom money laundering makes up a huge portion of their activity, to the point that many of them appear to have no other purpose,” the report continues. “A smaller but still significant portion also goes to deposit addresses doing a high volume of legitimate transactions, which could allow the illicit activity to fly under the radar, reinforcing the need for compliance professionals and investigators to stringently assess all deposit addresses—especially those of nested services.”

FROM TWITTER

Fyggex @fyggexchange Feb 10

"What is Hot attracts scamsters: #Cryptocurrency crime drops in 2020 but #DeFi breaches rise, study finds"

The report also broke down which countries take in the most cryptocurrencies from illicit addresses. Per the report, those countries are:

  • United States
  • Russia
  • China
  • South Africa
  • United Kingdom
  • Ukraine
  • South Korea
  • Vietnam
  • Turkey
  • France

“The first trend that stands out is Russia’s receipt of a disproportionately large share of darknet market funds, which is largely due to Hydra,” the report notes. “Hydra is the world’s largest darknet market by revenue, and exclusively serves Russia and other Russian-speaking countries in Eastern Europe.”

Additionally, a separate report from CipherTrace shows the percentage of cryptocurrency crime dropped between 2019 and 2020, although 2020 still had the second-most crypto crime by annual value ever recorded. To that end, cryptocurrency crime was down 57% from 2019’s staggering $4.5 billion in total value ripped off. Last year saw a total of $1.9 billion in crypto frauds, hacks and thefts with “massive exit scams” playing a large role in those scams, notes the CipherTrace Report.

“2020 saw WoToken… defraud investors out of $1.1 billion in its exit scam—58% of 2020’s major crime volume. While major fraud volume saw a significant decrease, it still made up 73% of 2020’s crime total.”

Register to download a copy of the Chainalysis report. See more from more from CipherTrace.

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