Summary
Crypto crime increased in 2018, but it made up a smaller slice of a much larger market. Indeed, according to our analysis, illicit transactions comprised less than 1% of all economic bitcoin activity in 2018, down from 7% in 2012.
Even so, crime remains a significant problem in the cryptocurrency ecosystem. Exchange hacks have generated billions of dollars in criminal proceeds, darknet market activities have netted hundreds of millions of dollars in illicit revenues, and scams targeting individuals have stolen tens of millions of dollars. Moreover, criminal use of cryptocurrencies has become far more sophisticated. As a result, in this second edition of our Crypto Crime Report, we go deeper in our analysis to seek out granular insight into three categories of criminal activity.
For instance, we first look at hacks targeting cryptocurrency exchanges, not just in aggregate, but by tracing the movement of hacked funds from the scene of the crime to their exit points. Our analysis uncovers signature patterns in transaction activity in the months after a hack that may eventually assist in identifying and recovering hacked assets.
Then, we examine the surprising resilience of darknet markets as law enforcement takes aggressive action against them. In a report on the “whack-a-mole” problem with the darknet, we look at how transaction activity briefly subsides then quickly reroutes itself to new platforms when major darknet markets are closed down.
We also examine changing trends in Ethereum scams, where individuals are targeted, as last year’s phishing schemes lose their effectiveness and more complex Ponzi and ICO exit scams emerge to make outsized gains.
Finally, we discuss the role of cryptocurrency in the broader context of money laundering and highlight the importance of different types of services that are used to integrate illicit cryptocurrency into the clean economy.
Based on our analysis, we provide a summary of trends and developments that we believe will shape crypto crime activities—and crypto crime prevention—during the year to come.
