Cryptocurrency thieves make off with record $14 billion

Cryptocurrency-based crime hit a record high last year, with criminals pocketing $14 billion worth of bitcoin, ethereum and other digital currencies from scams, ransomware and thefts.

The figure, reported by Chainalysis, a data group, is almost double the $7.8 billion worth of crypto funds that were deposited into accounts with known criminal associations in 2020.

In its latest Crypto Crime Report, Chainalysis said that “$14 billion worth of illicit activity represents a significant problem”.

It added that such “criminal abuse” increases the likelihood of restrictions being imposed by governments on the use of cryptocurrencies, and “worst of all, victimises innocent people around the world”.

Scammers stole $7.8 billion of cryptocurrency last year, Chainalysis found — a year-on-year increase of 82 per cent. About a third of this came from “rug pulls”, where a developer builds what looks to be a legitimate cryptocurrency project only to take investors’ money and disappear. A high-profile incident in 2021 involved the Turkish crypto exchange Thodex, whose chief executive, Faruk Fatih Ozer, allegedly ran off with as much as $2 billion of investors’ money.

Cryptocurrency theft grew even faster, with roughly $3.2 billion of digital currencies stolen last year. That was a 516 per cent increase on 2020, according to Chainalysis.

However, the report stressed that, although the value of crime-linked transactions was at an all-time high, the proportion of illicit dealings fell.

While the amount of crypto pocketed by criminals rose 79 per cent in 2021, the overall market expanded by 567 per cent, with $15.8 trillion worth of cryptocurrencies traded last year.

“Given that roaring adoption, it’s no surprise that more cybercriminals are using cryptocurrency. But the fact that the increase was just 79 per cent might be the biggest surprise of all,” the report said.

Chainalysis said that the proportion of transactions involving illicit accounts “has never been lower”, but added that the figure could rise as it identifies more suspicious accounts.

Last year about 0.62 per cent of all crypto transactions were thought to involve criminals. That percentage has steadily fallen in recent years apart from a blip in 2019 when illicit transactions made up more than 3 per cent of the total cryptocurrency market, largely because of the multibillion-dollar PlusToken ponzi scheme.

Chainalysis said that the authorities are starting to get to grips with cryptocurrency crime, which is why it is “becoming a smaller and smaller part of the cryptocurrency ecosystem”.

However, by its calculations, digital wallets linked to criminals still hold at least $10 billion worth of cryptocurrency. Those criminals are increasingly targeting decentralised finance, or DeFi, markets, where algorithms handle all transactions without any human interaction.

That is partly because of the “incredible returns” generated by decentralised tokens such as Shiba Inu, which have encouraged investors to take a punt on other DeFi tokens.