2019 was the best year for hackers targeting cryptocurrency exchanges. 11 major exchanges were , leading to the theft of $283 million worth of cryptocurrency.
This is the largest number of successful attacks in a single year. In 2018, there were just six incidents recorded.
However, despite the increase in breaches, hackers have not been making the expected profits. In 2018, about half of the attacks managed to steal $875.5 million worth of cryptocurrency. In 2014, they made off with $483 million in just three breaches.
According to Chainalysis, the sharp rise in the number of successful hacks is related to the use of more sophisticated and complex methods of entering exchange systems.
However, these services also began to use more sophisticated protection methods and systems , which helped prevent a lot of money from being stolen.
In cases where breaches are successful, cryptocurrencies are usually sent to other exchange services and converted into cash.
However, Chainalysis reports that often “a significant portion of funds remains unused, even for years.”.
“In these cases, there may still be an opportunity to have the stolen funds seized by authorities,” the researchers.
Criminals use specific exchange platforms to launder stolen cryptocurrency
According to Chainalysis, during 2019, more than $2.8 billion in Bitcoin was transferred by criminals to specific exchange portals and quickly cashed out into “fiat money.”
The $2.8 billion has also come from other scams (not just exchange platform breaches), such as ransomware , funds from phishing operations, online scams , and resources associated with known criminal and terrorist groups.
About half of these illicit funds were transferred to accounts on the Binance and Huobi exchanges , two of the largest of their kind, where criminals converted cryptocurrency into cash.
“This may come as a surprise, given that Binance and Huobi are two of the largest cryptocurrency exchanges and are subject to KYC [Know Your Customer] regulations,” the experts added.
KYC regulations apply in almost all countries in the world and require companies to ask customers to certify and verify their identity before any activity.
OTC BROKERS
However, Chainalysis reports that many criminal groups are bypassing this obstacle by using the so-called OTC (Over The Counter) system.
OTC (Over The Counter) intermediaries are entities that operate on exchange portals and act as intermediaries to facilitate transactions between buyers and sellers who do not wish their identities to be visible when transacting on open blockchains.
However, some of these agencies are not legal and offer services to criminals.
For OTC brokers, KYC regulations are more lax. “Many of them exploit this laxity and help criminals steal cryptocurrency,” the researchers say.
Ransomware attacks
To stop criminals, researchers need to discover and track blockchain addresses used in criminal and terrorist operations.
Ransomware payments are the easiest to track, as the ransom payment address is usually included in the notes that hackers leave with victims.
Chainalysis says that based on its data, in 2019, ransomware gangs received over $6.6 million in ransoms.
However, Chainalysis believes that ransomware gangs certainly managed to make a lot more money, but researchers did not discover it.
