ciphertrace - Pwim.Net

CipherTrace: Cryptocurrency Theft Alarming at $4.4 Billion in 2019

According to a reportby CipherTrace, a blockchain forensics company, the cryptocurrency sector has lost a whopping $4.4 billion in scams and thefts so far this year, up by more than 150% from $1.7 billion in 2018.

The study dubbed the “Q3 2019 Cryptocurrency Anti-Money Laundering (AML) Report,” which covers various issues, such as cryptocurrency regulation, prevailing sentiments, international trends, and impending legislation, among others.

The report reveals that cryptocurrency theft has risen at an alarming rate in 2019 compared to 2018 because malpractices have been happening through crypto exchanges. This trend has been instigated by the urge of criminals to undertake bigger heists.

Dave Jevans, CipherTrace CEO, noted: “The 150% increase in crypto theft and fraud reflects how criminals are adapting for bigger and better scores.”

He added: “Criminals chase money and the money is right here and ripe for the taking. Little attacks are often easy to defend against, but targeted attacks are far more lucrative.”

CipherTrace stipulated that some of the biggest crypto thefts in 2019 included PlusToken, a Ponzi scheme involving crypto exchange and wallet, and customers lost $2.9 billion. Another one entails the loss of $195 million by QuadrigaCX customers that served as a Canadian crypto exchange before the abrupt death of its CEO and co-founder, Gerald Cotten.

Regulatory scrutiny in the cryptocurrency sector is, however, being stepped up across the globe, as market participants and developers are seeking to penetrate the crypto space.

Image via Shutterstock

CipherTrace Unveils New Compliance Software For Banks Against Illicit Crypto Transactions

Blockchain security and analytics provider CipherTrace has unveiled a new cryptocurrency compliance product recognized as “Armada”, which is designed to eradicate risky crypto blind spots for financial institutions and banks. The new product targets financial institutions and banks dealing with cryptocurrencies.

CipherTrace Dedicated to Help Banks

Armada targets a large number of financial institutions, which have not adopted the proper AML (anti-money laundering) and KYC (know your customer) guidelines that could assist in detecting unregistered digital asset transactions. With the use of the new tool, financial institutions would be able to meet their anti-money laundering obligations and gain visibility into risky crypto blind spots. This assists in keeping the KYC procedures secure and also conducting due diligence on all VASPs (virtual asset service providers).

Dave Jevans, CipherTrace CEO, said that: “If Kunal Kalra’s banks had been using Armada to monitor their accounts, we could have identified Kalra much earlier.”

CipherTrace works with financial institutions and banks and their existing monitoring tools to assist in enhancing their AML procedures. It also assists in tracing the source of on-chain funds, matching user IDs, and finding problematic wallet addresses. The firm is backed by Galaxy Digital owned and operated by Mike Novogratz, one of the most vocal cryptocurrency supporters within the industry.

With Armada, banks and financial institutions can learn more about counterparty risks linked with unregistered virtual asset service providers and money service businesses. Jevans further described that if M.Y. Safra Bank deployed Armada, it would easily detect illegal crypto transactions. He revealed that although the bank has not been fined by the OCC (Office of The Comptroller of The Currency), it must focus on reporting and monitoring suspicious activities and carrying out independent AML/BSA audits.

He stated that the bank also must allow an independent party to reviews its previous activities and not only hire a BSA officer, but also adequate support staff in the next 180 days.

CipherTrace is a California-based company that provides a suite of blockchain forensic services and tools, which allow its clients to analyze crypto transactions flow like identifying laundered or hacked funds and also provides theft asset recovery service.

Cryptocurrency Theft Alarming At $4.4 Billion In 2019

According to a report released by CipherTrace, the crypto sector lost about 4.4 billion in thefts and scams in 2019, up by more than 150% from $1.7 billion in 2018. The report shows that crypto theft has increased at an alarming rate because malpractices have been taking place through crypto exchanges. The trend has been triggered by an increased number of criminals who are keen to undertake bigger heists. Criminals endeavor to use every means to chase money, which is there and ripe for taking. However, regulatory scrutiny within the crypto sector is being beefed up across the world as the market developers and participants are seeking to penetrate the crypto space. CipherTrace assists law enforcement and financial regulators in their investigations on cryptocurrency-related AML and compliance issues.

Image via Shutterstock

CipherTrace Reveals $1.4 Billion Worth of Crypto Assets Stolen in the First Five Months of 2020

The world is gradually healing from the compulsory lockdown it was plunged into by the coronavirus pandemic. Businesses are beginning to open, borders are gradually opening and the market value of stocks and cryptocurrencies are hopeful for steady gains onwards.

Several businesses particularly those geared towards blockchain technology experienced quantifiable economic downturns. Some of these downturns are just coming to limelight with the CipherTrace reports released on June 2.

The CipherTrace Report

CipherTrace is a cryptocurrency intelligence platform with the capability of tracing about 800 digital currencies. The platform has algorithms that help monitor thefts and security compliance models in listed assets. With the company’s stride, it is helping to spread a widespread adoption of cryptocurrencies by world governments.

Built for cryptocurrency surveillance, the report released by CipherTrace gives a snapshot of how evil actors preyed on asset holders during the coronavirus lockdown. With losses estimated at about $1.4 Billion, this year may rank second to last year (2019) with a record of $4.5 Billion in crypto losses. The fraud came as a result of the impersonation of legitimate bodies fighting the coronavirus and soliciting funds from the public.

The implication for blockchain stakeholders

There is a general belief that assets in the form of cryptocurrencies are secure and free of theft. While this may be a newbie’s disposition to the nature of digital assets, there needs to be a clear cut analysis to help all understand what can compromise the safety of crypto assets.

Fraudsters most times capitalize on the lack of knowledge of their victims who part with their assets in ways they can not account for. Falling prey to phishing scams, and Ponzi schemes are some of the common ways people lose their digital assets. We can not declare digital assets invincible but crypto assets will be safe if all investors pay due diligence to extant safety and security precautions.

Image via Shutterstock

CipherTrace Unveils Crypto Predictive Risk Model to Combat Suspicious Transactions in Wake of Twitter Scam

CipherTrace, a cryptocurrency intelligence company, has introduced a predictive risk-scoring model to instantly avert money laundering of cryptocurrencies from ransomware attacks and theft. This model will enable crypto exchanges, hedge funds, OTC desks, ATMs, financial investigators, payment processors, and custody solutions to flag down suspicious transactions based on the predictive analysis scores generated.

Mitigating Twitter-like hacks

On July 16, the world woke up to the shocking news that Twitter had been hacked as high-profile figures like Jeff Bezos, Joe Biden, Elon Musk, and Bill Gates had been hit by a massive Bitcoin Scam. Things went haywire because victims lost Bitcoin worth nearly $200,000 in a matter of hours.

CipherTrace seeks to mitigate such hacks by warning the relevant stakeholders like exchanges and payment processors of the incoming plunder as the score given will show the transactions are traveling through illegal paths.

As per the announcement:

“Real-time analytics and predictive risk scoring for cryptocurrencies enables exchanges and other Virtual Asset Service Providers (VASPs) to be able to score transactions from low to high risk based on whether the funds have been tainted by traveling through illicit paths or associated with known bad actors or sanctioned geographies.”

User privacy is not sacrificed as the company asserts that it offers the foresight without personally identifiable information being processed by the software.

Crypto user protection

Crypto fraud and theft continue causing nightmares to users. For instance, a recent report by leading blockchain tracking and analytics provider Whale Alert revealed that scammers have looted Bitcoin worth $24 million so far in 2020.

The crypto predictive risk model seeks to eradicate this by undertaking predictive analysis enabling users to freeze stolen funds. Moreover, ransomware launderers will be stopped, and this offers crypto users protection.

Dave Jevans, CipherTrace CEO, noted:

“The introduction of predictive risk scoring provides VASPs with a powerful new tool to identify potentially illicit funds before those transactions are finalized on the Bitcoin blockchain. This capability will also help VASPs offer an improved, more efficient user experience to their customers.”

This development is touted a game-changer in altering Bitcoin’s lingering reputation in the movement of illegal funds.

US Department of Homeland Security Can Now Trace Illicit Monero Cryptocurrency Transactions

The United States Department of Homeland Security (DHS) will now be able to track transactions of the most privacy-oriented cryptocurrency coin, Monero (XMR), leveraging a new tool by crypto intelligence company CipherTrace.

In an official release, CipherTrace mentioned that the forensic tools were developed under contract with DHS Science & Technology Directorate. Law enforcement and government agencies will now be able to use the tools to visualize and trace Monero transactions flows in criminal investigations.

Monero The Black Sheep of Crypto

Although Bitcoin cryptocurrency has been ranked the number one cryptocurrency choice among criminals, a significant number (45%) of darknet market transactions are carried out using the privacy coin Monero.

Monero employs a unique design to ensure user anonymity and always enforced privacy. Ring signatures are built into the protocol design and thus enable transaction mixing. Therefore, when someone tries to locate the source of a Monero transaction, it would appear as if a whole crowd of users took part in the exchange, thus making it almost impossible to identify the true source.

Law enforcement officials have been highly interested in finding a way to trace Monero. In the past, there has been no tool with the capacity to trace Monero transactions. However, Dave Jevans, the CEO of CipherTrace, said that the company has developed the first tool that has the ability to track Monero transactions.

Jevans mentioned that the tool has been in development for over a year. The US Department of Homeland Security will now use the tool to carry out investigations and trace Monero transactions.

The tool provides the US DHS with visualization, exploration, and search tools for tracking Monero transaction flows; integrated with CipherTrace’s Inspector financial investigations products. The tools help to ensure investment funds, OTC trading desks, and cryptocurrency exchanges that they do not accept Monero currencies from illicit proceeds and investigate Monero obtained from potentially illicit sources and take appropriate actions to stay in compliance.

Blockchain And Data Privacy

As people have public blockchains, the strive for anonymization in both processing and transaction is a key element for preserving consent and protecting privacy. Monero is one cryptocurrency that has taken the lead on this, and which uses stealth addresses and ring signatures. Such mechanisms now support the hiding of the core information of a transaction. Such anonymization has made life increasingly difficult in detecting and investigating crypto-related crimes. Thanks to the recent development of forensic tools for law enforcement and government agencies to monitor, track, and investigate illicit Monero transactions.

New Darknet Markets Launch Despite Exit Scams as Demand Rises for Illicit Goods

Despite the recent amount of exit scams on dark web platforms, the darknet sector has seen increasing growth, with new marketplaces launching every year.

At the time of writing, crypto forensic firm CipherTrace has reported that it has been monitoring over 25 active darknet markets. Dark web platforms appear to have been on the rise, despite the numerous exit scams the sector has undergone this year.

Notorious exit scams

An exit scam that made headlines everywhere was that of Empire Market, one of the most successful darknet marketplaces out there before it suddenly went offline. Along with its disappearance, the dark web platform bagged a hefty profit of $30 million USD from Bitcoin funds, much to the outrage of its users.

Other exit scams flagged as significant by crypto intelligence firm CipherTrace includes that of Icarus Market. Unlike Empire Market, Icarus’ sudden shutdown was alleged to not have been planned, as the dark web market was making a sizeable profit from the influx of new users flocking to its platform after the disappearance of Empire Market. Per Ciphertrace’s official report:

“Icarus had been pushing high effort updates soon before the exit, leading CipherTrace analysts to believe that the exit likely wasn’t planned. Rather, it’s probable that the large influx of new users from Empire and their deposits made Icarus ripe for a profitable exit.”

In addition, DeepSea market is the most recent dark web to have gone offline. Due to the nature of its disappearance, moderators have concluded that the illicit goods platform exit scammed and is unlikely to return into service.

Despite the growing amount of exit scams, dark markets have been reported by CipherTrace to have been on the rise, as the cost of creating a darknet market is low and profits that could potentially be reaped from it are high. Furthermore, as exit scams have caused reputable dark webs to be non-operational, the demand for illicit goods and services have shifted to other platforms, with new dark web additions being Invictus Market and Lime Market.

Hydra is the largest dark web worldwide

Currently, the largest worldwide dark web market is estimated to be Hydra, which tops more than $1.2 billion in revenue. What is notable about it is the fact that the Russian-based darknet behemoth appears to be the top illicit platform leveraged worldwide, but most of its users are based exclusively in the Eastern European region.

CipherTrace has pinpointed that in the Western world, “DarkMarket and White House Market appear to be the largest darknet markets in the Western world with over 300,000 customer accounts each.”

Recently, the blockchain intelligence firm released a comprehensive guideline to help law enforcement detect whether cryptocurrency had been leveraged for foul play during crime.

$1 Billion in Bitcoin Moves From Silk Road Wallet, a Format Update or a Hack?

69,370 Bitcoins (BTC) just moved from an address known to be connected to the infamous Silk Road darknet marketplace for the first time in five years in what could be a hack or a way to keep up with the Bitcoin network’s address format. At the time of writing, the BTC moved is valued at nearly $1 billion.

Crypto intelligence firm Ciphertrace has reported that an anonymous crypto user has just moved over $1 billion in Bitcoin from an address associated with the Silk Road darknet marketplace—speculating the wallet was either hacked or the user is trying to stay up to date with the Bitcoin network.

According to Ciphertrace on Nov. 3, the BTC was moved in two transactions and equated to almost one billion dollars in Bitcoin. The anonymous crypto user reportedly first sent a test transaction on 1 BTC, before then moving a further 69,369 Bitcoin from the Silk Road wallet address.

The crypto intelligence firm offered a plausible explanation that the BTC transactions were an effort to switch to a new address format and stay up to date with the BTC network. However, as the original address associated with the Silk Road darknet market has recently become a popular hacking target, they could not rule out the possibility that the wallet was finally cracked.

According to Ciphertrace:

“These movements could possibly mean that the wallet owner is moving funds to new addresses to prevent hackers from accessing the wallet.dat file or that hackers have already cracked the file.”

The last time the funds were moved from the wallet associated with the Silk Road darkweb market was in April 2015. The wallet has reportedly been circulating among darknet hackers for the last two years, with some hackers being so bold as to call on google to lend them a quantum computer to crack the address and the private key.

Silk Road Founder Ross Ulbricht is currently serving a double life sentence for his role as a darknet marketplace entrepreneur after being found guilty of money laundering, computer hacking, and conspiracy to traffic narcotics. He is in the seventh year of his sentence and it would appear that he is unlikely to ever be released without a pardon. He is 36 years old. The darknet marketplace was officially shut down in 2013.

In September 2020, Silk Road computer programmer Michael R. Weigand pleaded guilty for providing false statements regarding his involvement with the darknet marketplace.

Weigand served as a tech advisor for the darknet leaders, and also utilized his skills as a programmer to fix any vulnerabilities the illicit marketplace encountered. Serving as a backend technician, the Silk Road operator also confessed that he had previously lied to the IRS and FBI about his involvement with Silk Road darknet market. Weigand was sentenced to five years in jail.

Ethereum-Based Akropolis DeFi Protocol Hacked, More than $2 Million Stablecoins Stolen

With the ongoing rise in popularity of DeFi protocols, it was only a matter of time before hackers caught on and attempted to get away with a piece of it.

The recent hack suffered by Akropolis, an Ethereum-based DeFi protocol, resulted in a loss of more than 2,030,850 DAI ERC-20 tokens. According to people familiar with the talks, smart contracts in savings pools were targeted, with Curve Y and Curve sUSD savings undergoing huge losses. Per Akropolis team’s Twitter announcement:

“We recently identified a hack executed across a body of smart contracts in the ‘savings pools’ that have been audited twice. We are working with security specialists and on-chain analytics providers and aim to make a more detailed statement shortly.”

Stablecoins were liquidated by hackers, who transferred the stolen crypto to an Ethereum digital wallet. To prevent more funds from exiting the DeFi protocol, Akropolis has temporarily suspended the activity of all stablecoin pools.

At the time of writing, the team is investigating the losses and trying to get to the bottom of it. As two separate audits have been conducted on the targeted savings pools before hackers made away with over 2 million tokens, the hack has caught Akropolis completely by surprise. Currently, the team is brainstorming solutions to reimburse the lost stablecoins to Akropolis users.

The bad that comes with the DeFi boom

The surge in DeFi hackers has been notable this year, with the decentralized finance sector taking off in 2020 like never before. DeFi hacks, which were not significant in the least in 2019, has been growing in tandem with the decentralized finance sector’s success this year.

According to CipherTrace, crypto losses and laundered funds are up 30% compared to last year, with $468 million of fraudulent funds attributed to cybercrime. Of that amount, about 20% of the hacks targeted the decentralized finance sector, translating to approximately $98 million in stolen funds.

The largest hack recorded in 2020, in which KuCoin crypto exchange was targeted, resulted in funds being laundered through DeFi. Though KuCoin is listed as a centralized exchange, this did not prevent criminals from successfully stealing funds. So what is the solution here?

According to CipherTrace, running security audits is an important step in preventing contracts from running unaudited. Commenting on the matter, the US Securities and Exchange Commission’s Lead Director Valerie Szczepanik, also said:

“If the industry takes the time to get it right and engages with regulators to help them do so, then good stuff percolate to the top and you will have the benefits that come with the promise of distributed ledger technology.”

Mastercard Attains CipherTrace to Boost Security and Fraud Detection in the Crypto Ecosystem

Payment giant Mastercard announced the acquisition of CipherTrace, a leading cryptocurrency intelligence company, to offer businesses powerful intelligence about the crypto economy as digital assets continue becoming more intertwined with daily activities.

In a statement, Mastercard revealed the expectation for crypto consumers to have peace of mind about their investments. As a result, the acquisition will help the card issuer offer crypto users significant security and fraud detection apparatus by highlighting the risks and regulatory obligations.

Ajay Bhalla, the president of cyber & intelligence at Mastercard, welcomed the move and said:

“With the rapid growth of the digital asset ecosystem comes the need to ensure it is trusted and safe. Our aim is to build upon the complementary capabilities of Mastercard and CipherTrace to do just this.”

He added that digital assets emerged to be more inclusive and efficient based on their capability to reshape commerce.

Boosting transparency in crypto assets

CipherTrace has carved a niche for itself in the crypto space based on its innovative platform, which boosts fraud monitoring and security for crypto-related programs.

For instance, the intelligence company unveiled a predictive risk-scoring model intended to instantly avert money laundering of cryptocurrencies from ransomware attacks and theft in July 2020.

At the time, Twitter had been hacked, and high-profile figures like Jeff Bezos, Joe Biden, Elon Musk, and Bill Gates were hit by a massive Bitcoin scam.

The acquisition will enable the integration of different technologies like artificial intelligence (AI), blockchain, and cyber security for a safer crypto ecosystem.

Per the announcement: “The deal enables Mastercard to combine the technology, AI and cyber capabilities of both companies to differentiate its card and real-time payments infrastructure, allowing customers and stakeholders globally to build upon and benefit from the solutions to protect their consumers and comply with regulations, as they build their own virtual asset offerings.”

Mastercard continues to stamp its authority in the crypto space. For example, the payment giant launched a crypto program dubbed Start Path to support fast-growing cryptocurrency, digital assets, and blockchain companies in July this year.

Percentage of Crypto Transaction Volume Used for Crime is Reducing: CipherTrace

The growth of the broader cryptocurrency ecosystem is not reflected in the percentage of crypto transaction volumes being used for illicit or fraudulent criminal activities.

This fact was corroborated by blockchain security firm, CipherTrace in a recently published survey report.

According to the CipherTrace data, the nascent digital currency ecosystem recorded a 1,456% growth from January 2019 when the industry was valued at $135 billion to March 2022 when it was pegged at $2.1 trillion. In between, the industry attained an all-time high in terms of its combined market cap which almost topped $3 trillion.

Amidst this growth, the rate at which scammers utilized crypto as a tool for their activities notably declined from 0.62 – 0.65% in 2020 to 0.1 – 0.15% in 2021. This comes on the back of a total of $590 million paid as payment to ransomware attackers in 2021, a figure that stands at 42% above the figure recorded within the same time frame in 2020.

The insight from CipherTrace also revealed that there is a gradual shift in the modalities being employed by cybercriminals. The security outfit said its data showed that illicit activities are now gradually moving into the decentralized finance (DeFi) space as well as into mixing services and digital collectables or non-fungible tokens (NFTs).

This year alone has seen a lot of attacks on DeFi protocols, one of which is the $625 million breach of the Ronin Bridge, Axie Infinity’s main bridge. The Lazarus Group from North Korea was linked to this crime by US authorities and Blender, a privacy mixing tool was indicted as being used by the hackers to launder the proceeds of the hack.

This corroborates CipherTrace’s observation that mixing services are now being featured in criminal activities. In stemming the activities of Blender.io, the US Treasury Department has placed a sanction on the protocol.