What are the latest crypto crimes since 1 Januar 2023?

The year 2022 was a turbulent one for the cryptocurrency industry, with several major events shaking up the market and affecting both legitimate and illicit actors. In this blog post, we will review some of the latest crypto crimes that took place since 1 January 2023, and explore how they relate to the broader trends of crypto-based crime. We will also discuss whether there have been any new discoveries of drug or other illegal webshops on the Dark Web, and how law enforcement and regulators are responding to these challenges.

Illicit transaction volume reached $20.1 billion

One of the most notable crypto crime trends of 2022 was the surge in illicit transaction volume, which reached an all-time high of $20.1 billion, according to a report by Chainalysis. This was mainly driven by a sharp increase in transactions involving entities that were sanctioned by the U.S. Office of Foreign Assets Control (OFAC), such as Hydra, a Russian darknet marketplace that sells drugs, weapons, and other contraband; Tornado Cash, a decentralized mixer that obscures the origin of cryptocurrency transactions; and several Iranian entities that allegedly used crypto to evade sanctions and fund terrorism. These sanctions were some of the most ambitious and difficult-to-enforce crypto sanctions ever issued by OFAC, and they posed significant challenges for compliance professionals and service providers who had to monitor and block these transactions.

Another major crypto crime trend of 2022 was the record-breaking amount of hacking incidents, which accounted for $7.6 billion of illicit transaction volume.

Some of the most prominent hacks included:

The Poly Network hack

The Poly Network hack resulted in the theft of over $600 million worth of various cryptocurrencies from a cross-chain interoperability protocol in August 2022. The hacker later returned most of the funds after claiming to have done it “for fun” and engaging in a public dialogue with Poly Network.

The BitMart hack

The BitMart hack involved the compromise of a hot wallet belonging to a centralized exchange in December 2022, leading to the loss of over $200 million worth of cryptocurrencies. The hacker attempted to launder the funds through various mixers, decentralized exchanges, and other services, but some of them were frozen or blacklisted by service providers.

The Badger DAO hack

The Badger DAO hack, which exploited a vulnerability in a smart contract associated with a decentralized finance (DeFi) protocol in December 2022, resulting in the theft of over $120 million worth of Bitcoin and other tokens. The hacker used a complex technique called flash loan to manipulate the price of certain tokens and drain funds from the protocol.

These hacks demonstrate the increasing sophistication and diversity of cybercriminals who target cryptocurrency platforms and users, as well as the need for more robust security measures and cooperation among service providers to prevent and mitigate these attacks.

While hacking and sanctions evasion were the dominant forms of crypto crime in 2022, there were also other types of illicit activities that involved cryptocurrencies, such as scams, ransomware, darknet markets, and money laundering. Some examples include:

The Squid Game scam

The Squid Game scam, which lured investors with a cryptocurrency project inspired by a popular Netflix series in November 2022. The project claimed to offer a play-to-earn game based on the show’s challenges, but it turned out to be a rug pull that drained over $3 million worth of funds from unsuspecting users.

The REvil ransomware group

Extorted millions of dollars worth of cryptocurrencies from various victims, including meat producer JBS, IT firm Kaseya, and celebrity law firm Grubman Shire Meiselas & Sacks. The group went offline in July 2022 after allegedly receiving pressure from law enforcement, but it reemerged in October 2022 with new attacks and demands.

The White House Market

Became one of the largest and most resilient darknet markets after the shutdown of Empire Market in August 2021. The market exclusively accepts Monero, a privacy-focused cryptocurrency that makes it harder to trace transactions. The market offers a variety of illicit goods and services, such as drugs, counterfeit products, malware, and stolen data.

These examples show that cryptocurrencies continue to facilitate various forms of online crime, especially those that rely on anonymity and pseudonymity. However, they also show that law enforcement and regulators are not powerless against these threats, as they have made significant progress in identifying and prosecuting crypto criminals, as well as imposing regulations and guidelines to enhance compliance and transparency in the industry.

For instance, in January 2023, the U.S. Department of Justice announced the indictment of four individuals who allegedly operated OxyMonster, a darknet vendor that sold opioids and other drugs on various darknet markets, including Dream Market, Empire Market, and White House Market. The defendants allegedly used Bitcoin and Monero to receive payments from customers, and laundered their proceeds through various methods, including cryptocurrency tumblers, prepaid cards, and cash deposits.

In February 2023, the Financial Action Task Force (FATF), an intergovernmental body that sets standards for combating money laundering and terrorist financing, issued updated guidance on the application of its recommendations to virtual assets and virtual asset service providers (VASPs). The guidance clarified the definition and scope of VASPs, the requirements for licensing and registration, the implementation of the travel rule, and the risk-based approach to supervision and enforcement.

These developments indicate that the crypto crime landscape is constantly evolving, and that stakeholders need to keep up with the latest trends and challenges. As cryptocurrencies become more mainstream and integrated into the global financial system, they also become more attractive and accessible to criminals who seek to exploit their potential benefits. However, they also become more transparent and traceable, as blockchain analysis tools and techniques improve and expand. Therefore, it is essential for service providers, users, regulators, and law enforcement to work together to ensure that cryptocurrencies are used for legitimate purposes, and that crypto criminals are held accountable for their actions.

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