Cryptocurrency Exchange

A study reveals that Two groups behind Scams worth $1 billion

Recently, Chainalysis, a blockchain analytics firm operating out of the U.S. and Denmark, has published an interesting fact which reports that only two groups were involved in crypto scams worth $1 billion. The firm studied the transactions and addresses of the hacker’s transaction and stated that on an average the hackers made around $90 million from each such hack, thereby operating a booming criminal act which involved various crypto markets.

Chainalysis works with many of the leading cryptocurrency exchanges with a motive to break the mistrustful transaction from entering the exchange’s trading platform in an unauthorized manner. For example, Binance, the world’s largest crypto exchange by volume, collaborated with Chainalysis in October 2018 to handle issues related to money laundering.

Working along with the Blockchain analytics firm helps the exchanges in reducing their liability significantly with respect to dealing in such transactions or addresses involved in illegal activities.

Even though most of the transactions can be tracked which happen on the major public blockchain networks such as Bitcoin and Ethereum, the criminal groups are smart enough to opt different routes to conduct their illegal operations so that no one is able to track their origin.

A few weeks back, as soon as Cryptopia, a New Zealand-based crypto exchange firm, got hacked, Binance was able to freeze the funds of the stolen user immediately.

As soon as the act was reported to Binance, it tweeted “Just checked, we were able to freeze some of the funds. I don’t understand why the hackers keep sending to Binance. Social media will be pretty fast to report it, and we will freeze it. It’s a high risk maneuver for them.”

But not every transaction comes within the radar especially when it is managed by knowledgeable and intelligent hackers who are proficient and persistent enough to confine their data in a smarter way, just like the two groups mentioned above which were part of the research conducted by Chainalysis.

The report by Chainalysis revealed that the two groups by the name Alpha and Beta, are said to wait for 112 days on an average to change and launder their funds so that their transaction or addresses is not traced.

Giving an instance the reported mentioned that one of the groups, Beta, waited for around two years to withdraw funds which were stolen in one of their hacking attacks in order to flush out all the pieces of evidence which can be used to trace their origin.

The report read: “The hackers typically move stolen funds through a complex array of wallets and exchanges in an attempt to disguise the funds’ criminal origins. The hackers then often observe a quiet period of 40 or more days in which they don’t move funds, waiting until interest in the theft has died down. Once they feel safe, they move quickly.”

Further, Philip Gradwell, the chief economist of Chainalysis, in an interview with Wall Street Journal stated that sometimes even after laying down strict regulation with respect to Know Your Customer (KYC) and Anti-Money Laundering (AML) policies, it becomes difficult for the crypto exchanges to track the origin of the stolen funds.

He believes that as the hackers are becoming smarter day by day and with the deployment of the latest technology by the hackers, the only way to handle such situation and to stop fraudulent transaction to go through is by the exchanges cooperating with each.

He stated that “Cooperation between exchanges also goes a long way to help fight crime in this ecosystem. Neutral intermediaries between exchanges can play an important role in this effort.”

Earlier this week, Bithumb, UPbit, Korbit, and Coinone, the top four crypto exchanges in South Korea came together to create an association with a motive to crack down on money laundering operations using cryptocurrencies thereby increasing the efficiency of KYC and AML initiatives.

The exchanges in a statement said that “The cooperation between exchanges will improve the efficiency of anti-money laundering policies. If exchanges work together in obtaining identities of customers through a strict know-your-customer system and monitoring transactions, it will prevent money laundering using cryptocurrencies and create a safer environment for cryptocurrency trading.”

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