The report reflecting criminal activity and money laundering in the digital currency market also showed a steady rise in smaller thefts in the $20m-$60m range, totalling $173m in the third quarter.
Digital currencies stolen from exchanges in 2017 totalled $266m, according to a previous report from CipherTrace. Bitcoin’s popularity and the emergence of more than 1,600 other digital coins or tokens have drawn more hackers into the cryptocurrency space, expanding opportunities for crime and fraud.
“The regulators are still a couple of years behind because there are only a few countries that have really applied strong anti-money laundering laws,” Dave Jevans, CEO of CipherTrace, said in an interview.
Jevans is also the chair of the Anti-Phishing Working Group, a global organisation that aims to help solve cyber crime.
He said there were probably 50% more criminal transactions than those traced for this report. For instance, CipherTrace knew of more than $60m in cryptocurrency stolen but not reported. The figures also showed that the world’s top cryptocurrency exchanges in countries with weak anti-money laundering regulations (AML) were used to launder $2.5bn in bitcoins since 2009.
The top 20 virtual currency exchanges in terms of volume were analysed for the report. The CipherTrace report declined to name those exchanges. These money-laundered funds represented transactions that CipherTrace could monitor directly and designate as criminal or highly suspect.
In estimating the $2.5bn figure, CipherTrace looked at about 350-million transactions on the 20 exchanges and found 100-million of those with counterparties. From there, the firm was able to cross-check the 100-million transactions with its own data on criminal activity. At the same time, these exchanges were also used to buy 236,979 bitcoins worth of criminal services, equivalent to about $1.5bn at current prices, the report showed.
“All exchanges get these money-laundered funds. You really can’t stop them,” said Jevans. “And here’s the reason why. We learn about the criminal stuff often times after it actually happened. So there’s no way to know in real time. You can know 80%-90% of the time, but it’s impossible to know 100%,” he said.