Since Bitcoin began to plunge in early-2018, investors have reeled in a bear bite-induced pain, stuck sitting in front of their computer monitors waiting for the ‘moon’. On the other hand, rumor has it that crypto hackers, scammers, and the like are sitting on Caribbean beaches, sipping sangrias, and partying the night away. (I’d love a piña colada just about now.)

This subset of industry participants scored hefty profits in 2018 — a far cry from the bloodstained Blockfolios that haunted crypto’s common Joes and Jills.

Crypto Scams, Thefts, Hacks A Booming Industry

2018 may be over, but the most fervent research groups have been left to pick up the pieces. According to CipherTrace, a leading U.S.-headquartered crypto analytics group, which routed its information through Reuters, hacks & scams allowed malicious actors to turn a profit of over $1.7 billion in 2018, up 400% from the year prior.

Out of the nonuplet-digit sum, $950 million pertained to thefts of crypto exchanges & wallets, up 260% from the $266 million garnered in 2017. The remaining stolen funds, which amounted to a tad over $700 million, were a result of exit scams, like fraudulent token sales, inside job exchange hacks, and plain old Ponzi schemes. While $700 million is only a small portion of the aggregate value of all cryptocurrencies, funds garnered by exit scams were even less in 2017, at a relatively mere and minuscule $56 million.

But the question remains, how have this industry’s sly criminals made away with their funds? Case in point, in the recent Cryptopia hack, which saw a minimum of $15 million worth of Ethereum and ERC-20 tokens get stolen, Binance and other preeminent trading platforms froze all hacker-linked holdings.

But, this doesn’t mean that all bad actors are susceptible to the same risks. Especially in cases that aren’t publicized, the act of tracking, freezing, and resecuring stolen cryptocurrencies can be difficult, as the clamoring cries of the public are non-existent. Moreover, CipherTrace’s researchers noted that “unregulated cryptocurrency exchanges” have facilitated upwards of 97% of criminal Bitcoin flows, due to “jurisdictions with weak AML and KYC regimes.”

Bitcoin Scams/Hacks (Likely) Dominated 

Interestingly, this CipherTrace report was issued just days after Chainalysis, a fellow crypto-friendly research unit, released a debrief on a similar subject matter. Per previous reports from Live Coin Watch, $36 million worth of Ethereum was stolen, which originated from 40,000 “unique users.” This sum, a purported of 0.01% of all Ether in circulation was purportedly routed through 2,000 addresses.

Per Chainalysis’ deep dives into the addresses, including the vectors of attack that scammers employed, Ponzi schemes, ICO exit scams, and pure scams (look at the once-incessant number of Twitter bots) were overshadowed by the role that phishing played, with such attacks amounting to 38.7% of 2018’s Ethereum scams by ETH volume.

Due to the fact that Ethereum is the third largest cryptocurrency by market capitalization, and that the sum of Ether stolen was minimal, it can be presumed that Bitcoin-related schemes dominated this shadowed sector. But, as I’m just an outsider looking in, I can’t make that assumption with 100% certainty.


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