CRYPTO CRIME
An overview of Crypto crime in 2020
Although Darknet markets revenue dominated, Ransomware & DeFi hacks were the bigger story that emerged last year
Faisal Khan

Faisal Khan

1 day ago·6 min read

2020 was a record-breaking year for cryptocurrencies, led by Bitcoin. Despite the COVID-19 pandemic wreaking havoc on the lives of people, the digital assets skyrocketed with the institutional investment pouring into the premier digital asset. At the same time though, the decentralized and somewhat anonymous nature of cryptos entices them to be used by criminals. The good news last year was that cryptocurrency-related crime fell significantly in 2020.

However, the ransomware dimension saw a huge percentage increase with the emerging Decentralized Finance sector becoming the favorite for crypto criminals as well. The latest The 2021 Crypto Crime Report by Chainalysis presented a detailed look at the breakup of the crypto crime that took place last year. You can always study the report in detail but here’s a brief overview for you.
Share & Value of Crypto transactions by Illicit Entities
Image for post
Image for post
Figure 1

According to the report, illicit activity represented 2.1% of all cryptocurrency transaction volume or roughly $21.4 billion worth of transfers in 2019. In comparison, the same fell to just 0.34%, or $10.0 billion in transaction volume (Figure 1). A bigger than expected drop in the share of illicit activity can be attributed to the tripling of economic activity in the Cryptoverse between 2019 and 2020.
Crypto value received by Illicit Entities
Image for post
Image for post
Figure 2

The second chart (Figure 2) looks at the value of various kinds of crime categories that drove the illicit transactions mentioned above, comparing the last four years. This chart is different from the one above since it only tracks cryptocurrency received. Darknet markets and Scams were the two biggest components in 2020, similar to the previous year. The large spike in 2019 can be attributed to the huge PlusToken scam.
Percentage increase in Crime categories
Image for post
Image for post
Figure 3

The biggest story for 2020 was the massive increase of 311% in Ransomware from 2019 (Figure 3). However, the same metric accounted for just 7% of all funds received by criminal addresses at just under $350 million worth of cryptocurrency. Darknet markets accounted for a 29% increase while crypto thefts increase by a mere 4%. Scams, on the other hand, declined by an impressive 71%.
Money Laundering
Image for post
Image for post
Figure 4

Money laundering is considered a key component of the cryptocurrency-based crime. Primarily cybercriminals who steal cryptocurrency or receive them as payment for illegal goods, use this as a way to hide the source of funds so that it can be converted into cash and can be kept at a bank for later use. Historically, mainstream exchanges have been the primary destination of illicit cryptocurrency, and that didn’t change in 2020 (Figure 4, left). In fact, the share of all illicit cryptocurrencies received by exchanges grew slightly in 2020.

The countries receiving the highest volume of cryptocurrency from illicit addresses, based on the breakdowns of the locations of the users for the services receiving those funds (Figure 4, right) are as follows — United States, Russia, China, South Africa, United Kingdom, Ukraine, South Korea, Vietnam, Turkey & France. Overall, 270 Service Deposit Addresses Drive 55% of Money Laundering in Cryptocurrency.
Ransomware
Image for post
Image for post
Figure 5

As mentioned earlier, ransomware skyrocketed in 2020 (Figure 5, left) — the total amount paid by ransomware victims increased by 311% this year to reach nearly $350 million worth of cryptocurrency. No other category of cryptocurrency-based crime had a higher growth rate. The massive increase was driven by the introduction of new strains bringing in large sums from victims, apart from existing strains increasing similar earnings as well.

According to the data (Figure 5, right) shows that ransomware money laundering is even more concentrated at the deposit address level. Just 199 deposit addresses received 80% of all funds sent by ransomware addresses in 2020. An even smaller group of 25 addresses accounted for 46%.
Darknet Markets
Image for post
Image for post
Figure 6

Darknet market activity continues to churn higher despite the dwindling of these markets and shrinking activity. Darknet markets set a new revenue record in 2020, bringing in a total of $1.7 billion worth of cryptocurrency (Figure 6, left) — despite falling purchases from 12.2 million in 2019 to fewer than 10 million in 2020. In fact, all of the growth in darknet market activity 2020 can be attributed to the Russian-based Hydra darknet market (Figure 6, right). If you exclude Hydra from the calculations, the monthly darknet crypto revenue has actually declined since 2015.
Scams
Image for post
Image for post
Figure 7

Cryptocurrency Scam was the only category where revenue fell 75% in 2020 despite an increase in victims. According to Chainalysis data, while scams remain the highest-grossing form of cryptocurrency-based crime, total scam revenue fell drastically in 2020, from roughly $9 billion to just under $2.7 billion (Figure 7, left). Interestingly though, the number of individual payments to scam addresses rose from just over 5 million to 7.3 million, suggesting that the number of individual scam victims rose by more than 48%.

Ponzi schemes took in nearly $7 billion worth of cryptocurrency in 2019, which was more than double what all scam categories made in 2020. PlusToken was the most high-profile scam in 2019, which alone raked in $3 billion in cryptocurrency from millions of victims in Asia (Figure 7, right).
Crypto Thefts
Image for post
Image for post
Figure 8

Money stolen from Defi platforms jumped in 2020 with the ongoing boom in the novel digital marketplace. Despite representing just 6% of all cryptocurrency activity, DeFi platforms lost roughly 33% of all cryptocurrency stolen in 2020 and were victims in nearly half of all individual attacks (Figure 8, right). What makes them so vulnerable is their autonomous setup, functioning on top of smart contract-enriched blockchains — primarily the Ethereum network.

2020 saw over $520 million worth of cryptocurrency stolen from services and individuals through hacks and non-technical attacks like social engineering or phishing. Although this was an uptick from 2019, more than half of the amount stolen in 2020 was from the hack of crypto exchange KuCoin worth $275 million — the third-largest crypto theft ever (Figure 8, middle).

Overall, Cryptocurrency-related crime is falling, it remains a small part of the overall cryptocurrency economy, and it is comparatively smaller than the amount of illicit funds involved in traditional finance. Stringent KYC/AML requirements with the implementation of better security features will keep the crypto crime in check but the explosive growth of DeFi will continue to provide an attractive playground for nefarious players.
Medium