[1] According to blockchain analysis company Chainalysis, around US$2.5 billion was laundered through Bitcoin between 2009 and 2018, and the fraction of cryptocurrency transactions linked to illicit activities has been on the rise since early 2019.
[2] In 2021, 0.15% of known cryptocurrency transactions conducted were involved in illicit activities like cybercrime, money laundering and terrorism financing, representing a total of $14 billion.
[40][41] In November 2017, a subsequent multisignature[clarification needed] flaw in Parity made 513,774 ETH (about US$150 million) unreachable;[42][43] as of March 2019, the funds were still frozen.
Gox, one of the largest virtual currency exchanges, filed for bankruptcy in Tokyo amid reports that bitcoins worth US$350 million had been stolen.
[65] In 2022, the US government recovered 94,636 bitcoin (worth approximately $3.6 billion at the time of recovery) from the 2016 thefts of the Bitfinex exchange, reported as the "largest financial seizure" in U.S.
Charles Hayter, founder of the digital currency comparison website CryptoCompare said, "It's a reminder of the fragility of the infrastructure in such a nascent industry.
"[69] According to the hearing of the U.S. House of Representatives Committee on Small Business on April 2, 2014, "these vendors lack regulatory oversight, minimum capital standards and don't provide consumer protection against loss or theft.
"[70] Japan and the United States have accused North Korean hackers of stealing cryptocurrency worth over $300 million from the Japan-based exchange DMM Bitcoin.
The theft involved the hackers using social engineering tactics to impersonate a recruiter on LinkedIn and send a malicious pre-employment test to an employee at a crypto wallet software company.
The FBI and Japan's National Police Agency are collaborating to combat North Korea's cybercrime activities, which date back to the mid-1990s and include a cyber-warfare unit known as Bureau 121.
The Lazarus Group has previously gained notoriety for its involvement in high-profile hacks, including the attack on Sony Pictures in retaliation for the film "The Interview."
[citation needed] In 2022, hackers created a signature account on a blockchain bridge called "Wormhole" and stole more than $300 million worth of ether.
[76] These scams usually involve attracting investments from mostly retail investors, inflating the price and the perpetrators subsequently abandoning the project in question after selling off their own shares.
[78] This lack of regulatory measures as well as the pseudonymity of cryptocurrency transactions and their international nature across countless jurisdictions in many different countries can make it much more difficult to identify and take legal action against perpetrators involved in these scams.
[97] Due to the inability of third parties to de-pseudonymize crypto transactions criminal entities have often resorted to using cryptocurrency to conduct money laundering.
[100] NFTs are often used to perform Wash Trading by creating several different wallets for one individual, generating several fictitious sales and consequently selling the respective NFT to a third party.
[101] According to a report by Chainalysis, these types of wash trades are becoming increasingly popular among money launderers especially due to the largely anonymous nature of transactions on NFT marketplaces.
[104] Canada is generally regarded as the first state actor implementing regulatory measures dealing with money laundering conducted by the usage of cryptocurrencies.
[125] Josh Garza, who founded the cryptocurrency startups GAW Miners and ZenMiner in 2014, acknowledged in a plea agreement that the companies were part of a pyramid scheme, and pleaded guilty to wire fraud in 2015.
The U.S. Securities and Exchange Commission separately brought a civil enforcement action against Garza, who was eventually ordered to pay a judgment of US$9.1 million plus $700,000 in interest.
The SEC's complaint stated that Garza, through his companies, had fraudulently sold "investment contracts representing shares in the profits they claimed would be generated" from mining.
[128] Garza was later found guilty of fraud and ordered to pay US$9 million and begin serving a 21-month sentence commencing January 2019 by the U.S. Attorney's Office District of Connecticut.
[citation needed] The cryptocurrency community refers to pre-mining, hidden launches, ICO or extreme rewards for the altcoin founders as deceptive practices.
[140][141] One program called CryptoLocker, typically spread through legitimate-looking email attachments, encrypts the hard drive of an infected computer, then displays a countdown timer and demands a ransom in bitcoin, to decrypt it.
[147][151] Like most malicious attacks on the computing public, the motive is profit, but unlike other threats, it is designed to remain completely hidden from the user.
[156] Former DEA agent, Carl Mark Force, had attempted to extort Silk Road founder Ross Ulbricht ("Dread Pirate Roberts") by faking the murder of an informant.
He pleaded guilty to money laundering, obstruction of justice, and extortion under color of official right, and was sentenced to 6.5 years in federal prison.
In late 2018, Canada's largest crypto exchange QuadrigaCX lost US$190 million in cryptocurrency when the owner died; he was the only one with knowledge of the password to a storage wallet.
[164] Michael Terpin, the founder and chief executive officer of Transform Group, a San Juan, Puerto Rico-based company that advises blockchain businesses on public relations and communications, sued Ellis Pinsky in New York on May 7, 2020, for leading a "sophisticated cybercrime spree" that stole US$24 million in cryptocurrency by hacking into Terpin's phone in 2018.
[166] On July 15, 2020, Twitter accounts of prominent personalities and firms, including Joe Biden, Barack Obama, Bill Gates, Elon Musk, Jeff Bezos, Apple, Kanye West, Michael Bloomberg and Uber were hacked.