A new report from Chainalysis finds that a trend in crypto crimes established in 2020 and 2021 continued to hold in 2022; while there tends to be very little crypto traffic involved with crime, the criminals that are pulling off robberies are getting away with more and more money as they hone their craft.
Chainalysis found that the share of crypto traffic involved with illicit activity hit a record low in 2021, but the amount of stolen money skyrocketed. Crypto crimes became even more lucrative in 2022, even though that share of illicit activity only increased very slightly and stayed far below historic highs.
Crypto crimes not rampant, but the big scores are extremely big
After peaking at 1.9% of crypto activity in 2019, illicit traffic has been only a fraction of a percent of traffic and hit a record low of 0.12% in 2021. While that only increased to 0.24% in 2022, the take from crypto crimes jumped from about $18 billion to about $20 billion.
It’s important to note that Chainalysis does not present definitive numbers, but just one estimate using methodology that excludes a number of types of crypto crimes (such as fraud cases as of yet proven out in court) and that has come in far underneath some other estimates of the market that use different approaches. The theft numbers are solid, however, and point to the biggest organized gangs (and in some cases state-backed actors) able to do increasing amounts of damage while smaller players may be finding it tougher to run their more modest scams.
Lazarus group, other organized criminals getting rich off crypto weaknesses
North Korea’s Lazarus team, a state-backed hacker outfit that steals to fund the governing regime, is the lead example of a modern source of crypto crimes. The group is though to be responsible for several billion of the 2022 total, mostly by targeting a rash of security weaknesses in DeFi platforms.
Chainalysis has revised its numbers upward after publishing past studies, however (changing the 2021 theft total from $14 billion to $18 billion as more crypto crimes were discovered), and this may happen again as the saga of FTX (and some smaller firms) plays out in legal proceedings.
What is known at this point is that much of the illicit crypto traffic has shifted from individual scammers receiving direct payments to their personal wallets, to money being handled by sanctioned exchanges in Russia (such as Garantex). Chainalysis also posits that scammers are exiting the market en masse as the global economy takes a major downturn, making it tougher to sell marks on the promise of large and fast investment returns.
The Chainalysis estimates of crypto crimes do tend to be among the lowest published each year; governments pushing for crypto crackdowns tend to cite other reports that find anywhere from 15% to 45% of all traffic being associated with some kind of illegal activity.