It’s not even half a year, while cybercriminals have already stolen $1.4 billion in cryptocurrencies since the beginning of 2020. However, 2020 is unlikely to beat 2019 in terms of stolen crypto.
According to analyst firm CipherTrace, scammers, intruders and robbers managed to steal $1.36 billion in cryptocurrencies in the first five months of 2020. Such data is provided in the CipherTrace report on money laundering and crimes using cryptocurrencies.
According to experts, 2020 will be the second year in the history of the cryptocurrency world in the number of cryptocurrencies stolen, surpassing 2018. But it is unlikely to be ahead of 2019, during which $4.5 billion was stolen.
The largest crime related to the theft of cryptocurrencies in 2020 is the fraudulent Ponzi scheme Wotoken. The large-scale Chinese multi-level MLM scheme deprived its customers of $1.09 billion in cryptocurrencies during its existence. Wotoken was launched in 2018 and continued to attract investments in 2019, but its collapse became known only last month. According to CipherTrace, Wotoken accounts with 46,000 bitcoins (BTC), 2040000 ETH, 292000 Litecoins (LTC), 56000 Bitcoin Cash and 684000 EOS are still showing activity.
“It was a classic pyramid scheme,” John Jeffries, chief financial analyst at CipherTrace, said. Claiming to have a “magic algorithm,” Wotoken grew and grew, passing 715,000 users, until Jeffries said it “collapsed under its own weight.” The scheme’s alleged perpetrators are now on trial in China.
According to CipherTrace, the case of Wotoken demonstrates that fraudulent schemes remain one of the main threats to the development of the cryptocurrency market. And this threat is stronger than the risks associated with hacker attacks and thefts, which in 2020 accounted for only 2% of the stolen funds. The same statistics was observed in 2019.
On the other hand, the low percentage of losses from thefts and hacker attacks indicates that the industry is steadily growing and becoming more mature, suggests Jeffries. After a series of major hacker attacks, many crypto exchanges drastically strengthened their security systems.
The high share of losses resulting from fraud emphasizes the need for more stringent regulation of the cryptocurrency business and the requirements for the disclosure of significant financial and technical information, says Jeffries:
“It’s not just protecting against counter terrorist financing or protecting against money laundering. It’s to protect uninformed consumers from themselves.”