Cryptocurrency Fraud Runs Rampant

Crypto criminals are having a big year, according to the Silicon Valley-based cybersecurity firm CipherTrace.


The firm’s quarterly Cryptocurrency Anti-Money Laundering Report released today, estimates that total losses of crypto funds due to theft, fraud and other crimes will surpass $4.3 billion in 2019. It’s a figure that puts 2018’s losses total of $1.1 billion to shame.

CipherTrace’s latest report provides several reasons for this, and includes discussion on various topics surrounding cryptocurrency regulation and customer safety. Over just the last few months alone, hackers and cyberthieves managed to steal roughly $160 million in assorted crypto-funds, though this number could be greater, given that cryptocurrencies such as bitcoin have risen in price since the information was first gathered.

Crypto investors have also been victim to several exit scams, which are presently under investigation by legal authorities in North America and abroad. One of the most well-known involves QuadrigaCX, the cryptocurrency exchange in Canada which saw its founder—the only person with the necessary keys to access customer funds—mysteriously pass away while working disappear in India. Several investors have been unable to withdraw their funds from the exchange, and a class-action will soon be underway.

The crypto industry is also faced with several Ponzi schemes, such as the one involving PlusToken, which is being investigated for potential losses of nearly $3 billion in crypto, according to CipherTrace.

These and other crimes have put cryptocurrency regulation on the agendas of various legislative bodies, and several world leaders are now utilizing their powers to bring cryptocurrencies under government scrutiny. The entrance of Libra -Facebook’s new cryptocurrency – to the industry has caused several leading governments, including the U.S. and the U.K., to examine crypto as they would a standard bank or financial institution.

Report: crypto scammers made off with more than $1.2 billion in Q1 2019 alone

Cryptocurrency remains one of the most speculative industries in the financial world. Given digital assets’ tendencies to spike at a moment’s notice, investors stand to gain wealth very quickly, which may explain the increasing presence of malicious actors.

Crimes like SIM-swapping, crypto jacking and other forms of theft open the crypto space to massive losses. That’s where companies like CipherTrace come in—firms that aim to provide crypto investors with the tools they need to keep their data and assets under lock and key.

One positive piece of news from the report is that bitcoin and cryptocurrency remittance payments have increased tenfold (roughly 66 percent) since 2017. The properties and blockchain security often associated with these coins have seemingly improved cross-border payments for workers overseas.

Then again, it also suggests that many U.S. residents are hiding their wealth in offshore accounts, leading to the possibility of tax-dodging and other fraudulent activity.

This is still the wild, wild west because of the lack of regulation and the numerous scams involving ICOs. Regulators have not come out yet to say whether these are securities or not. It’s important, but we don’t have many clients that recommend or invest their clients in cryptocurrency.

The most important concern, as with all investments, centers on due diligence, knowledge of the product, and knowledge of that area. There are also Code of Ethics considerations, because your Code must address employees who invest in cryptocurrency/ICOs. The regulators are spending a lot of energy and time looking into this. The SEC has been sending out investor bulletins.  This is an area that will continue to be scrutinized. For more information on how to prevent harm from potential cryptocurrency fraud, please contact us today for assistance.


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