Home / Markets / Cryptocurrency /  Crypto criminals are becoming crypto whales

Crypto criminals, who steal funds from crypto enterprises through various means, are increasingly becoming the biggest hodlers for these currencies. Hodling is an industry term for users who hold large amounts of crypto without selling them, in hopes of future profits. The largest hodlers are called whales, who hold over $1 million worth of crypto in their wallets.

Crypto criminals now account for roughly 4% of all whales in the industry, according to a report by blockchain tracking firm Chainalysis. The company’s 2022 Crypto Crimes report said that cryptocurrency holdings among cyber criminals saw a massive surge in 2021, rising from around $3 billion in 2020 to over $11 billion in 2021.

In this, the biggest source of funds among criminals happen to be stolen funds, which contributed to $9.8 billion (or 83%) of all crypto holdings with criminals in 2021, the report said. The company identified these users as whales who received 10 to 25% of their crypto funds from illicit addresses, amounting to holdings of over $25 billion (~ 1.87 lakh crore) in crypto tokens.

Further, the report details how cryptocurrency crimes have been on a rampant rise through 2021, especially stolen funds. Multiple reports of funds stolen from decentralised finance (DeFi) platforms have surfaced, with information from crypto data tracker The Block showing a rise of over 20x year-on-year (YoY) in crypto funds stolen through DeFi platforms in October 2021. According to this, attackers exploited coding flaws in flash loans, or non-collateralised cryptocurrency loans, to steal funds.

In January 2022, blockchain security firm CertiK stated that stolen cryptocurrencies crossed $1 billion in 2021, led by coding discrepancies on DeFi platforms. Chainalysis’ report shows that attackers have clearly exploited this the most.

In terms of criminal cryptocurrency balances, the Dark Web markets contributed $448 million through 2021, followed by $192 million from scams, $66 million from organised fraud and $30 million from ransomware. Interestingly, the 2022 Global Threat Report by cyber security firm CrowdStrike showcased how Iranian hackers were the biggest contributors to ransomware activity in the world through 2021, which led to the above figure.

According to Chainalysis, in terms of the criminal whales, the biggest contributing sector was the Dark Web marketplaces – 37.7% of all funds credited to criminal whales in 2021 came from here. Scams and stolen funds were the next largest contributors, accounting for 32.4% a% of the $25 billion figure. Frauds and ransomware cumulatively accounted for the remaining 5.4%

However, despite a watershed year for criminals in cryptocurrencies, law enforcement agencies have not been entirely steamrolled either. The data underlines recoveries such as $2.3 million from the Colonial Pipeline hackers in USA in July 2021, $3.5 billion by the US Internal Revenue Service, and the London Metropolitan Police Service’s recovery of $180 million.

On February 8, the United States Department of Justice (DoJ) announced the recovery of $3.6 billion in cryptocurrencies, and the arrest of two individuals linked to the theft on cryptocurrency exchange Bitfinex. During the arrest, Kenneth A. Polite Jr., assistant attorney general of the US DoJ’s criminal division, said, “Federal law enforcement has demonstrated that we can follow money through the blockchain, and that we will not allow cryptocurrency to be a safe haven for money laundering – or a zone of lawlessness within our financial system."

“These stories are important not only because they allow financial restitution for victims of cryptocurrency-based crime, but also because they disprove the narrative that cryptocurrency is an untraceable, unseizable asset perfect for crime. If cyber criminals know law enforcement is capable of seizing their cryptocurrency, it may lower their incentive to use it in the future," the Chainalysis report, said.


Shouvik Das

Shouvik Das is a science, space and technology reporter for Mint and TechCircle. In his previous stints, he worked at publications such as CNN-News18 and Outlook Business. He has also reported on consumer technology and the automobile sector.
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