A recent report from blockchain analytics firm Chainalysis revealed that cryptocurrency has become increasingly mainstream, as illicit on-chain activity has become more varied.
The report revealed that 2024 saw a drop in value received by illicit cryptocurrency addresses to a total of $40.9 billion. However, 2024, was likely a record year for inflows of illicit bad actors.
Crypto-related thefts surged by 21% year-over-year (YoY), totaling $2.2 billion. While decentralized finance (DeFi) platforms remained the primary targets, centralized exchanges suffered the most significant breaches in Q2 and Q3. Private key compromises accounted for 43.8% of stolen assets, with North Korean hackers stealing a record-breaking $1.34 billion, representing 61% of the total stolen funds. These cybercriminals exploited vulnerabilities within crypto and Web3 firms, leveraging sophisticated infiltration tactics.
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Crypto crime has become increasingly diverse and organized, with transnational criminal networks leveraging digital assets for a wide range of illicit activities, including drug trafficking, money laundering, human trafficking, and cyber extortion. Criminals are also engaging in polycrime, where multiple illicit activities are interwoven into complex financial schemes.
A prime example of this professionalization is Huione Guarantee, a marketplace facilitating $70 billion in crypto transactions since 2021. This platform has been linked to fraudulent schemes, sanctioned entities, stolen funds, and illicit gambling operations.
Pump-and-Dump Schemes in Token Markets
In 2024, over 2 million tokens were launched, with 42.35% listed on decentralized exchanges (DEXs). However, only 1.7% of these tokens remained actively traded after 30 days. So many were abandoned shortly after creation, potentially due to a lack of interest or failure to gain traction.
Also, some of these tokens facilitate intentional short-lived schemes designed to exploit initial hype before fading away, also known as pump-and-dumps or rug pulls. Approximately 3.59% of launched tokens exhibited pump-and-dump characteristics, where creators artificially inflated prices before abandoning projects.
Alarmingly, 94% of DEX pools tied to pump-and-dump schemes were manipulated by the creators themselves, highlighting a persistent issue of market manipulation.
Fraud and AI-Driven Scams on the Rise
The use of artificial intelligence (AI) in crypto scams has expanded dramatically. High-yield investment scams and pig butchering schemes were among the most successful fraud types in 2024. AI-driven attacks, such as personalized sextortion scams and KYC bypassing techniques, have increased in prevalence. Crypto ATM fraud, particularly targeting elderly victims, is also a growing concern.
While ransomware groups continued to generate hundreds of millions in illicit revenues, the total ransom payments decreased by 35% YoY, falling to $813.55 million from $1.25 billion in 2023. This decline was driven by enhanced law enforcement efforts, improved cybersecurity defenses, and a growing reluctance among victims to pay ransom demands. However, ransomware actors have adapted, launching new strains and accelerating attack timelines, with negotiations often beginning within hours of data exfiltration.
The decline in Darknet Market and Fraud Shop Transactions
Darknet markets (DNMs) received $2 billion in crypto, down from $2.3 billion in 2023, while fraud shop transactions declined by over 50% to $220.1 million. A key factor in this decline was the U.S.-Dutch takedown of the Universal Anonymous Payment System (UAPS), which processed payments for numerous illicit platforms.
The Future of Crypto And Crime Prevention
With the rapid evolution of illicit tactics, a robust, data-driven approach is essential to combat crypto crime. Enhanced on-chain analytics, regulatory collaboration, and law enforcement interventions will be critical in identifying and mitigating emerging threats.
While 2024 saw declines in some areas of crypto-related crime, the adaptability of malicious actors ensures that the fight against illicit activity remains an ongoing challenge.