Group-IB, a cybersecurity firm with its headquarters based in Russia, recently released a report that put the United States in the lead of crypto crime with 56 percent of all incidents either happening in the country or having its roots based there.
The company, which is currently among the most recognized cybersecurity firms, specializes in online information security and IT forensics.
Over its years in operation, Group-IB has handled cases relating to online fraud, data breaches, among many other forms of internet crime.
The research involved a group of 50 bots that conducted routine searches on discrepancies in cryptocurrency programs operated by various exchange platforms.
The checks would then be followed by a thorough audit of the systems to determine the criminal activities associated with hacks and cybersecurity.
Data obtained from the bots showed that most traffic originated from the U.S. The other countries that contributed to cryptocurrency crimes are the Netherlands, Ukraine, Russia, France and Germany, with a share 21.5 percent, 4.3 percent, 3.2 percent, 2.6 percent and 1.6 percent respectively.
By analyzing data from 19 top cryptocurrency exchanges, Group-IB found that as much as the companies had some security measures meant to prevent loss of coins, cybercriminals outsmarted them by bypassing their systems.
2017 Vs. 2018
In 2017, hackers were able to compromise 369 accounts across major exchange platforms, but in 2018, the number nearly doubled to 720, and more than a third of the accounts belonging to individuals in the U.S.
A quick analysis of the statistics shows that at this rate, the number will definitely go up before the end of this year.
Smarter Criminals Targeting Vulnerable Systems
Over the years, cryptocurrency crimes have increased at a tremendous rate, and it keeps on doing the same after each consecutive year.
The reason is that as each day passes, we continue hearing reports of exchanges falling victim to hacks, and that is a clear indication that the victims are of no match to the hackers.
It also suggests that in the cyber world, the attackers are devising new tactics that see them stay at the top of the game.
Among the ways they operate is by taking advantage of any loopholes that they may find in any given system.
Apart from that, there are cases like during the Mt. Gox saga of insiders conspiring with outsiders to compromise the systems of the companies they work for, provided they get a share.
With that in mind, it can be noted that with the adoption of additional features such as two-factor authentication and multi-sig processes, then one can be able to prevent access to certain types of wallets depending on the transactions that happen.
Effects of a Hack on the Exchange, Its Customers and Market Prices
Depending on the magnitude of the hack, then the impact will vary from mild to severe.
In the past there have been hacks on small to large exchanges, and it can be noted that when any given platform is compromised and huge amounts of coins are stolen, then irrespective of the type of digital currency it is, the effect is that the market value of that particular asset will plummet until the market stabilizes.
For example, after South Korea-based exchange Coinrail was compromised by hackers in June, the market value of Bitcoin fluctuated by 10 percent.
Another major hack that transpired earlier this year affected Japan-based exchange Coincheck.
NEM coins worth over $500 million vanished as a result of the hack. Despite the situation, the company agreed to pay back the affected individuals an amount of about $425.
Additionally, another South Korean exchange, Bithumb, suspended its activities following a hack that led to the loss of cryptocurrencies worth more than $30 million.
A reason that may lead to an exchange halting its operation after a hack is to strengthen the security of their systems.
Sometimes, the funds are moved into a cold wallet to keep them offline and secure.
It is not always the same outcome that is expected whenever a hack has transpired. Depending on a wide range of factors, then the outcome may be different.
ICOs Falling Victim
There are also instances in which Initial Coin Offerings (ICOs) have fallen victim to massive cyberattacks.
What Can Happen to the Coins After a Hack
It is entirely the decision of the hacker to decide what they will do with their proceeds but several factors may drive them to make the decision.
Depending on how fast they want to liquidate their virtual funds, some may seek refuge in the dark web.
When NEM was stolen from Coincheck in the first quarter of 2018, the hackers turned to the dark web to dispose of their proceeds at a discounted rate.
And in just a few months, they were reportedly close to cashing out the coins.
With the innovations that are coming up, exchange platforms began offering some new services to their customers and there is one in particular which is bound to gain popularity with time.
Nowadays, the integration of other cryptocurrencies by exchanges has made them offer an additional service which involves exchanging one cryptocurrency for another at a small fee.
Without a doubt, as this form of crime continues to evolve, then this is a service likely to be used in the near future.
When operating with vast amounts of money, it becomes relatively harder for persons to cash out their proceeds fast because exchanges have certain limits that customers can use from time to time.
It is, therefore, possible for attackers to liquidate their funds in small bits as they buy time.
Then since the activities are of criminal nature, some hackers tend to store their proceeds using virtual currencies for an extended time.
However, it may be a risky thing to do because the prices are highly volatile and may crash at any time.
But either way, cybercriminals see that it is better to have funds stored using virtual currencies because it does not give law enforcement bodies a clue as to what they may have. That way, they do not have to account for their “dirty” money.