A report published by a blockchain data analytics firm suggests that two professional hacking groups are behind 60 percent of all publicly reported cryptocurrency hacks, mostly affecting exchanges and custodial services.
The report states that the groups were able to amass approximately $1 billion in revenue from the attacks.
On average the hacking groups stole around $90 million per incident.
Chainalysis, the blockchain data analytics firm that published the report, explained that the groups move the stolen funds using a complex network of exchanges and wallets to obfuscate their source.
They later convert the cryptocurrencies into fiat currencies after attention has died down.
The firm noted that the two groups would move the funds at least 5,000 times on average.
Differences Between the Hacking Groups
Who or what embody these two groups? According to Chainalysis’ report, the first and the most prominent group is referred to as “Alpha.”
This is a group well organized and tightly controlled, with intentions partly influenced by non-monetary goals.
The other group is referred to as “Beta,” the smaller and less organized of the two groups. Beta is focused mainly on making money but is less skilled at moving it.
Chainalysis states that both groups have been successful in converting their loots into fiat currency with Alpha group putting extra effort into hiding their funds.
It is claimed that Alpha executes approximately 15,000 transactions to disguise the funds.
Furthermore, it’s the fastest group to cash out after a hack. It is estimated that they cash out around 75 percent of the funds within 30 days.
Beta, on the other hand, takes a bit longer before they cash out on their loot, converting the funds into clean money.
However, Chainalysis says that in less than four months (112 days), both groups were able to convert more than half of all hacked funds into ordinary currency.
About six months (168 days) later, 75 percent of the funds had been converted mostly through regular crypto exchanges.
The company has stated that the identities of the two groups are still unknown.
More Findings on the Cryptocurrency Ecosystem
Another key topic discussed in the publication is understanding darknet markets and their relationship with the cryptocurrency ecosystem.
The report states darknet markets have been resilient despite crackdowns by law enforcement.
Market activity fell by 60 percent in mid-2017 but has since bounced back.
Darknet markets also seem inelastic to the severe price shifts experienced in cryptocurrency markets.
For instance, activity in darknet markets doubled in 2018 while Bitcoin simultaneously lost nearly 80 percent of its value.
The company released a report that showed how Bitcoin is thriving in the dark web despite efforts by authorities to try and tame its use.
Ethereum Scams and Money Laundering
Other matters in the Chainalysis report are the focus on Ethereum scams and how there are fewer but lucrative scams.
Only $36 million worth of Ether was stolen in 2018, making it the lowest-earning crypto crime last year despite doubling.
However, data shows that it is the go-to cryptocurrency for scammers.
Most techniques used by scammers are ICO exit scams, phishing scams and Ponzi schemes.
In 2017, phishing scams accounted for over 88 percent of scam revenue but became less effective in 2018 due to public awareness and over-saturation.
The other area of interest is money laundering and the role cryptocurrencies play.
In traditional money laundering involving fiat currencies, experts work backward to reliably estimate and quantify money laundering activity.
Criminal activities in the crypto ecosystem are causing jitters to the community. The report suggests that exchanges, communities and law enforcement need to work together to identify and weed out criminal organizations.
At the same time, recognizing the type of crypto crime activities and deploying Know Your Transaction (KYT) features can help identify distinctive patterns of illicit activities.