2020-Crypto-Crime-Report Chainanalysis

January 2020ZGPTHE 2020 STATE OF CRYPTO CRIMEEverything you need to know about darknet markets, exchange hacks, money laundering and more Table of ContentsIntroduction 4Money Laundering 8Scams 16Ransomware 30Hacks 40Darknet Markets 52Terrorism Financing 69Conclusion 80 OI OJIntroduction PROPRIETARYInTroduCTIon 52019 Crypto Crime Activity SummarizedIf the last few years have proven anything, it’s that cryptocurrency isn’t just for criminals. Polling shows that adoption is increasing, as 18% of all Americans and 35% of American millennials have purchased cryptocurrency in the last year. Mainstream financial institutions like JP Morgan Chase are getting involved. Popular retailers like Amazon and Starbucks now allow customers to pay in Bitcoin.nonetheless, cryptocurrency’s decentralized, semi-anonymous nature makes it a uniquely appealing option for criminals, and their embrace of the technology has helped shape its overall reputation. But the upside is that unlike cash and other traditional forms of value transfer, cryptocurrency is inherently transparent. Every transaction is recorded in a publicly visible ledger. With the right tools, we can see how much of all cryptocurrency activity is associated with crime, hone in on the types of crime that dominate the ecosystem, and share insights with law enforcement and the industry to curb its impact and stop bad actors from abusing the system and, in many cases, taking advantage of vulnerable people. Total cryptocurrency sent and received by illicit entities vs. Illicit share of all cryptocurrency transaction volume, 2017-2019Billions of USDShare of cryptocurrency volume that is illicit$0.0B$2.5B$5.0B$7.5B$10.0B$12.5B0.0%0.3%0.5%0.8%1.0%1.3%201720182019Share of cryptocurrency volume that is illicitTotal received by illicit entitiesTotal sent from illicit entitiesCurrencies included: BAT, BCH, BnB, BTC, Cro, CrPT, dAI, ETH, Gno, GuSd, HT, LEo, LInK, LTC, MCo, MKr, MLn, oMG, PAX, TuSd, uSdC, uSdT, WETH, ZIL, ZrZFrom the above, we see that illicit cryptocurrency transactions have risen, both in total value and as a share of all cryptocurrency activity. However, illicit transactions still make up a small share of all cryptocurrency activity at just 1.1%. What kinds of crimes are driving these numbers? PROPRIETARYInTroduCTIon 6Share of total cryptocurrency transaction volume by illicit subcategoryShare of total cryptocurrency activity0%1%2%3%4%Jan '17Jul '17Jan '18Jul '18Jan '19Jul '19Terrorism financingStolen fundsScamsSanctionsRansomwareDarknet marketsChild abuse materialCurrencies included: BTC, ETH, LTC, BCH, uSdT, PAX, ZrX, BnB, oMG, uSdC, TuSd, dAI, WETH, HT, Gno, ZIL The graph above shows which crimes take up the biggest share of overall cryptocurrency activity over time since 2017. We see that in 2019, scams made up the overwhelming majority of cryptocurrency-related crime, accounting for a whopping $8.6 billion in transactions. In fact, were it not for just three separate large-scale Ponzi schemes, the crime would account for just 0.46% of all cryptocurrency activity.of course, it’s not just about the data when it comes to crypto crime. It’s about the story behind the numbers. As the world’s leading blockchain analysis firm, we’re in a unique position to contextualize crypto crime data with real, in-the-trenches experience. In this report, we’re going to share our expertise and tell you everything you need to know about what happened in crypto crime in 2019 across six key categories, including actionable takeaways for law enforcement, regulators, financial institutions, and cryptocurrency businesses. PROPRIETARYInTroduCTIon 7In analyzing these six categories, we’ve identified three common threads that bind all of them together:1. Crypto crime is starting to look more like white collar crime. When you think of white collar crime, you probably think of a small cadre of executives abusing the powers of their position or acting on privileged information to enrich themselves. Believe it or not, crypto crime functions in much the same way. Whether it’s tight-knit criminal groups defrauding millions in brazen Ponzi schemes or elite hackers breaking into exchanges, we find that the majority of cryptocurrency gained through criminal activity goes to a small but powerful segment of criminals.2. Money laundering is the key to crypto crime. Money laundering is the common denominator between all forms of crypto crime, because ev