Cryptocurrency criminals, who steal funds from crypto enterprises through various means, are fast becoming the largest holders of these currencies. Hodling is an industry term for users who keep large amounts of crypto unsold in the hope of making profits in the future. The biggest hodlers are called whales, who hold over $1 million worth of crypto in their wallets.
According to a report by blockchain tracking firm Chainalysis, crypto criminals now account for around 4% of all whales in the industry. The company’s 2022 Crypto Crime Report states that there was a huge jump in cryptocurrency holdings among cybercriminals in 2021, from nearly $3 billion in 2020 to over $11 billion in 2021.
In this, the biggest source of wealth among criminals is stolen money, which contributed $9.8 billion (or 83%) to all crypto holdings with criminals in 2021, the report said. The company identified these users as whales, who obtained 10 to 25% of their crypto funds from illegal addresses, amounting to $25 billion (~ 1.87 lakh crore) in crypto tokens.
In addition, the report outlines how cryptocurrency crimes are ramping up through 2021, especially stolen funds. There have been several reports of funds stolen from decentralized finance (DeFi) platforms, with information from the Crypto Data Tracker, the year-over-year (YoY) in the block of crypto funds stolen via the DeFi platform in October 2021. Showing an increase of more than 20 times. According to this, attackers exploited coding errors in flash loans, or non-collateralized cryptocurrency loans, to steal funds.
In January 2022, blockchain security firm CertiK said that the cryptocurrency stolen in 2021 exceeded $1 billion due to coding inconsistencies on the DeFi platform. Chainalysis’ report shows that attackers clearly made the most of it.
In terms of criminal cryptocurrency balances, dark web markets contributed $448 million by 2021, followed by scams with $192 million, organized fraud at $66 million, and ransomware at $30 million. Interestingly, cyber security firm CrowdStrike’s 2022 Global Threat Report showed how Iranian hackers were the biggest contributor to ransomware activity in the world by 2021, leading to the above figure.
According to Chainalysis, in the case of criminal whales, the biggest contributing sector was the dark web marketplace – 37.7% of all funds deposited to criminal whales in 2021 came from here. Scam and stolen funds were the next biggest contributors, accounting for 32.4% of the $25 billion figure. Overall fraud and ransomware accounted for the remaining 5.4%
However, despite a watershed year for criminals in cryptocurrencies, law enforcement agencies have not been fully steamrolled. The data underlines the recovery of $2.3 million from colonial pipeline hackers in the USA in July 2021, $3.5 billion by the US Internal Revenue Service and $180 million by the London Metropolitan Police Service.
On February 8, the United States Department of Justice (DOJ) announced the recovery of $3.6 billion in cryptocurrency, and the arrest of two individuals linked to a theft on cryptocurrency exchange Bitfinex. During the arrest, Assistant Attorney General Kenneth A. Polite Jr. of the U.S. DOJ’s Criminal Division said, “Federal law enforcement has demonstrated that we can follow money through blockchain, and we want to allow cryptocurrency as a safe haven.” for money laundering – or an area of chaos within our financial system.”
“These stories are important not only because they allow for financial restitution for victims of cryptocurrency-based crime, but also because they disprove the narrative that cryptocurrency is an untraceable, untraceable asset for crime. Knowing that law enforcement is able to confiscate their cryptocurrency, it could reduce their incentive to use it in the future,” the Chainalysis report states.
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