Crypto heists are ‘serious national security concerns’
The amount of crypto stolen by hackers has increased by more than a quarter this year, even as the value of cryptocurrencies has plunged.
Blockchain thieves have captured as much as $3 billion of investor funds through 141 different crypto exploits since January, according to data from DeFi Yield, a 31% increase compared to the same period last year. That means 2022 is likely to surpass 2021 as the biggest crypto hack year ever,
Of the nearly weekly occurrences of crypto exploits this year, those involving “cross-chain” crypto bridges accounted for as much as $600 million in October and $2 billion in stolen funds so far this year, with at least $1 billion in exploits attributed to North Korean-affiliated hackers, according to Chainalysis estimates.
“These are serious national security concerns that really extend beyond the fact that there are millions of dollars being stolen in single episodes that we’re seeing with the DeFi hacks and exploits,” Eun Young Choi, director of the National Cryptocurrency Enforcement Team (NCET). said at Yahoo Finance’s All Markets Summit.
Choi’s team – NCET – effectively provides one possible link in the chain of how companies and investors can recover stolen funds.
Formed a little more than a year ago, NCET is meant to act as a “one-stop shop” for the federal agency’s investigators specializing in crypto, according to Choi.
Working at times with other government agencies both in the United States and abroad, NCET has helped seize over $3.8 billion in stolen crypto this year, the bulk of that sum coming from an indictment in February involving alleged launderers of dividend stolen in 2016.
These billions will not be returned to the victims anytime soon or at least not until the trial of the case reaches a conclusion.
On the flip side, during a record year for crypto exploits, illegal crypto earned through fraud (-65%) and darknet markets (-43%) fell particularly between January and July, according to a report from blockchain analytics firm Chainalysis.
In April, an investigation by the Ministry of Justice also led to the closure of the world’s largest darknet marketplace, the Hydra market.
Although also partially attributed to the crypto market’s performance, increasing exploits and declining darknet flows illustrate how the illegal use of crypto has changed in recent years.
“In the early days, there were darknet markets and there were people buying and selling all kinds of contraband,” Choi explained. “These days we see [crypto] shows up in every single type of criminal activity the department looks at.”
Although Choi admitted cases involving crypto can be different in nature, NCET pursues cases involving digital assets in much the same way the Justice Department pursues criminal activity dealing in stocks, commodities and other assets.
“These transactions can often be relatively frictionless and fast, but it also means that if we identify a particular transaction as criminal, we can’t go to a centralized, you know, financial institution and ask for the money to come back,” Choi said.
Still, Choi admitted that her team has a role to play in reducing the high rate of crypto exploits plaguing the industry.
“We need to work with the private sector and make sure they understand the ways we’ve identified particular tactics that bad actors can use to exploit these types of platforms,” she said.
“The industry is still, in our view, in a maturing phase, and in many ways we look at companies and hope that they will understand that doing things like basic risk reduction, having robust compliance programs and ensuring that they are reducing the opportunities for this the kind of exploits on their own platform are the first, best line of defense.”
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David Hollerith is a senior reporter at Yahoo Finance covering cryptocurrency and stock markets. Follow him on Twitter at @DsHollers
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