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CipherTrace’s Cryptocurrency AML Report Details $4.3 Billion in Schemes

The digital security firm has compiled some of cryptocurrency’s most recent exit scams and frauds.
The digital security firm has compiled some of cryptocurrency’s most recent exit scams and frauds.

The digital security firm has compiled some of cryptocurrency’s most recent exit scams and frauds.

Digital security company CipherTrace has published its second “Cryptocurrency Anti-Money Laundering Report” for the fiscal year 2019, taking an in-depth look at the schemes that have wracked the industry this quarter.

The report claims that the total revenue acquired by scammers and frauds in the crypto space has reached $4.3 billion in 2019 to date, from a variety of sources including exit scams and various insider thefts. Although the report covers several well-known incidents in the space, such as those involving QuadrigaCX and Binance, it also details the wide variety of fraud in the space.

Investigating Scams

For example, the report references the case of Polish exchange Bitmarket, which abruptly shut down in July 2019 due to “liquidity issues.” The site’s co-owners had a public dispute about the causes of this shutdown, which included the loss of some $23 million in user funds, and two weeks later, one of the owners was found dead in a forest with a gunshot wound to the head. Investigators have been investigating suspicions of foul play around the death and making attempts to locate the funds.

The report also made several references to the changing climate in law enforcement’s relationship with these scams. In the U.S., for example, the Commodity Futures Trading Commission (CFTC) opened a case against crypto trading and investment company Control-Finance Limited for its alleged operation of a $147 million Ponzi scheme. Although the commission has been issuing formal warnings to potential investors around these scams, this represents a new step in proactive enforcement from U.S. financial regulators.

And, of particular interest for the future of the space, is the peculiar events surrounding Plus Token. An exchange and wallet based in South Korea and run by a multinational group including Russians and Chinese nationals, Plus Token somehow absconded with more than $2 billion of user funds in a situation that CipherTrace could not definitively call an exit scam or identify as some other form of fraud. 

According to the report, the Chinese police arrived at the island nation of Vanuatu to arrest six of the site’s ringleaders after they had fled there and the Vanuatuan government immediately agreed to extradite them all to China. These “Plus Token Six” were all originally Chinese nationals but had either acquired citizenship in Vanuatu or were in the process of obtaining it. New measures like this seem justifiable given the sheer scale of the fraud committed but still seem a worrying precedent for crypto crackdowns in the future. 

All told, CipherTrace’s report is a reminder that the cryptocurrency space is still rife with fraudulent activity — and that the scams seem to only get more bizarre and convoluted as time goes on.