Criminals are less inclined to target Bitcoin as a tool for their activities these days than they were in the past, according to research by TRM Labs.
The study, titled Illicit Crypto Ecosystem Report: A Comprehensive Guide to Illicit Finance Risks in Crypto, said that in 2016, two-thirds of crypto-related hacks had Bitcoin as their target. By 2022, this had dropped to just 3%, while Ethereum had taken the dominant spot for preferred target of criminal activities with a 68% target, and Binance Smart Chain was the second preferred crypto with 19% volume.
In 2016, Bitcoin was the exclusive digital asset used in terrorism financing. By 2022, assets on the Tron network would account for 92% of the volume used in terrorism financing.
Drug trafficking
These illicit activities include drug trafficking dominated by Russians in the darknet markets, where $1.49 billion was spent in 2022. The report says that Russian darknet markets, which account for 80% of volume, mostly use Bitcoin, while darknet markets in Western countries mostly use Monero.
Other illicit activities include cybercrime services such as bulletproof hosting and credit card checkers. There is also illicit trafficking of stolen goods such as cards, personally identifiable information, and intellectual property.
Human trafficking and migrant smuggling
Others are human trafficking and migrant smuggling, child sexual abuse, and molestation, which accounted for $3 million sent in crypto in 2022. Murder for hire is another segment of the illicit activities that have attracted criminals to crypto. The report said that law enforcement authorities have arrested people who hire hitmen to kill others in the United States and Europe.
Murder for hire
In 2022, a Los Angeles man pleaded guilty to a federal murder-for-hire charge after sending USD 13,000 worth of bitcoin to a darknet website to hire a hitman to kill a woman who had rebuffed his advances.
Other instances of people accused of using cryptocurrency to pay hitmen have been reported elsewhere. In 2022, a Mississippi resident received a 10-year prison sentence for attempting to have her husband killed for a USD 10,000 fee in bitcoin.
Such events have not been confined to the US. In 2021, Europol and the Italian police collaborated to arrest a man suspected of paying EUR 10,000 in bitcoin to hire an assassin to kill his ex-girlfriend. In that instance, the virtual asset service provider (VASP) involved in the transfer of the bitcoin to the would-be killer cooperated with authorities in providing details about the suspect.
Illicit payments
Cryptocurrencies have also been used by criminals for illicit payments. These are terrorist financing activities, such as fundraising for ISIS families held in internment camps in northeastern Syria. Pro-ISIS groups in Pakistan and Tajikistan are known to use USDT based on the Tron network to raise funds for their recruitment propaganda. The TRM Labs report said there has been a 240% year-on-year increase in the use of Tether compared to a 78% increase for Bitcoin in donations to terrorist groups.
Bribery and corruption
Among the high-profile bribery cases is the 2021 allegation that FTX founder Sam Bankman-Fried gave a $40 million bribe to Chinese authorities to unfreeze the company’s accounts that had over $1 billion in them.
The report continues,
“In 2022, the US Department of Justice accused two Chinese intelligence officers of allegedly attempting to bribe a US government employee with USD 61,000 in bitcoin to steal documents related to an investigation into Chinese tech giant Huawei.
Cryptocurrencies can also be used to influence voters during election campaigns. In 2019, a gubernatorial candidate in St. Petersburg, Russia, handed out crypto tokens to voters on the campaign trail.”
Crypto in espionage
In 2022, a US nuclear engineer, Jonathan Toebbe, and his wife, Diana, were sentenced to 18 and 21 years of imprisonment, respectively, for attempting to pass sensitive propulsion technology secrets to a third country.
Fraud Schemes
Other illicit payment uses of cryptocurrencies include export control evasion, sanction evasion, and the proliferation of financing, the report said. In fraud and scams, crypto is used in investment frauds. These include deceptive smart contracts, exit scams, phishing, impersonation scams, business email compromise, ransomware, illicit commerce scams, and blackmail scams. It also highlighted exit scams.
“Exit scams, also known as rugpulls, occur when the operators of a project – one often related to investments or a new token – stop developing the project and withdraw user funds for themselves. They can either happen abruptly where project devs and funds suddenly disappear, or they can occur more slowly, where money is siphoned off a bit at a time and devs get less and less active. Sometimes, projects are called rugpulls by the community when they overpromise and underdeliver, though this is more difficult to outright label as fraud.”
Other scams included in the report are misappropriation of funds, theft, extortion, market manipulation, insider trading, and tax evasion. It further highlighted money laundering and the layered process involved. The report further alleged that seemingly legal crypto operations such as gambling and mining have been used by criminal groups as channels for money laundering.
