Cryptocurrency Crime Report: General Decrease In Illicit Activity With Alarming Growth In Ransomware

• Despite a general market pullback in 2023, cryptocurrency crime has seen a significant decline, with inflows to known illicit entities down by 65% compared to the same period in 2022. The most notable decrease was in scams, where crypto scammers had accrued nearly $3.3 billion less than in the previous year.
• Ransomware is the only form of cryptocurrency-based crime on track to grow in 2023, with attackers having extorted $175.8 million more than they did at the same time in 2022. This trend likely signals a reversal of the positive decline observed in ransomware activities in 2022.

The first half of 2023 has brought a sense of relief to the cryptocurrency sector following a tumultuous 2022. Digital currencies such as Bitcoin have seen a value resurgence, with an 80% increase in price as of June 30th. Further bolstering industry optimism, significant reductions in cryptocurrency-related crimes have been reported. As highlighted in the graph below, cumulative daily inflows to legitimate, risky, and illegal services during 2023 demonstrate this positive trend when compared with previous years.

In comparison with 2022, by the end of June 2023, there has been a 65% decrease in crypto inflows to recognized illicit entities, not including those subject to sanctions or special measures. Simultaneously, inflows to risky entities, comprised mainly of mixers and high-risk exchanges, have seen a 42% decrease. Overall transaction volumes have declined across the sector, but legal services have experienced a less dramatic dip of 28%. Despite the market pullback, the volume of illicit crypto transactions has declined more steeply than legitimate transactions.

Regarding specific types of cryptocurrency-based crime, nearly every category has seen a downturn. However, the most notable reduction is in the area of scams. By June, crypto scammers had accrued nearly $3.3 billion less than in 2022, totaling just over $1.0 billion for the year. Contrarily, ransomware is on track to be the only type of crypto-crime that is set to grow in 2023, with attackers having extorted $175.8 million more than they did at the same point in 2022.

While scams typically generate the most revenue in cryptocurrency-based crime, 2023 has seen a significant decrease. By the end of June, revenue drawn from crypto scams was 77% lower than it was in the same period of 2022. Notably, this decline comes at a time when crypto asset prices are rising, contradicting the usual correlation between market growth and scam revenue.

This significant drop in scam revenue is largely attributed to the sudden disappearance of two major scams, VidiLook and Chia Tai Tianqing Pharmaceutical Financial Management, as shown in the chart below. Both scams offered unrealistic returns on cryptocurrency “investments,” with VidiLook adding a unique twist, promising users its native VDL token in return for watching digital ads, supposedly enabling users to stake for substantial rewards.