How Cryptocurrency Crime is on the Rise

Patrick Ward Patrick Ward Follow Jan 24, 2023 · 4 mins read

Interest in cryptocurrency today is greater than ever before. The opportunities to use crypto in everyday life range from buying a coffee at Starbucks to a meal at KFC.

While the adoption of blockchain technology continues to increase, the strategies of crypto criminals continue to evolve day by day. On average, cryptocurrency crime has risen by 312% yearly since 2016.

This increase includes everything from hackers stealing coins to ransomware and investment scams. In 2021, addresses linked to illicit activities received slightly more than $14 billion.

Take a look at the following graph to get an idea:

Graph showing total crypto value received by illicit address in 2017 - 2021.
Source: Chainalysis 2022 Crypto Crime Report

In addition, the following graph shows several of the most significant thefts in the blockchain ecosystem. In each one, we can see how costly crypto security vulnerabilities can be:

Graph highlighting the biggest crypto heights to date.
Source – Statista

Crypto Crime Modalities

One of the crimes most remembered by the Ethereum and blockchain community is when approximately $60 million of Ether was stolen due to a vulnerability in the smart contract code of a decentralized organization known as “The DAO.”

This caused the Ethereum blockchain to suffer a hard fork, resulting in 2 different Blockchains, Ethereum Classic and Ethereum. In December 2021, due to a security hole in the BitMart exchange, several private keys and their respective funds totaling nearly $150 million were stolen.

Ransomware attacks, where criminals demand millions in bitcoin from large companies in exchange for the release of encrypted files, have become a very common practice that has mainly affected large companies, especially in the telecommunications sector.

We saw this in the case of Orange in Europe or Telecom in Argentina in 2020, where the latter demanded 7.5 million dollars in Monero to decrypt about 18,000 files and systems.

The Perfect Crime

Crypto criminals take advantage of anonymity and tools that make it almost impossible to trace accounts. The following graphic shows how payment for ransomware works and how criminals can avoid being tracked:

Laptop and bitcoin images showing how ransomware criminals avoid tracking.
Source – Emsisoft

In the above example, they use mixer services where they can do something similar to “money laundering,” mixing illicitly obtained funds with other people’s funds and then sending the funds to multiple addresses, making it almost impossible to keep track of them.

To remain anonymous, they also make use of “Privacy Coins” such as Monero, which are designed to maintain the anonymity of their users, although these are not the best option since they are not as liquid as bitcoin or other cryptocurrencies.

How to avoid being a victim

(1) Save your private key

No one can access or transfer your funds without your private key. If you have your coins or tokens in a self-custody wallet, you must have this private key (or the seed phrase to retrieve it) stored in a place where only you can access it.

I recommend writing it down on a physical piece of paper and keeping it safe; never store it on your computer or any cloud service. REMEMBER, NO PROTOCOL OR DAAP SHOULD ASK YOU FOR YOUR PRIVATE KEY.

Important – validate the URL of the DAAPs you interact with.

In the crypto world, it is common for people to try to phish you. A platform wants to impersonate another, impersonating the original to steal your information. It would be best if you always validated the URL of the DAAP you are interacting with.

Let’s look at an example with one of the largest DeFi protocols:

This is the real URL for the Aave Protocol:

URL for Aave Protocol.
Aave Protocol URL

In recent times, there was the following fraudulent platform posing as Aave. Its interface was the same, but as you can see, its domain ended in .pw:

URL for

(2) Validate social networks of DAAPs or protocols

Behind every proper protocol, there must be a community that supports it. Usually, the communities of web 3 projects are found on Twitter or Discord. You’ll need to take your time to review the project’s social networks, read comments and draw your conclusions.

(3) Validate and understand tokenomics and the purpose of protocols

For more experienced users, according to the aforementioned crypto crime report by Chainalysis, DeFi and Mining services are the fastest-growing services associated with illicit activities.

All DeFi projects must have a document commonly referred to as tokenomics. Users must read and understand how the agents interact and use the tokens to avoid fraud and ensure the correct functioning of the protocol.

Wrapping up

As the use of cryptocurrency continues to rise, an unfortunate reality is that crypto crime will also likely continue to grow. The strategies and sophistication at which crypto criminals learn and operate should not be ignored.

With cryptocurrency and smart contracts likely to become increasingly embedded in our everyday lives, blockchain security must be armed with the necessary resources to combat these highly-skilled crypto criminals.

Patrick Ward
Written by Patrick Ward Follow
Hi, I'm Patrick. I made this site to share my expertise on team augmentation, nearshore development, and remote work.