Blockchain Security Firm Tracks Over $1.4 Billion in Laundered Funds on Crypto Exchanges in 2020

Unveiling Crypto’s Dark Side

Cryptocurrency, despite its revolutionary potential, continues to face challenges related to money laundering and illicit transactions. A recent report by Peckshield, a blockchain security company, highlights the extent of the problem, revealing that over $1.4 billion in laundered money was moved onto crypto exchanges in 2020.

Using its CoinHolmes tracking platform, Peckshield identified that much of this illicit activity is linked to hacker attacks, the dark web economy, and illegal gambling platforms. The findings emphasize the need for enhanced security measures and regulatory frameworks within the crypto ecosystem.

How Peckshield Tracked the Funds

1. Comprehensive Data Gathering

Peckshield employed a combination of online and offline methods to gather data on suspicious transactions.

• Over 100 million transactions were verified and analyzed.
• The tracking process included monitoring 147,000 BTC that moved onto exchanges in 2020.

2. CoinHolmes Platform

The CoinHolmes platform specializes in tracking digital assets and identifying suspicious activities.

• It flagged transactions tied to high-risk activities, including hacking and dark web operations.
• The platform also monitored movements through crypto mixers, which obscure the origins of funds.

Key Findings of the Report

1. Major Sources of Illicit Funds

Peckshield’s report links the laundered money to various illegal activities:

• Hacker Attacks: A significant portion of the funds originated from cyberattacks targeting crypto wallets and exchanges.
• Dark Web Transactions: Funds were traced back to transactions on darknet marketplaces.
• Illegal Gambling: Gambling platforms were identified as conduits for moving illicit money.

2. Top Crypto Exchanges Involved

Peckshield ranked the exchanges with the largest amount of stolen money deposited:

• Huobi, Binance, and OKEx topped the list.
• Other exchanges implicated include ZB, Gate.io, Bitmex, Luno, HaoBTC, Bithumb, and Coinbase.

The Role of Crypto Mixers

1. Laundering Through Mixers

Crypto mixers play a significant role in money laundering by:

• Obfuscating Fund Origins: Mixers shuffle transactions to make tracing difficult.
• Facilitating Fund Transfers: Illicit funds are often funneled through mixers before reaching exchanges.

2. Peckshield’s Findings

• As of June 30, 2020, Peckshield monitored over $1.62 billion flowing into high-risk addresses.
• Approximately $15.9 billion moved through crypto mixers, with much of it successfully laundered.

Notable Case: PlusToken Scandal

The PlusToken scam is one of the most significant crypto fraud cases to date. Peckshield tracked wallets associated with PlusToken, which were suspected of conducting massive open market sales on cryptocurrency exchanges.

• These sales created market instability and highlighted the vulnerability of crypto platforms to illicit activities.

Impact on the Crypto Ecosystem

1. Threat to Trust and Adoption

• Reputational Damage: High-profile laundering cases tarnish the image of cryptocurrencies, deterring new investors.
• Regulatory Scrutiny: Incidents like these invite stricter regulations, potentially stifling innovation.

2. Challenges for Exchanges

Exchanges must:

• Implement robust KYC/AML protocols to identify and block suspicious transactions.
• Invest in blockchain analytics tools to monitor fund flows.

3. Need for Industry Collaboration

• Cooperation among crypto platforms, security firms, and regulators is crucial to combat illicit activities.
• Sharing data and insights can help trace and recover stolen funds.

Peckshield’s Call to Action

Peckshield emphasized the importance of proactive monitoring and transparency in the crypto space. The company has:

• Promoted blacklist addresses to flag suspicious transactions.
• Advocated for stricter compliance measures across the industry.

“Most of the funds through the mixed currency service have been successfully laundered,” the report warned, underlining the urgency for action.

Recommendations for Strengthening Crypto Security

1. Enhanced Blockchain Analytics

• Tools like CoinHolmes should be adopted widely to monitor and flag high-risk activities.

2. Stricter Regulations

• Governments and regulatory bodies must establish clear guidelines for exchanges and mixers.

3. Public Awareness

• Educating users about the risks of participating in unverified crypto platforms can deter illicit activities.

4. Decentralized Solutions

• Decentralized exchanges and blockchain solutions with built-in security features can help reduce vulnerabilities.

Looking Ahead: The Future of Crypto Security

The $1.4 billion in laundered funds tracked by Peckshield is a stark reminder of the challenges facing the cryptocurrency ecosystem. While the technology holds immense potential, addressing its vulnerabilities is essential for sustained growth and adoption.

As blockchain technology evolves, so too must the tools and strategies used to combat illicit activities. With collaboration among industry players, regulators, and security firms, the crypto space can become a safer and more trustworthy environment for all participants.

For more insights into cryptocurrency security and regulatory developments, explore our article on latest news, where we analyze trends shaping the digital finance landscape.