Criminals use cross-blockchain tools to hide billions in cryptocurrencies
Tuesday 4 October 2022 at 2 p.m
Criminals are using complex new blockchain technologies to hide and launder billions in unpaid winnings.
At least $4bn (£3.6bn) worth of illicit crypto assets have been laundered via various “cross-chain” technologies, which allow both legitimate and illegitimate users to move funds between blockchains, research firm Elliptic said.
Decentralized exchanges (DEX), cross-chain bridges and coin exchange services are used for money laundering due to the additional levels of anonymity they provide.
The cross-chain technologies give hackers, sanctions evaders and cybercriminals new opportunities to fly under the radar of legacy blockchain analytics tools, which have traditionally only been able to track transactions across one digital asset at a time.
DEXs — decentralized peer-to-peer cryptocurrency marketplaces that allow users to buy and sell digital assets among themselves without oversight or intervention from a central authority — have been used to launder $1.2 billion in funds, the Elliptic report said .
Another $1.8 billion in funds has been laundered through cross-chain bridges, or blockchain bridges, which use smart contracts to allow seamless transfers of cryptocurrencies, such as Bitcoin and Ethereum, between blockchains.
At the same time, coin exchange services, which allow users to exchange coins between themselves – often without requiring oversight or identification – have also been used to hide the origin of another $1.2 billion in illicit funds, the report said.
The use of various chain-jumping tools helps to hide transaction traces and hinder investigations.
In one case, North Korea’s state-backed Lazarus hacking group – which has previously been linked to a number of crypto-based heists – used two DEXs and a cross-chain bridge to hide $540 million worth of funds, including 138,600 Eth.
The report notes that while “the use of these services is overwhelmingly legitimate”, the lack of controls on these platforms means “criminals face little resistance when using them for malicious purposes”.
