How do criminals turn crypto into cash?

In the world of cybercrime, cryptocurrency is the preferred form of payment. But ultimately, criminals still need to convert electronic assets into cash.
According to the Financial Times When it comes to converting cryptocurrencies into cash, criminals often go to the Treasure Men group. To contact this group, simply go to the Hydra dark web. It is the largest online marketplace on the dark web by revenue.

“This group leaves cash in specific places – behind a bush or under a bus seat – for criminals to get. They send specific location instructions. This is a whole new profession.” Financial Times quoted Dr. Tom Robinson, founder of Elliptic organization specializing in analyzing cryptocurrency transactions. The dark web site Hydra (Russian) offers a variety of methods for criminals to exchange cryptocurrency for cash, for example exchanging Bitcoins for gift certificates, debit cards or iTunes vouchers. Special software is required to access the Hydra dark web. Photo: ZDNet. Anonymous but still leaving traces According to experts, the ability to store cryptocurrency without providing an identity makes this currency especially attractive to many criminal gangs, especially hackers specializing in breaking into networks of businesses. and demand ransom. Statistics from research firm Chainalysis show that in 2020, businesses and organizations paid at least $350 million in cryptocurrency ransoms to a number of hacker groups, including DarkSide, the group that attacked the pipeline system. Colonial Pipeline earlier this month. But while anonymous, cryptocurrency transactions are recorded on an immutable blockchain system, leaving a clear trail for anyone with any knowledge of the technology. A number of investigative firms have been established to assist national authorities in tracking various criminal gangs by analyzing the flow of cryptocurrency transactions. Chainalysis (headquartered in New York, USA) is one such company. Binance cryptocurrency exchange. In 2011-2019, cryptocurrency exchanges supported the conversion to cash of about 60-80% of Bitcoin transactions by criminal groups. Photo: Binance. Chainalysis raised $100 million in its initial public offering, reaching a valuation of over $2 billion. There are also Elliptic (headquartered in London, UK) and CipherTrace, a company supported by the US government. Chainalysis said that in 2020, some illegal organizations receive about 5 billion USD and transfer 5 billion USD to other organizations. This represents almost 1% of all global crypto flows. Initially, the criminals only withdrew funds through major cryptocurrency exchanges. Elliptic estimates that between 2011 and 2019, cryptocurrency exchanges supported the conversion of about 60-80% of Bitcoin transactions by illegal organizations into cash. Take advantage of crypto ATMs Since last year, exchanges have been concerned about the tightening of regulations by many governments, so they have begun to apply anti-money laundering (AML) and customer identity verification (KYC) processes. This change pushes criminals to unlicensed exchanges. Still, expert Michael Phillips of online insurance company Resilience said that unlicensed exchanges have low liquidity, making it difficult for criminals to convert crypto to fiat. “The goal is to make it more expensive for criminals to convert money,” he explained. However, criminals still have a way around. Research by Chainalysis shows that some intermediaries are quietly assisting gangs in conducting many illegal money conversion transactions. Meanwhile, small-scale transactions still flow through more than 11,600 crypto ATMs worldwide without any control, or through gambling sites that accept crypto payments. Criminals can use crypto ATMs to get cash. Photo: EPA. Faced with that situation, crypto security companies use the technology of analyzing blockchain transactions and intelligence to determine which crypto wallets belong to criminal gangs. At the same time, they provide an overview of the global crypto crime ecosystem. As a result, companies discovered that many hacker groups lease ransomware to criminal networks. Kimberly Grauer, director of research at Chainalysis, said hackers also pay support services to other criminal groups in cryptocurrency. Thus, a criminal cryptocurrency ecosystem has been formed on a global scale. “We were able to see the ransom transactions, how the gangs split the money and how that money went to groups in the system,” Grauer said. The tricks are getting more and more sophisticated However, cybercriminals are increasingly using a variety of high-tech tools to obscure the traces of cryptocurrency transactions. Some criminals use “chain-hopping” – repeatedly switching between different cryptocurrencies – to avoid the eyes of security companies. In addition, they use a “privacy cryptocurrency” like Monero, which has a high degree of anonymity. Another tool commonly used by criminals is a “mixer,” a third-party service that mixes illegal cryptocurrencies with clean money, before pushing them back onto the market. In April, the US Department of Justice arrested a Swedish citizen of Russian origin, who specialized in operating a “mixing” service called Bitcoin Fog. During the past 10 years, this guy has transferred a total of 335 million USD in Bitcoin. Governments need to modernize confiscation and asset freezing processes to make it easier to confiscate cryptocurrencies from exchanges. Tom Kellerman, director of cybersecurity strategy at VMware V “It is possible to untangle mixed cryptocurrencies. However, that requires high technology and a lot of processing and data power,” said Katherine Kirkpatrick, director of law firm King & Spalding. According to Elliptic, the popular 2020 coin mixers are highly anonymous “personal wallets”. They supported 12% of Bitcoin wash transactions last year. Tom Kellerman, director of cybersecurity strategy at VMware and a member of the US Secret Service’s advisory board, said that governments need to modernize the process of confiscating and freezing assets for law enforcement. easily confiscate cryptocurrencies from exchanges. In the past, blockchain security experts have floated the idea of ​​sharing a “blacklist” of crypto wallets used by criminals with exchanges, analytics firms, and governments. “Now is the right time to consider that initiative.” he Kemba Walden of Microsoft’s Digital Crimes Unit.