Yahoo Finance Justice Dept’s crypto chief: Crypto thefts are 'serious national security concerns'
The amount of crypto stolen by hackers has risen by more than a quarter this year, even as the value of cryptocurrencies has plunged.
Blockchain thieves have nabbed as much as $3 billion of investor funds through 141 various crypto exploits since January, according to data from DeFi Yield, a 31% increase over the same period last year. That means 2022 likely will surpass 2021 as the biggest year for crypto hacks on record.
Of the nearly weekly occurrence's of crypto exploits this year, those involving “cross-chain” crypto bridges have accounted for as much as $600 million in October and $2 billion worth of stolen funds year to date, with at least $1 billion in exploits attributed to North Korean-linked hackers, according to Chainalysis estimates.
“These are serious national security concerns that really stretch beyond the fact that there are millions of dollars being stolen in single episodes that we see with the DeFi hacks and exploits,” Eun Young Choi, director of the National Cryptocurrency Enforcement Team (NCET), said at Yahoo Finance's All Markets Summit.
Effectively, Choi’s team - NCET - provides one possible link in the chain for how companies and investors might recover stolen funds.
Formed little more than a year ago, NCET is intended to act as a “one-stop shop” of the federal agency’s investigators specializing in crypto, according to Choi.
Working at times with other government agencies both in the U.S. and abroad, NCET has helped seize over $3.8 billion worth of stolen crypto this year with the bulk of that sum coming from a February indictment involving alleged money launderers of proceeds stolen in 2016.
Those billions won’t be returned to victims any time soon or at least not until the trial for the case reaches some conclusion.
On the flip side, during a record year for crypto exploits, illicit crypto earned by scams (-65%) and darknet markets (-43%) declined notably between January and July, according to a report from blockchain analytics firm, Chainalysis.
In April, an investigation by the Justice Department also led to the shutdown of the world’s largest darknet marketplace, Hydra market.
While also in part attributed the crypto market’s performance, rising exploits and dropping darknet flows illustrates how illicit use of crypto has changed in recent years.
“Early days, it was darknet markets and it was people buying and selling all sorts of contraband,” Choi explained. “These days, we're seeing [crypto] pop up in any every single type of criminal activity the department looks into.”
Although Choi admitted cases involving crypto can be different in nature, NCET prosecutes cases involving digital assets virtually the same way the Justice Department pursues criminal activity dealing in stocks, commodities, and other assets.
“These transactions can oftentimes be relatively frictionless and quick, but it also means that if we identify a particular transaction as being criminal, we can't go to some centralized, you know, financial institution and ask for that money to come back,” Choi said.
Nevertheless, Choi admitted her team has a role to play in reducing the high degree of crypto exploits plaguing the industry.
“We have to work with the private sector and ensure that they understand the ways in which we've identified particular tactics that bad actors might be using in order to exploit these types of platforms,” she said.
“The industry is still, in our view, in a maturation phase and in a lot of respects we're looking at companies and hoping that they will understand that doing things such as basic risk reduction, having robust compliance programs and ensuring that they are decreasing the opportunities for these types of exploits on their own platform is the first, best line of defense.”
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David Hollerith is a senior reporter at Yahoo Finance covering the cryptocurrency and stock markets. Follow him on Twitter at @DsHollers
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