Scams and crimes related to cryptocurrencies have seen a significant drop of 65% in the first half of 2023, according to the recently released Crypto Crime Report by Chainalysis. The study highlights a decline in overall illicit revenue in various categories, including scams and darknet markets. In a recent interview with CNBC Crypto World, Jacqueline Burns Koven, the head of cyber threat intelligence at Chainalysis, breaks down the data and provides insights into the reasons behind this decline.

Scams, which topped the list of crypto-based crimes, have decreased despite the increase in crypto prices. This may seem counterintuitive, as one would expect higher scam revenue with the growing interest in the crypto space. However, Burns Koven explains that investment scams might become more attractive in the future. She also points out that impersonation scams, particularly those involving authority figures and influencers, have not been significantly affected.

Romance Scams – An Ongoing Concern

The report highlights romance scams as an ongoing concern, as they continue to receive substantial scam payments irrespective of cryptocurrency price fluctuations. Burns Koven emphasizes the need to monitor and address this specific type of scam.

She said, “Romance scams are agnostic to price fluctuations in cryptocurrency and on a per-victim basis are receiving more total scam payments than other types of scams.”

Asked about the decline in scams, Burns Koven attributes it to the disappearance of two major scams from the previous year, possibly due to law enforcement activities and pressure.

Noting that while this trend was positive, she said: “This is a fragile trend and we are on the lookout for what the next big scam might be so that we can highlight it to investigators from the private and public sector and try to prevent their customers from sending funds to these scams.”

While overall crypto crime has decreased, ransomware attacks have witnessed a surge. The report reveals that ransomware attackers have extorted over $449 million in the first half of 2023, potentially making this year their second most profitable year. Burns Koven points out that this increase can be attributed, at least in part, to the Ukraine-Russia conflict. Russian-based operators have shifted their focus from potential military activities to ransomware attacks.

Another newly uncovered ransomware attack is Clop ransomware, according to Burns Koven, this has exploited a zero-day vulnerability to target numerous victims. Ransom demands have reached eight figures, indicating the growing financial impact of these attacks. The report predicts that if the current pace continues, ransomware attackers could take more than $898 million from victims in 2023, trailing only the figures from 2021.

Prevention Remains Key

To prevent ransomware attacks, Burns Koven suggests a combination of factors, including law enforcement actions, sanctions, insurance policies that promote stringent security measures, and the availability of decryptors.

She added: “So we’ve seen private sector companies, as well as law enforcement, come out with decrypters that they’ve been able to supply to victims so that they wouldn’t need to actually pay the ransom to get their data back.”

Apart from the rise in ransomware attacks, the report highlights the surprising decline in scam revenue, which fell by $3 billion compared to the previous year despite increasing cryptocurrency prices. Burns Koven acknowledges the positive development but stresses the need for continued efforts in education, public advocacy, and victim reporting to identify, track, and mitigate these issues.

Looking ahead, Burns Koven advises vigilance since threat actors and scammers constantly adapt to new circumstances. Ransomware attackers, in particular, have been refining their techniques to overcome improved defenses by victims. With rising cryptocurrency prices, scammers will likely devise new tactics to target different victims within the ecosystem.

The findings of the Crypto Crime Report for the first half of 2023 signify a positive trend but do not guarantee a sustained decline. Continued efforts from law enforcement, public advocacy, victim reporting, and education will be necessary to mitigate the evolving threat landscape in the crypto space.