Cryptocurrency And Cybertheft: Issues Of Global Concern.

By Isaac Ijuo[i]

INTRODUCTION

With over a decade since the introduction of Bitcoin (BTC), the first and the most prominent cryptocurrency, digital currencies continue to redefine the global digital economy. Although it is being speculated that cryptocurrencies may have the potential to replace the traditional fiat currencies and transform the financial services landscape, however, the shortcomings of the network cast doubts on the possibility. Yet how did it come this far so quickly? The year 2009 marked a defining moment for cryptography and the peer-to-peer electronic cash system when an individual (or group) under the pseudonym Satoshi Nakamoto publicly released Bitcoin using the Blockchain software. This was indeed a break from the past, having seen the failure of DigiCash (the first digital cash and electronic signature), founded by David Chaum in 1990.

As a result of the unregulated nature of cryptocurrencies, and the level of anonymity and transnational existence makes it an attractive opportunity for cyber offenders, money launderers, and criminals alike. Cryptocurrencies have thus proven to be both a tool, and target for a multitude of cybercrimes. However, it is important to acknowledge that the technology underpinning Bitcoin’s operation is not inherently criminal, nor are persons seeking levels of anonymity in a modern world of intrusive, universal surveillance.

It is against this background that this piece seeks to understand the relationship between cryptocurrency and cybercrime, with an outlook into the future of Blockchain in solving global criminal financial-related activities.

HOW CRYPTO CAN BE USED AS AN INSTRUMENT OF CYBER THEFT.

Cryptocurrencies can be used as a tool for criminal activities through different ways including – Crypto Exchange Hack,[x] Initial Coin Offering (ICO) scams, Initial Exchange Offering (IEO) Scams, Fake Giveaway[xi], Airdrops, Crypto Faucet and Mining, Crypto Jacking, Phishing, Spam, Investment Fraud[xii], Rug pulling in the decentralized finance ecosystem, Malware and Ransomware. For instance, a typical ransomware attack on a company or organization might proceed like this: Executives realize their business website is down or systems inaccessible, and administrator overrides don’t work. A ransom demand email arrives, providing a Bitcoin address or a Cryptocurrency address where the payment must be made before the company system becomes operational. The victim copies the string of alphanumeric characters (the wallet address) and deposits the Bitcoin.

RECORDS OF CYBERCRIME COMMITTED USING CRYPTOCURRENCIES.

Bitcoins’ security issues became a news with the bankruptcy of Tokyo-based Mt. Gox in February 2014. Mt. Gox was one of the largest digital currency exchangers until its computer system was hacked and approximately $477 million worth of Bitcoins were stolen prompting it to declare bankruptcy.

In recent time, Chainalysis – a Cryptocurrency Tracking Company, reported that after a drop in scam revenue in 2018, 2019 was the biggest year for cryptocurrency scams. Scammers tripled their revenue, bringing in $4.30 billion worth of cryptocurrency from millions of victims. The vast majority of this came from Ponzi schemes, which accounted for 92% of the bottom-line total. Blackmail scams also grew significantly for the second straight year, nearly quadrupling their total 2018 revenue to $22.5 million. [xvi]

The most prominent of the scams was the PlusToken scam of China, what was tracked after the heist was a total of 194,775 BTC, 1.4 million LTC, 833,083 ETH, 79,581 BCH, 27.6 million EOS, 74,167 Dash, 6 billion Doge, 487 million XRP and 213,724 USDT [xvii]. That went from scam victims to PlusToken wallets, equating to roughly $2 billion.

The list of criminal activities is endless.

EFFECT OF USING CRYPTOCURRENCY AS AN INSTRUMENT OF CYBER THEFT

The blockchain invention popularized the use of cryptography which uses hash codes to accept, store and process data using codes in form of blocks. It merits emphasis that even if cryptocurrencies offers more anonymity than banks or traditional money service businesses, this new currency may not be the ideal platform to facilitate money laundering and cyber fraud because of two things referenced in the whitepaper which are: immutability and the fact that the network works on a public and transparent ledger. Thus, cyber fraud through cryptocurrency may be a bad idea not merely because it’s illegal, but also because it leaves a permanent trail. Cyber Fraud using cryptocurrency is like pulling a bank heist, yet leaving a map to your apartment at the scene of the crime. The clearer fact is, an attempt could be made to relocate or to recover the map and shred the same into pieces, but for cryptocurrency once created it cannot be erased even if the coins are redistributed to multiple accounts. It remains a fact that persons who have attempted cyber fraud using cryptocurrency were sometimes arrested years after their alleged crimes, [xxiv] and their account can be flagged easily for criminally related activities [xxv]

RECOMMENDATIONS ON DEALING WITH CRYPTO-RELATED CRIMES.

• The invention (Cryptocurrency and the Blockchain network) unfortunately cannot be uninvented, at this rate States and Governments must start growing expertise in understanding the network.
• At the moment, no country has a holistic regulation on Cryptocurrency and Blockchain Technology – taxation, punishments of offenders, breach of contract, and settlement of debt, loans, and crowdfunding. It is without a doubt that, since the invention is gaining mainstage adoption, crypto-centric regulations should be attention and enacted.
• Cryptocurrency Exchange platforms should of necessity should start mandating Customer Verification often called Know Your Customer (KYC) this is to monitor fraudulent activities, money laundering amidst others.
• The decentralized finance ecosystem offers an opportunity for cyber offenders to carry out their activities technically unnoticed, however, since the blockchain network operates on a public and transparent ledger, states should partner with crypto analysis company to trace accounts of such users.
• Users are equally advised to use browser extensions that are designed for decentralized platforms to prevent them from any of the scams.
• Due diligence should be done before investing or buying any cryptocurrency especially those offering unorganized or unregulated coin offerings.
• As the adoption of the network increases, Lawmakers, the Judiciary and even Law enforcement agencies must start equipping themselves with the relevant blockchain skills for the future.
• The emergence of Initial Coin Offering, Initial Gaming Offering, Initial Decentralized Exchange Offering, and Initial Exchange Offering has opened up opportunities for the Securities and Exchange Commission to monitor how companies and entities offer their tokens to the public. It is therefore imperative that, before coins are offered/issued to the public, they should go through the Securities and Exchange Commission of the said country.

CONCLUSION.

As Bitcoin adoption becomes more widespread and drives investor demand, the risk of it being displaced by a better-designed decentralized, digital store of value decreases. Although there are varying challenges on the network – mining, privacy, and anonymity, which makes it susceptible to cybercriminals but truth be told, anonymity is not a bane. On the contrary, it’s a key ingredient of privacy-preserving systems, and necessary to prevent overreach and abuses by governments. However, with the level of transparency the network gives, it is worthy of adoption. The Blockchain network offers integrity and transparency.

References___

[i] Barrister and Solicitor of the Supreme Court of Nigeria, Associate, The Cloud Attorneys, https://thecloudattorneys.com/

[ii] https://bitcoin.org/bitcoin.pdf accessed, October 29, 2020

[iii] Cryptocurrency News, https://www.investopedia.com/news/bitcoin-pizza-day-celebrating-20-million-pizza-order/ accessed, September 13, 2020.

[iv] Tim Alper, Legend of Mir Developer plays for success in Blockchain Gaming Market, https://cryptonews.com/exclusives/legend-of-mir-developer-plays-for-success-in-blockchain-gami-7216.htm, accessed September 13, 2020.

[v] Grace Caffyn, Bitcoin on the Dark Web: the Facts, https://www.coindesk.com/markets/2015/09/23/bitcoin-on-the-dark-web-the-facts/, accessed September 13, 2020.

[vi] https://casetext.com/case/meissner-v-bf-labs-inc-1, Accessed, September 13, 2020.

[vii] https://casetext.com/case/united-states-v-lord-10, Accessed September 13, 2020.

[viii] https://indiankanoon.org/doc/12397485/?__cf_chl_jschl_tk__=pmd_sbrKXZ5byI4AW1cs0nzkiAnb6SC4A1isa8hsI3SAGVM-1631528152-0-gqNtZGzNAiWjcnBszQil, accessed, September 13, 2020.

[ix] Ameer Rosic, What is Cryptocurrency [Everything you need to know!] https://blockgeeks.com/guides/what-is-cryptocurrency/, accessed, September 13, 2020.

[x] Selfkey Blog, A Comprehensive List of Cryptocurrency Exchange Hacks, https://selfkey.org/list-of-cryptocurrency-exchange-hacks/, accessed, September 16, 2021.

[xi] BBC News, Major US Twitter accounts hacked in Bitcoin Scam, https://www.bbc.com/news/technology-53425822, accessed, September 16, 2021.

[xii] Roxanne Henderson, Loni Prinsloo, South African Brothers, Vanish and so does $3.6 Billion in Bitcoin, https://www.bloomberg.com/news/articles/2021-06-23/s-african-brothers-vanish-and-so-does-3-6-billion-in-bitcoin, accessed, September 16, 2021

[xiii] Dan Mangan, Man busted in 2020 Twitter hack, Bitcoin scam of Biden, Obama, Must, Buffett Accounts, https://www.cnbc.com/2021/07/21/man-busted-for-twitter-hack-of-biden-obama-musk-in-bitcoin-scam.html, accessed, September 16, 2021

[xiv] Greeshma K. V. Cryptocurrencies and Cybercrime, https://www.researchgate.net/publication/331384975 Accessed, September 12, 2021

[xv] CBN, https://www.cbn.gov.ng/Out/2021/CCD/Letter%20on%20Crypto.pdf?__cf_chl_captcha_tk__=pmd_dUqTiJiFW_f61926SNblv9Yh_tRaPziviAevtGiSwDg-1631775936-0-gqNtZGzNAuWjcnBszQjR, Accessed, September 16, 2021.

[xvi] Chainalysis, The 2020 state of Crime, published January 2020.

[xvii] PlusToken scam: China seizes $4.2B in Digital Currencies, https://coingeek.com/plustoken-scam-china-seizes-4-2b-digital-currencies/, accessed, September 16 2020

[xviii] Gertrude Chavez-dreyfuss, Michelle Price. Explainer: How hackers stole and returned $600 million in tokens from Poly Network. https://www.reuters.com/technology/how-hackers-stole-613-million-crypto-tokens-poly-network-2021-08-12/, accessed, September 16, 2021

[xix] Countries that have Banned Bitcoin https://www.escapeartist.com/blog/countries-banned-bitcoin/, accessed September 1, 2020

[xx] Kelvin Amugo, Central Bank of Nigeria, “Circular to Banks and other Financial Institutions on Virtual Currency Operations in Nigeria”, https://www.cbn.gov.ng/Out/2017/FPRD/AML%20January%202017%20Circular%20to%20FIs%20on%20Virtual%20Currency.pdf, accessed September 1, 2020

[xxi] Isaac Okorafor, Central Bank o Nigeria, “Virtual Currencies not Legal Tender in Nigeria – CBN,” https://www.cbn.gov.ng/Out/2018/CCD/Press%20Release%20on%20Virtual%20Currencies.pdf, accessed September 1, 2020.

[xxii] CBN, https://www.cbn.gov.ng/Out/2021/CCD/Letter%20on%20Crypto.pdf?__cf_chl_captcha_tk__=pmd_dUqTiJiFW_f61926SNblv9Yh_tRaPziviAevtGiSwDg-1631775936-0-gqNtZGzNAuWjcnBszQjR, Accessed, September 16, 2021.

[xxiii] https://sec.gov.ng/statement-on-digital-assets-and-their-classification-and-treatment/ accessed, October 29, 2020.

[xxiv] CISOMAG “Binance and Ukraine Police Arrest Crypto Hackers in a Bulletproof Exchanger Project”, https://cisomag.eccouncil.org/binance-help-ukraine-police/#:~:text=Ukraine’s%20Cyber%20Police%20identified%20and,dollars%20in%20cryptocurrencies%20since%202018.&text=The%20hackers%20have%20been%20indicted,exchanges%20from%202018%20to%202019. Accessed, October 20, 2020.

[xxv] https://twitter.com/polynetwork2/status/1425073987164381196?lang=en, Accessed, September 18, 20201