People use cryptocurrency for quick payments, to avoid transaction fees that regular banks charge, or because it offers some anonymity. Others hold cryptocurrency as an investment, hoping the value goes up. You can buy cryptocurrency through an online exchange platform. Cryptocurrency is stored in a digital wallet, which can be online, on your computer, or on an external hard drive.
And, because you typically transfer cryptocurrency directly without an intermediary like a bank, there is often no one to turn to if you encounter a problem. Scammers are always finding new ways to steal your money using cryptocurrency. One sure sign of a scam is anyone who says you have to pay by cryptocurrency. In fact, anyone who tells you to pay by wire transfer , gift card , or cryptocurrency is a scammer.
Which is what the scammers are counting on. Here are some cryptocurrency scams to watch out for. Before you invest, check it out. And read more about other common investment scams. Scammers will often send emails that say they have embarrassing or compromising photos, videos, or personal information about you. Then, they threaten to make it public unless you pay them in cryptocurrency.
This is blackmail and a criminal extortion attempt. Report it to the FBI immediately. The ledger on which trades occur is immutable. It should always be possible to track stolen loot through its digital footprint. The problem of handling stolen bitcoin is not unlike that of smuggling a Picasso in the trunk of your car. Stealing the painting is one thing; realizing any monetary gain for it is another. Morgan and Lichtenstein seem to have understood some of the dangerous terrain of the crypto laundry.
Last year, Robinson, the Elliptic scientist, showed me a visualization of a peel chain. The diagram looked like an airline-magazine route map, in which several lines sprout from one dot and then converge on another. The affidavit also details how the couple understood other, more sophisticated laundering techniques.
One is known as chain hopping. This is when one type of coin is swapped for another—Bitcoin to Ethereum, for instance—to disguise its provenance. The blockchain-forensics firm Chainalysis recently published a report that detailed the growing use of chain hopping, particularly by North Korean criminal groups.
The preferred method is to use what is known as a DeFi decentralized finance platform, which swaps currencies without ever taking custody of the funds. DeFis are not required to have any know-your-customer procedures. According to Chainalysis, in , North Korean hackers used a DeFi called Uniswap to launder the proceeds of a two-hundred-and-seventy-five-million-dollar theft from the KuCoin exchange—one of the largest hacks of any exchange ever.
Morgan and Lichtenstein also allegedly moved coins to AlphaBay, a dark-Web marketplace that was shuttered by police in You can buy pretty much anything you want using digital currency on the dark Web, and nobody cares where you got your funds. But it seems that the sums Morgan and Lichtenstein were looking to launder were too unwieldy to cash out by buying products. AlphaBay was simply a conduit for the stolen coins. When they attempted to open seven new accounts on one exchange using fake identities, the exchange could not verify the accounts, and froze their funds.
The couple ran into locked door after locked door. They spent some of the coins on N. They cashed out small amounts using gold trades and other techniques. Gurvais Grigg, a former F. Reading the affidavit, I found myself asking: How would the North Koreans have washed so many coins? They would have done it slowly. Criminal groups associated with North Korea leave large volumes of cryptocurrency untouched in digital wallets for years. They also would have used some of the same techniques that Morgan and Lichtenstein did: peel chains and chain hopping.
But they would have kept their real identities far away from any accounts handling the stolen coins. Certainly, they would have found a way to cash out large sums, probably using an exchange in a lax jurisdiction. In , a digital-currency exchange in Hong Kong was hacked by a North Korean group.
About 10, bitcoin was stolen. Today, the bitcoins would be worth nearly half a billion dollars. According to an indictment in , these coins were then diverted, via peel chains, to two Chinese citizens, Tian Yinyin and Li Jiadong, who had successfully opened accounts on other exchanges using fake pictures and fake names. Tian and Li then cashed out using a Chinese bank. According to the U.
Treasury, several financial institutions in China offer accounts to North Koreans, or to front companies that have relationships with Pyongyang. The North Koreans prefer to cash out in China, but, according to the forensics firms that track cryptocurrency, there are also plenty of exchanges in Russia and Eastern Europe that will not ask awkward questions. Morgan and Mr.
Hackers can steal Bitcoin from the wallets of legit crypto exchanges. They can also steam money from the wallets of crypto exchange users. "If you can get into the server you can steal the passwords," he says. "Once you have the passwords, you move the bitcoins from one address to. That's why this step, money laundering, is so important. Laundering Bitcoin is done with “mixers,” also called “tumblers,” which randomly.