Cryptowashing is enhanced by Alazarus Group’s bridge strategies
Cryptocurrencies have introduced a new frontier for money laundering, challenging the traditional methods used to hide the source of illicit funds. At the heart of this challenge is blockchain technology, which makes every transaction publicly visible in a transparent ledger. Despite this transparency, criminals try to creatively hide their money trail, hoping to convert their ill-gotten cryptocurrency into fiat currency without being detected.
The “2024 Crypto Crime Money Laundering Report” from Chinalysis highlights a significant evolution in the tactics employed by these individuals, reflecting broader changes in the digital financial crime landscape. This analysis shows not only the adaptation of criminals to the advancement of technology, but also the battle between these illegal actors and the efforts to curb money laundering in the digital age.
Cryptocurrency counterfeiting is reduced
The updated findings of Chainalysis show a significant shift in cryptocurrency transactions related to illegal activities in 2023. Illegal addresses $ 22.2 cryptocurrency transferred to various services, a significant reduction from $ 31.5 billion in 2022, this reduction exceeds the total reduction in the volume of transactions, with counterfeit money. It decreased by 29.5% compared to 14.9% of the total transaction volume. This discrepancy suggests that factors beyond a simple trading slowdown are slowing down cryptocurrency supply.
The decline in crypto-mixing can be attributed to a number of factors, most notably the aggressive crackdown by US authorities on crypto-mixing. These services, known for aggregating illegal funds and obscuring their source, have faced higher charges, which has greatly reduced their activity in the sane ecosystem.
Mixing activity is reduced
In the year The closing of Tornado Cash on August 8, 2022 is a big change for the crypto-miner industry, which indicates further steps such as the closure of Sinbad US authorities on November 29, 2023. A mixture to hide the origin of illegal funds. The Chinalysis report shows a sharp decline in money sent from illegal addresses to mixers, from $1.0 billion in 2022 to $504.3 million in 2023.
Despite US efforts to legitimize cryptocurrency and block Sinbad, the Lazarus Group, a North Korean hacker with ties to their government, quickly adapted and revealed that as of January 2024, the Lazarus Group was making money through Yomix. Report it.
Yomix activity has grown fivefold by 2023, with a third of its revenue coming from wallets linked to cryptocurrency hacking. This Chineseization data underscores the constant adaptation of cybercriminals in response to regulatory pressures.
Despite the contraction in illegal services, Chainalysis notes a shift in the laundering landscape: an increasing part of cryptocurrency illegal money is now flowing through decentralized finance (DeFi) protocols. The report specifically noted an increase in funding for gambling services and bridging protocols, which are increasingly being leveraged by those seeking to obscure the origins of illicit funds.
Popular cross-chain bridges for crypto criminals
Cryptocriminals favor centralized exchanges (CEX) to launder illicit funds, although their tactics are evolving, showing constant preference in their counterfeiting techniques.
In the year While the increase in illegal funds moving through cross-chain bridges in 2023 appears modest compared to the central exchange (CEX), disaggregating the data shows a significant increase in the use of illegal transfers.
Using a centralized exchange (CEX) poses a risk to crypto criminals, as authorities or exchanges can freeze illicit funds. In contrast, decentralized protocols and exchanges do not have such controls, so they pose less of a barrier to criminals. Despite this, on-chain analysts can still track financial movements through DeFi protocols, which is more challenging with centralized services.
Chinalysis research shows a different trend: an increasing amount of stolen funds are being transferred to cross-chain bridges, making them the new preferred destination for illegal activities.
Speaking exclusively to Cointelegraph, Chinalysis Research Director Kim Graer said that Avalanche and THORChain are particularly popular blockchains for illegal activities, according to their latest data. The advantage of chain bridges that facilitate the transfer of money across different blockchains is to hide the increasing counterfeiting efforts of crypto criminals.
This strategy allows illicit funds to be distributed across multiple services and deposit addresses, complicating the efforts of law enforcement and the exchange's compliance groups. Additionally, distributing assets across multiple addresses aims to reduce the risks associated with being blocked by suspicious activity at any address.
Can Cross-Chain Bridges Avoid Illegal Money or Lazar Group's Client Activity?
Cross-chain bridges powered by modern contracts theoretically have the potential to withhold funds from sanctioned organizations such as the Alazarus Group by implementing blacklists. Grauer explained that such a method is not only theoretical: the Office of Foreign Assets Control (OFAC) has already prepared a list of wallet addresses that have been sanctioned, which crypto companies use to prevent these wallets from carrying out transactions through their platforms. She emphasized that service providers are expected to proactively identify and prevent illegal activities, including money laundering.
She also suggests that bridge builders and operators can use blockchain analytics tools to detect and prevent misuse by illegal actors. Failure to adopt such preventive measures poses a risk, especially to bridges frequently used by entities such as the Lazar Group. Continuing this trend will require the adoption of stricter regulatory measures by bridges to avoid the effects of Sinbad or Tornado Cash.
