A recent report from blockchain surveillance firm Elliptic has uncovered that $7 billion in “illicit or high-risk funds” has been laundered through decentralized exchanges (DEXs), cross-chain bridges, and non-KYC exchanges. This staggering sum was already reached by July of this year, exceeding Elliptic’s prediction from last year that such activities would amount to $6.5 billion by the end of 2023.
The Growing Complexity of Illicit Activities
The report highlighted the increasing complexity of these illicit activities, with criminals adopting more complex methods for making cross-chain transfers, including derivatives trading and limit orders on exchanges, to obscure their money laundering operations. Over the span of one year, from July 2022 to July 2023, approximately $2.7 billion was laundered using these methods, the report said.
“These bad actors can therefore make their activities difficult to trace by engaging in prolific asset- or chain-hopping,” the firm said.
The Involvement of the North Korean Lazarus Group
Notably, the North Korean Lazarus Group has been identified as a major contributor to this illicit activity. According to Elliptic, the Lazarus Group ranks as the top source of illicit funds laundered through cross-chain bridges. It is also the third-largest source of cross-chain crime overall, and is responsible for approximately 1/7th of all cross-chain crime tracked by Elliptic.
The Lazarus Group has managed to launder over $900 million through cross-chain methods alone
Commenting on the rising trend in cross-chain crime, Elliptic said digital assets other than Bitcoin (BTC) are becoming increasingly popular among cybercriminals. For instance, some digital assets, such as the privacy coin Monero (XMR), are better suited for criminals because they have stronger privacy built-in on the base layer, while stablecoins like DAI are popular because they maintain a stable value against fiat currencies.
“These bad actors can therefore make their activities difficult to trace by engaging in prolific asset- or chain-hopping,” the firm said.
The firm added that cross-chain activities are popular because most cross-chain services like bridges have no know-your-customer (KYC) requirements, unlike centralized exchanges.
- These illicit activities have shed light on the need for stricter regulations and oversight on decentralized exchanges and cross-chain bridges, to prevent further money laundering and illicit fund transfers.
- Law enforcement authorities and regulatory bodies should work together with blockchain surveillance firms to identify and track these criminal activities to ensure the integrity of the cryptocurrency ecosystem.
- The adoption of robust KYC procedures by all cryptocurrency platforms can act as a deterrent to potential money launderers and cybercriminals.
- Educating users about the risks associated with decentralized exchanges and the importance of conducting due diligence before engaging with any cryptocurrency platform is crucial in preventing financial losses and supporting a safer crypto environment.
