A small group of foreigners in Pasay City in the Philippines have been arrested after allegedly stealing almost $100,000 (five million pesos) worth of cryptocurrency. The thieves, who were identified as Chinese nationals, were turned over to the Chinese embassy for further processing. However, the subsequent investigation revealed that they were all simply pawns for another criminal.
According to the Pasay Assistant Chief of Police for Operations, Superintendent Gene Licud, another Chinese citizen, You Jin Gai, approached the Station Investigation Division Management Branch (SIDMB) over the weekend, claiming that his cryptocurrency had been stolen. The victim was able to identify the suspects, and gave the police their names. They were identified as Lai Ze Lin, Chen Xiao Yu, Cheu Zhi Pens, Wu Zhao Hua, Zhou Jin Lian and Xu Bao Yi.
All six were rounded up on Sunday by the SIDMB. Investigators determined that they had not perpetrated any crimes, but that they were only employees of the real criminal, Chen Yi. They all subsequently turned to the police for help, claiming that Chen had “promised them an honest work here in Philippines.” Chen has not yet been located.
South Korea has been cracking down on all types of illegal activity, particularly that associated with cryptocurrencies. It busted a major ring of Chinese and South Korean nationals last month that were involved in a $33-million crypto scam. Immigration Commissioner, Jamie Morente, said at the time, “We reiterate our warning to all foreign criminals who are hiding in the country that the long arm of the law will eventually catch you and we will send you back to your homelands.”
Pasay City is taking an especially hard stance against illegal activity. The city’s police chief, Senior Superintendent Noel Flores, said after the latest crackdown, “We will always continue our mandate in serving the Pasay City through our relentless anti-criminality and anti-illegal drugs operation with the observance of human rights in all our police operations in order to maintain peace and order and public safety.”
While there is no way to permanently rid the world of scammers, fraudsters and thieves, the efforts of law enforcement offices around the globe to clean up the cryptocurrency industry will go a long way to ensure crypto can mature and evolve as a viable alternative to fiat.
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Cryptocurrency thefts globally are expected to reach over $1 billion this year, about four times the recorded thefts in 2017, according to a report from CipherTrace, a firm that specializes in ensuring legal compliance for blockchain transactions.
From the first three quarters of 2018, already $927 million worth of cryptocurrencies has been documented as stolen, according to the company.
Included in the listed amounts were high-profile hacks of cryptocurrency exchanges such as $530 million worth of tokens stolen from Japanese exchange Coincheck, and $195 million taken from Italian exchange BitGrail.
“Additionally, CipherTrace is aware of over $60 million in cryptocurrency that was stolen but not reported publicly,” the report read.
The company also pointed out that the figure for the first three quarters of 2018 was already 3.5 times larger than all of the previous year, where $266 million was reported stolen globally.
CipherTrace, which deals with blockchain forensics and enforcement solutions, stressed that stricter regulations in the cryptocurrency trade were in demand all over the world. “Establishing their countries’ reputations as ‘safe’ digital markets helps to attract trustworthy cryptocurrency exchanges and digital asset businesses,” according to the company.
It cited the European Commission’s fifth Anti-Money Laundering Directive last July, and policies and monitoring of the Financial Action Task Force, as part of current regulatory initiatives.
The report also noted how existing anti-money laundering (AML) and know your customer (KYC) regulations for the cryptocurrency trade have been moving the use of cryptocurrencies for criminal activity to less regulated markets. The result is that 97% of BTC payments for criminal activity ended up in unregulated exchanges or in exchanges of countries with weak AML legislation.
According to CipherTrace, 4.7% of total BTC received in countries with weak regulations comes from criminal activity, which it defined as directly coming from sources such as dark market sites, extortion, malware, money laundering sites, ransomware, and terrorist financing.
The data analyzed came from 45 million transactions in the top 20 cryptocurrency exchanges, up to last September 29. Using U.S. Department of State Bureau for International Narcotics and Law Enforcement Affairs data, CipherTrace determined that 79 of 212 “have weak AML regimes” due to lack of government controls to regulate drug dealing and money laundering, to enforce KYC regulations, report large and suspicious transactions, and maintain records over time.
The data showed that 95% of BTC paid from exchanges to criminals, worth $1.5 billion at present prices, was sent from unregulated exchanges.
CipherTrace added that “the unregulated exchange is growing at 300%, with risky transactions and criminal transactions growing fastest.”
The number of cryptocurrency theft cases in Japan has tripled in the first half of 2018, according to figures released by the country’s National Police Agency (NPA).
The reports come shortly after Japanese crypto exchange Zaif confirmed it has been hacked, with around $60 million stolen in the process, as the latest example of the surge in security breaches to impact the Japanese crypto space.
According to The Asahi Shimbun report, which quoted the NPA figures, the amount stolen this year was substantially larger than the equivalent figure recorded in 2017, with JPY60 billion stolen so far across 158 separate thefts. By contrast, the whole of 2017 saw just JPY600 million lost to thefts over 149 cases, reflected the rapid growth in the volume of criminal activity over the last few months.
In cases where cryptocurrency has been stolen from individual accounts, some 60% of cases involved users with logins similar to those used on other sites. The cryptocurrency most frequently targeted by thieves was XRP, with over JPY1.5 billion stolen across 42 separate incidents.
This was closely followed by BTC, which saw JPY860 million worth of thefts in 94 separate instances. Increasingly the cryptocurrency of choice for scammers, fraudsters and criminals, it is perhaps unsurprising that BTC was represented so prominently in the figures.
After the high profile Coincheck hack back in January, the Japanese Financial Services Agency (FSA) stepped up its efforts to regulate cryptocurrency exchanges in the country. Some analysts have now suggested in light of the Zaif attack that measures could be intensified still further, with the FSA currently reviewing its regulatory approach to tackle this upsurge in criminality.
This is brought into even sharper relief in the present case, with Zaif’s parent company already served with business improvement orders by the FSA in the past. It is likely they will take a dim view on the organisation’s approach to security following the recent theft.
As with the Coincheck theft, Zaif is reported to have held the affected cryptocurrency in hot wallets, with around two-thirds of the total belonging to clients, rather than the exchange itself. This has already resulted in criticism for Zaif and its parent company. The firm has confirmed Zaif is to be acquired by Fisco Ltd., for an amount in the region of JPY5 billion.
With the spike in crypto thefts in the last six months, it’s now over to regulators in Japan to raise security standards throughout the crypto sector.
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