Cross-Chain Bridges, DEXs Have Been Used to Launder $4 Billion Stolen Crypto: Elliptic

A host of popular crypto tools allow criminals anonymity to launder stolen cryptocurrency.

Written by Shomik Sen Bhattacharjee, Edited by Richa Sharma | Updated: 5 October 2022 15:33 IST

Highlights

Around a third of all stolen crypto was swapped using DEXs
A third of stolen crypto was laundered through non-KYC swap services
A host of recent exploits saw the use of "cross-chain" tech

Cross-Chain Bridges, DEXs Have Been Used to Launder $4 Billion Stolen Crypto: Elliptic

Criminals are using new blockchain technologies to hide and launder billions in ill-gotten gains

Photo Credit: Chainalysis

At least $4 billion (roughly Rs. 32,600 crore) worth of illicit crypto-assets has been laundered via various “cross-chain” technologies, which let both legitimate and illegitimate users move funds between blockchain networks, analytics firm Elliptic claims in a new report. Decentralised exchanges (DEXs), cross-chain bridges, and coin-swap services are being used for money laundering due to their extra anonymity levels. Notable recent exploits include the Axie Infinity Ronin sidechain hack, which saw over $500 million (roughly Rs. 4,100 crore) stolen, and the $100 million (roughly Rs. 800 crore) Horizon Bridge attack.

The firm clarified that while these tools usually have legitimate use cases, they are also being increasingly used to process funds linked with activities such as thefts, dark web services, mixing, scams and ponzi schemes, ransomware and others.

⚠️🚀Launching - our State of Cross-Chain Crime report which explores illicit cross-chain activity to the tune of over $4bn, and demonstrates how the next-generation of blockchain analytics can provide a more holistic view of crypto risk.https://t.co/kJI3EsKtol #cybercrime
— elliptic (@elliptic) October 4, 2022

In its report titled "State of Cross-Chain Crime", Elliptic researchers broke down their findings for each of these blockchain tools, starting with decentralised exchanges or DEXs. Since 2020, DEXs have facilitated the movement of $1.2 billion (roughly Rs. 9,800 crore) in ill-gotten assets, Elliptic said. DEXs are protocols that let users execute buy and sell orders with the help of smart contracts. The use of DEXs by criminals is closely associated with exploits in the decentralised finance (DeFi) space and hacks of centralised exchanges, the firm reported.

Cross-chain bridges are the second kind of tool found by Elliptic to be popular among criminals. Here, the Elliptic researchers reported that since 2020, criminals have funnelled nearly $750 million (roughly Rs. 6,100 crore) of illicit funds via cross-chain bridges, an activity referred to as “chain hopping” by Elliptic. These bridges let users transfer assets among blockchain networks.

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The third tool detailed in the report is "coin swaps" or non-KYC cryptocurrency swap services. These allow users to swap assets within and across blockchains without opening an account. According to Elliptic, coin swaps are mostly advertised on Russian cybercrime forums and cater almost exclusively to a criminal audience. These account for $1.2 billion (roughly Rs. roughly Rs. 9,769 crore) in illicit transactions since 2020.

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