Increased Fraudulent Activity in the World of Cryptocurrency

Cryptocurrency is getting global acceptance as more and more people are making a move to shift towards digital currency. It is one of the reasons why hackers across the globe are targeting virtual currencies like Bitcoin. Digital currencies are decentralized and any authority that can keep a check and balance on the transactions being made does not control them. It is very easy for the hackers to hack the cryptocurrency accounts or wallets of people. Once the transaction is made, it cannot be reversed. Investors are at a constant risk of losing their money.

In 2017, North Korean hackers hacked the South Korean cryptocurrency exchanges and stole all the funds. The Lazarus group, that is a group of hackers working in North Korea, stole a total of $7 million. They used a range of tools like malware distribution, spear phishing attacks etc., to access the wallets and accounts of investors.

Online security is one of the main concerns for the market of digital currency because the number of bitcoins that are stored by investors and its prices has increased drastically. Growing number of global acceptance and awareness of large capitalization is one of the reasons why hackers are turning their attention to the crypto industry. The motivation for hackers is that the blockchain technology is designed in a way that it keeps every information anonymous. Nothing under the blockchain technology is regulated, which reduces the overall risk of getting caught during the transaction process.

Another incident was reported in 2017 in which $64 million were stolen by hackers who hacked the Slovenia based bitcoin marketplace i.e. NiceHash. NiceHash issued a statement, which stated:

The hack was a highly professional attack with sophisticated social engineering that resulted in approximately 4,700 bitcoin being stolen, worth about $63.92m at current prices.

An article was published in Bloomberg, which highlighted the biggest thefts in cryptocurrency from 2012 till 2018. The main motive behind this article is to point out that why cryptocurrency markets are the most vulnerable targets for hackers. The amount of money that is being stolen is becoming a major concern for people who are willing to invest in cryptocurrency.

The way hackers are attacking cryptocurrency accounts, shows that investors are at a risk of losing their money especially when the price of bitcoin increases in the market. The anonymity and decentralization of cryptocurrency is not only beneficial for the investors but it is highly detrimental as well.

Group-IB, a company that is involved in cyber-crime investigation and prevention, in its latest paper stated that USA, Russia and China are going to be the main targets for hackers in the year 2018. The findings of the company are mentioned in the report, “2018 Cryptocurrency Exchanges-User Accounts Leaks Analysis”. The researchers of the report observed that in January 2018 the number of incidents increased up to 689%. The reason given by the researchers for such a huge amount of increase is the excitement about cryptocurrencies.

The findings of the report also mentioned:

The number of malicious programs used by cybercriminals is constantly increasing, and the tools are regularly modified. Criminals have adapted patterns of attack on banks and used the same tools to hack cryptocurrency exchanges and wallets and make attacks on users.

The director of Group-IB also stated:

Increased fraudulent activity and attention of hacker groups to crypto industry, additional functional of malicious software related to cryptocurrencies, as well as the significant amounts of already stolen funds signal that the industry is not ready to defend itself and protect its users. In 2018 we will see even more incidents. The dark side of the crypto industry requires a response from the community, including researchers, scholars and the academia. The USA, Russia, and China are TOP-3 countries in which registered users became the victims of cyber attacks. Every third victim is from the USA.

The researchers believe that the clients of different cryptocurrency exchanges are the main reason behind the increase of these attacks. They investigated a total of 720 hacked accounts and found out that majority of the accounts didn’t complete the two-step authentication process that is required in order to ensure the security of the account. Furthermore, every fifth user of such cryptocurrency exchanges has a password that has less than eight characters. The less characters an investor has in their password, the more easily their account can be hacked.

Hiram Nadeem

Hiram is a teacher and media sciences graduate with focus over finance news. Contributes to BlockPublisher with fintech news and sometimes, her opinions. Email: editor.news@blockpublisher.com

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