The State of Crime in Web3

Transcript

foreign [Applause] [Music] talking about crime in web 3 which is fantastic to see so many of you here 3pm on the last day of the conference I kind of thought it might be a bit empty but apparently this room is either full of criminals who want some tips or people that are hopefully going to be protected against Crime now my name is Tara Anderson I've spent the last four years working at elliptic which is a crypto compliance company I'm now actually in the world of staking so if you want to talk to me about both crime and staking as a service then hit

me up but today I'm going to focus on crime so looking at some of the key trends in web 3 looking then at scams specifically because that affects a lot of us projects users I'm then going to dive into the really kind of dark side of things so sanctions of Asian and terrorist fundraising and then I'm going to look ahead into metaverse crime which is an area that not many people are thinking of but there's actually crime happening and there's some pretty wild future crimes that might happen so from a key Trend perspective the first key Trend I want to bring out and the formatting has gone a bit crazy but is that Bitcoin is no longer actually the asset of choice for criminals so

back in 2016 Bitcoin made up around about 97 of illicit Volume last year it was just 19 so really big reduction and that's criminals moving to non-bitcoin based assets primarily it's ethereum-based assets and on binance Smart chain so last year there was about 3.7 billion dollars stolen from hacks and exploits so that's not scams it's just people getting into the protocol finding their way through a smart contract and 68 of that was perhaps unsurprisingly ethereum-based assets now we do still see Bitcoin being used it's primarily on the dart markets now

if you want to go buy guns drugs and anything else on the dart Market you're going to use Bitcoin although we do see Monero used the problem is with Monero it's really hard to get hold of because most of the centralized exchanges now don't support it so if you are making your funds in Monero and you want to get to Fiat it can be quite hard to off-ramper so that's why we still do see Bitcoin because it's the most accessible for Dart markets now another kind of brand of coin that we see more and more is stable coins being used for criminals now this is because they're really easy to basically dupe noobs with like if you're new to the industry something which is dollar denominated feels a little bit more accessible and so the criminals use that

as a Target point it's also super easy to launder through dexes there's deep liquidity really good volume and what we're seeing now is more usdc and more usdt addresses be blacklisted so if you're not familiar with this it's a function within the smart contract so essentially allow Circle and tether to freeze your funds now from a decentralization perspective and from a censorship perspective that's pretty worrying but from a crime perspective and fighting crime it's actually pretty good because if a criminal exploits something and they're now holding a load of usdc if Circle acts quick enough they can freeze the funds and then the criminals can't basically off-ramp out of that asset so what we're seeing now

is an increased number of accounts with usdt and usdc being blacklisted and these are frozen funds that the criminals now can't access another key trend is Ponzi schemes and pyramids it might feel a bit 80s but they reign supreme and we saw in 2022 7.8 billion dollars worth of funds were stolen from users in the space from ponzi's impairments now the 10 largest of these schemes accounted for about 54 so the ponzis and pyramids tend to get really big and dominate there's some huge players there and two examples of Visage and tradecoin Club so for sarge is a very well known

Ponzi scheme they raised nearly 350 million dollars for the two-ish years until they were prosecuted which was last year now they were ethereum BSC based again you'll see common themes here with assets tradecoin Club was really damaging there was over a hundred thousand users which were victims of this and it ran for about two years for nearly 300 million dollars so these investment schemes these Ponzi schemes are really impactful for everyday users now another Trend that we're seeing is criminals getting a little bit more sophisticated to launder funds so they're using chain swapping asset swapping to try and hide their realist activity and we've seen that to the tune

of about 4.1 billion dollars so they hop across using a decks they use a coin swap service they use a mixer they use a bridge or basically to try and throw blockchain analytics firms off the trail now we see this most with thefts so if you have a thief they've got a load of assets they'll try and move out of the initial assets that they got them in especially if it's usdc and usdt they'll swap it for another asset that has good liquidity maybe it's got some good exposure on exchanges they might then move it over to another chain or with the aim of when they go into a sex for that sex who's using a blockchain analytics firm not to see the trail right back to the theft and we've seen

about 1.2 billion dollars stolen from dexas eventually end up on a sex but they've gone through this coin swapping and this chain hopping now from a scam perspective I actually have some good news so scams are down around about 46 which is great um but the reason why is because the price is down so what we tend to see is a correlation between the price and scams and that's because we've got less new people coming into the industry they're less hyped up the prices are lower so it's not as profitable for criminals so at least next time we're in a bear Market do bear in mind that the scams are at least down now of the 10 highest scams last year all of them were investment scams this is a very classic scam where someone

basically says give me your Bitcoin or your ether I'll invest it you'll make a billion percent return they never do in fact actually a load of them are really evil once you put the funds in they've got quite good dashboards with nice UI that will show you your making profits it's not even paper profits totally make belief profits when you then go to withdraw them they'll say oh there's there's just a fee to withdraw or your bank is being a bit difficult you just need to give us some extra money and so you see people scam twice initially when they put the funds in and then when they try and take them out so it can be really damaging but there's a couple of other scam types which you might be less familiar with the first is drainers so these are super impactful across the space and we've had

a bit of a Spate of them recently so monkey drainer and Venom drainer are the two most popular ones but there's also and pink drainer collectively this year they've seen about 64 million dollars stolen from people and what a drainer is is essentially a bit of software it's often got the user through a phishing scam or some kind of malicious link you click on it up Pops your meta mask and it just asks you to sign a little transaction that transaction will wipe all of your fungible assets all of your non-fungible assets so really really damaging uh it's done in an interesting way actually so criminals will basically Outsource this and take a cut of the profits so monkey drainer who disappeared in February kind of closed up shop he was making a 30

Commission on every crime that happened afterwards so a bit of a franchise situation Venom drainer had around about 15 000 victims and feel sorry for the top Victim Because they lost 3.4.3 million dollars worth of assets a single person really impactful but there's then an actually good scam happening at the moment so csam stands for child sexual abuse material and I bet you don't think I'm going to say is good here but there is a scam that's happening a lot now where scammers will pretend to have child sexual abuse material someone will pay them for it but they don't have any material at all now if you're that person you can't go to the police or someone stole my money because I was trying to buy child porn

that's like really not gonna fly so this is actually a really good scam that's happening in the space and for the three million dollars worth of action that we've seen with sea Summers over 66 of it as scams so that 66 of purchases that aren't actually for child porn it's someone getting scammed which is nice on the left nice side is romance scams so these are some of the most damaging ones per user you see about 15.5 000 pounds stolen from each user and they're really horrible the idea is you make someone fall in love with you you suggest they invest in crypto or that they give you your crypto assets and then they steal them so it's a breakup

and it's a theft in one it's really really damaging but what you perhaps don't know about romance scams is one of the biggest way that they're proliferated is in scam centers like this often operating in Southeast Asia where the people working in there have been Lord under false pretense of job offers or actually human traffic there there are people working in these Camp centers being forced to scam they do not want to scam you but if they don't there's fears of violence often their family is being held captive or the criminals know where their family is and put threats against them and there's even really horrible things like telegram groups where low performers in these scan factories are sold between different factories and

where people who run away have bounties on them so next time you're scammed just like bear a little bit of thought that the person who scammed you genuinely might not want to scam you at all they're fearing for their life and this is really sad but it's growing and we're seeing scam factors scam factories and centers across loads of areas in Southeast Asia and also in Africa now when we look at sanctions of Asian and terrorist financing 2022 was a big year for sanctions so we had tornado cash I'm sure everyone remembers that there was also grantex Hydra Market all sanctioned by the us there was even a Russian metaverse platform which was sanctioned

but if we take Hydra for instance that was a dark Market Russian language five billion dollars was flowing through it and crypto funds mainly for drug related activity there was classic a little bit of Hitmen here as well uh they had about eight million dollars linked to ransomware so really impactful crime was going through Hydra that was shut down which is definitely a positive but staying on the kind of Russian topic we've also seen a lot of fundraising from pro-russian criminals and pro-russian organizations around the war there's one particular group who are suggesting so people within Russia and Ukraine that if they find a dead Ukrainian Soldier they bury them and

then contact the family for a ransom and Bitcoin so there's some really nasty things happening from a sanctions perspective and certainly connected to the war a piece of good news though is that Ukrainian fundraising versus Russian fundraising is actually outnumbered about 44 to one so there's a lot more crypto going for Ukraine than Russia now some other items in the sanctions and terrorist fundraising and my slides seem to have gone a little bit Hayward but the asset of choice for terrorists is actually Tron and usdt yeah there's a lot of really quite dodgy activity happening on the Tron blockchain uh that we're seeing there was a 240 year-on-year increase so the terrorists are looking at Tron which is a bit

worrying when we look at tornado cash pre-sanctions 1.5 billion dollars and that's a lower bound went through for the North Korean hacking group so funds specifically going to North Korea there I'm from the mining perspective perhaps a surprise here but there are countries whole countries who are using mining as a way to evade sanctions so in 2021 it was estimated that around about 4.5 of all Bitcoin mining was happening in Iran and they were using that to evade sanctions but now looking kind of a little bit further ahead in the final minutes just looking at metaverse crime now there's a whole bunch of crimes that can happen in

the metaverse and essentially any crime that can happen in the real world will probably happen to some form or other in the metaverse and there's even going to be crimes that only happen in the metaverse because of the technology that underpins it now we've seen a whole bunch of crimes happening already there was a 900 000 K ape coin crime that happened it's a fishing crime the azuki team had their Twitter hacked their gold tick Twitter hacked uh not too long ago they pretended the scammers pretended to launch a new metaverse which was being teased for a while and there was about 750 000 worth of assets that were taken a whole bunch of nfts now their fungibles were liquidated a whole bunch ended up tornado cash which actually

makes this both a theft and a sanctions violation and perhaps unsurprisingly the nfts were all laundered the criminal actually only made about 5k off them but they did have a doodle and massively undersold it so that was a bit sad but then looking ahead to the future of metaverse crime there's some really quite dodgy stuff one is wallet painting this is really kind of like building on the dusting that we saw from tornado cash being sanctioned but imagine if you have quite a big Persona in the space and someone sends you an nft which is racist homophobic just something really illicit could seriously damage your reputation so as more of us have more online personas I think we're going to start seeing more people sending you

funds from illicit sources or sending you nfts which could damage your reputation there's also augmented reality hacks so next time you're scanning a QR code just bear in mind that someone could be putting malicious code in there I think we're going to start seeing that more and more as we get used to scanning things around us from an augmented reality perspective there's even in this sounds probably the most crazy Hardware attacks so this VR headset was more of a thought experiment than a commercial product but someone put TNT explosives in it so if you died in game the headset exploded and you died please no one take that away as a product idea but does show some of the risks from a hardware perspective and then finally just the other two

things a 3D social engineering from an avatar level but also just using the improvements in Ai and video manipulation will become more of a thing across the space and then I think we're going to start seeing as we kind of use Virtual Worlds a bit more metaverse DDOS attacks protests especially if you start bringing your headquarters or your virtual Workforce in there hopefully I haven't scheduled too much but tells you are there's a lot of crime right now and there's going to be a lot more so do stay safe in the world of web 3 the criminals are really quite smart and they are trying to catch you out so if you're building a project always have that in mind and if you're interacting with dap Services Etc just be thinking about how to protect yourself I'll be around so if anyone has any questions

please do catch me always love talking about crime in web3 thanks very much thank you