Criminals Change Their Tune
It seems like cybercriminals have taken a page from the ‘Evolution of Crime’ handbook, quick to adapt their methods like a bad magician at a children’s party. According to blockchain forensics firm Elliptic, these digital miscreants have accelerated their shift from crypto mixers to cross-chain bridges for laundering funds in a significant way over the past year.
Tracking the Trends
In the months of June and July, it was a veritable free-for-all; nearly all stolen crypto got laundered through cross-chain bridges. Elliptic, in their latest blog post, reported an impressive turnabout from the dynamics of the first half of 2022—a bit like how we all returned to socializing in person post-lockdown but perhaps with less Zoom fatigue.
The Perpetual Game of Cat and Mouse
Elliptic pointed out that this trend can be linked to a phenomenon known as “crime displacement.” This theory proposes that when one method of executing a crime gets the heat turned up, the bad guys simply switch it up and try something new, like criminals scrambling to a different corner of the playground after the teacher catches them misbehaving.
High-profile Cases and Notable Names
The report shows that notorious groups, such as the North Korean-backed Lazarus Group, have flocked to stopovers like the Avalanche bridge following sanctions on mixers like Tornado Cash. It’s almost as if they received a ‘Welcome to Your New Laundering Ground’ email right after the sanctions were enacted. Interestingly, the Avalanche bridge made headlines recently for helping facilitate the stolen funds in a hefty $41 million exploit.
The Comeback of Crypto Mixers
Between November 2022 and January 2023, crypto mixers exhibited a brief resurgence, though it’s uncertain whether they hosted a meet-and-greet or just went for a second round. This was due to the closure of RenBridge, which was shut down following the financial backlash from the fall of Alameda Research amid the FTX fiasco. With an estimated $500 million coursing through RenBridge, you could say it was the life of the laundering party.
The Challenge: Traceability
One major hurdle for blockchain forensic firms is tracking illicit activity across various chains. As stated by Elliptic, legacy blockchain analytics programs are grappling with this complexity, much like trying to find a specific sock in a dryer full of laundry. This lack of traceability is part of why certain cybercriminals prefer using cross-chain bridges, as they operate largely without identity verification, making them prime targets for scams.
A Closing Note
With approximately $4 billion in illicit cryptocurrencies having filtered through cross-chain bridges since 2020, it’s becoming clearer that the digital underworld is shifting—and fast. The bad news for investigators? It’s about as easy to keep track of these illicit financial flows as it is to convince a cat to take a bath.
