Cybercriminals Shift to Cross-Chain Bridges for Laundering Stolen Cryptocurrency
According to blockchain forensics firm Elliptic, cybercriminals have changed their tactics for laundering stolen cryptocurrency. Instead of using traditional crypto mixers, they are now favoring cross-chain bridges. This shift has been attributed to the “crime displacement” effect, where criminals adapt to new methods when their existing ones face increased law enforcement scrutiny.
Elliptic’s data for June and July shows that almost all of the stolen cryptocurrency was laundered through cross-chain bridges, a complete reversal from earlier this year. In fact, it is estimated that approximately $4 billion in illicit or high-risk cryptocurrencies have been laundered through cross-chain bridges since 2020.
Sanctions Against Tornado Cash Triggered the Shift
The shift towards cross-chain bridges can be traced back to the United States Office of Foreign Asset Control’s sanctions against Tornado Cash in August 2022. Tornado Cash was accused of being a tool used by cybercriminals to hide their stolen funds. The co-founders of Tornado Cash faced charges related to money laundering and sanctions violations.
The Lazarus Group’s Adoption of Cross-Chain Bridges
Cybercriminal groups, including the North Korean-backed Lazarus Group, quickly embraced cross-chain bridges after the sanctions against Tornado Cash. The Lazarus Group had previously relied on Tornado Cash but now utilizes the Avalanche Bridge. This bridge was recently implicated in facilitating some of the stolen funds from Stake’s $41 million exploit on September 4.
Challenges Faced by Blockchain Forensic Firms
Blockchain forensic firms face difficulties in tracking illicit activity across different blockchain networks at scale. Traditional blockchain analytics solutions lack the capability to effectively trace illicit activity across various blockchains and tokens. Additionally, many stolen tokens can only be exchanged through cross-chain bridges, and decentralized finance services associated with these bridges do not require identity verification.
Hot Take: Addressing the Rise of Cross-Chain Crime
The shift towards cross-chain bridges for laundering stolen cryptocurrency poses challenges for blockchain forensic firms and highlights the need for effective solutions. The limitations of traditional blockchain analytics solutions in tracing criminal activities may lead to more stringent regulatory oversight. It is crucial to find ways to combat the increasing trend of cross-chain crime in the crypto world.
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