Cryptocurrency news heated up at the end of 2019. The second half of the year also brought a wave of new litigations around cryptocurrency misuse, fraud and theft. I expect we’ll see even more of this in 2020, along with a surge of interesting news. Industry watchers can expect a range of cases, from the state level, all the way up to far-reaching cross-border matters, as criminals find new ways to leverage crypto markets to further their malicious interests.
While we wait expectantly for all that the new year will bring, here’s a look back at some of the most relevant and interesting cryptocurrency stories that closed out 2019…
In December, charges were brought against the three men operating the BitClub Network, which defrauded investors of $722 million in cryptocurrency. This case came on the heels of a guilty verdict against one of the perpetrators in the $400 million OneCoin Ponzi scheme from earlier this year. More about the BitClub Network case can be read here, and our initial commentary on the OneCoin case is here.
We also noticed a recent report that the total losses due to cryptocurrency fraud exceeded $4 billion in 2019. This is up significantly from the previous year, serving as a glaring reminder that consumers and businesses need to tread carefully when it comes to cryptocurrency investing and how they protect their digital assets.
News resurfaced in November that Wyoming is furthering its plan to bank with cryptocurrency. The state has passed an array of cryptocurrency laws over the last year, and cryptocurrency companies are flocking there as a result. Lawmakers in Wyoming are currently working to refine the law passed in February 2019 that allows for “Special Purpose Depository Institutions”, a national first that has put the state on the map in the cryptocurrency world. Kraken, a cryptocurrency exchange from San Francisco is one of five companies that have already applied for a charter in the state, marking Wyoming officially as the crypto haven of the U.S. This move is expected to bring in as much as $20 billion in assets as applications open for the new type of bank charter. Other states are keeping a close eye on these developments, and looking to follow suit.
Also in November, two men in Massachusetts were arrested and charged for stealing more than half a million dollars in cryptocurrency, using SIM swapping and computer hacking. Their activities included taking over the victim’s social media accounts and making violent threats in demand for payment. While SIM swapping has been around a long time as a way to commit identity theft and access assets—there were 1,038 reported incidents of SIM swap identity theft as early as January 2013, and by 2018, that number had ballooned to 11,000 incidents of SIM swapping in mobile banking fraud—we’re going to see more of this tactic among cryptocurrency hackers. The Massachusetts case is not the first instance of SIM swapping being used by hackers looking for new ways to access a new class of asset, nor will it be the last.
The good news is that cryptocurrency tracing techniques are becoming more sophisticated and may help locate stolen cryptocurrencies, retrieve them, and support law enforcement efforts. Corporations and individuals with large amounts of cryptocurrency must take additional steps to minimize risk of theft. These include hardening accounts and vetting and implementing the full extent of security features available for mobile devices and accounts.