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Cryptocurrency Exchanges Lost $1.2 Billion in Q1 2019

Encouragingly, regulators are stepping in. For example, following losses in Quadriga CX, “regulators in Canada are rethinking controls on the internal business practices and security operations of exchanges.”

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CipherTrace, a blockchain analytics firm created to “develop cryptocurrency and blockchain tracing and security capabilities” and founded by experienced Silicon Valley entrepreneurs now confirms that more than $356 million was stolen from different cryptocurrency exchanges in Q1 2019. The heist consequently drives that total amount of crypto funds lost through fraud, theft and hacks to over $1.2 billion during the same time frame. But it could be worse. The analytics firm admits that lost funds could be higher.

In their analysis, CipherTrace notes that criminals are evolving, employing sophisticated tools and ingenious techniques by the day to rob cryptocurrency exchanges. Of the $1.2 billion, $195 million was through exit scams linked to Quadriga CX where the founder Cotton allegedly died without handing over the private keys of the exchange’s cold wallet. However, a large chunk was from BitFinex failure to recover $851 million it had wired to a Panama-based crypto processor, Crypto Capital.

Among these losses, exit scams—which CipherTrace is considering the implosion of QuadrigaCX to be one—robbed cryptocurrency users of nearly US$195 million. On top of these numbers, the New York Attorney General’s Office revealed what they allege is a fraud involving the loss of $851 million by a major cryptocurrency exchange, BitFinex.”

What else?

Encouragingly, regulators are stepping in. For example, following losses in Quadriga CX, “ regulators in Canada are rethinking controls on the internal business practices and security operations of exchanges .” That’s on top of conceited efforts to “ recommend bans on privacy coins, as criminals are coming to prefer these new anonymous altcoins to bitcoin because they are more difficult to trace .” The anonymous nature of privacy coins as Monero, however, seem to contribute, encouraging deliberate attacks on exchanges. Add that to rogue banks assisting in laundering stolen funds plus the involvement of states as North Korea, sponsoring hacks via their elite military units, tough regulations forcing exchanges to implement extra security practices to prevent losses is paramount. Cipher Trace notes that:

On March 6, 2019, the UN Security Council reported North Korean state-backed hackers successfully breached at least five cryptocurrency exchanges in Asia between January 2017 and September 2018, causing $571 million in losses.”

Although the exchanges are being bombarded by attacks, most are resilient. Their track record of putting in place insurance policy as a safety net against loss and operating from stringent economies mean they are trusted. If other exchanges follow suit and remain rigorous, acting in good faith as true facilitators then the number of hacks perpetrated by two main notorious hacker groups would drastically shrink, relieving the sphere.

Jason Lee is a writer for various crypto publications and manages a small team on Medium. His love of technology and inquisitive nature set him up with crypto back in early 2016 and he hasn’t looked back since. In his spare time, Jason enjoys rock climbing and wakeboarding.

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