Cross-Chain Crime Revealed: $7 Billion Laundered in Crypto via DEXs and Bridges

A recent report by Elliptic, a blockchain surveillance firm, has exposed a shocking $7 billion in illicit or high-risk funds laundered through decentralized exchanges (DEXs), cross-chain bridges, and non-KYC exchanges. This staggering amount was reached by July this year, surpassing Elliptic’s earlier prediction of $6.5 billion by the end of 2023.

The report sheds light on the surging trend of cross-chain crime, which involves swapping crypto assets between tokens or blockchains to confuse their origin illicitly. This is often done swiftly and needs more legitimate business purposes, making it difficult to trace. Known as “chain-” or “asset-hopping,” cross-chain crime is on its way to becoming the dominant method for laundering crypto assets.

According to Elliptic, this method is quickly becoming the preferred money laundering technique for various cybercrimes, including scams and crypto thefts. Enforcement actions increasingly target traditional means of obfuscating funds, causing criminals to turn to cross-chain crime as an alternative.

The Genesis of the Report

The findings have been unveiled in Elliptic’s latest report, “State of Cross-chain Crime”. The information leverages new research methodologies empowered by Elliptic’s new Holistic-enabled blockchain analytics capabilities. This technology simultaneously enables the programmatic and at-scale screening, tracing, monitoring, and investigation of activities across multiple blockchains and assets, revealing new insights into the accurate scale of cross-chain crime.

This report follows up on their initial “State of Cross-chain Crime” report from last year, which found that $4.1 billion of illicit or high-risk funds had been laundered through decentralized exchanges (DEXs), cross-chain bridges, and coin swap services. The estimated figure has surpassed expectations, showcasing that cross-chain crime is rising faster than predicted.

Several factors contribute to the surge in cross-chain crime. Crypto assets other than Bitcoin are gaining popularity among criminals. Many of these assets have features that are attractive to bad actors, such as anonymity in the case of privacy coins like Monero (XMR) or stability tied to government-backed currencies, as seen in stablecoins like Tether (USDT) or DAI.

Moreover, the report notes that mainstream blockchain analytics solutions often need more capabilities to detect and monitor cross-chain activity. Criminals exploit this gap, making their activities difficult to trace by engaging in prolific asset- or chain-hopping.

North Korea’s Lazarus Group: A Major Contributor

Notably, the North Korean Lazarus Group has been identified as a significant contributor to this illicit activity. Elliptic states this group is the largest source of illegal funds laundered through cross-chain bridges and ranks as the third-largest source of cross-chain crime overall. 

The Lazarus Group alone is responsible for approximately 1/7th of all cross-chain crime tracked by Elliptic, having laundered over $900 million through these methods.

The Focus: Cross-Chain and Cross-Asset Swaps

In both their initial and current report, Elliptic focused on the cross-chain and cross-asset swaps facilitated by three main types of virtual asset service providers, excluding centralized exchanges:

1. DEXs (Decentralized Exchanges): These services allow cross-asset swaps on the same blockchain, often running on smart contracts.

2. Cross-Chain Bridges: These decentralized services enable cross-chain swaps across assets on different blockchain platforms.

3. Coin Swap Services: Centralized and typically anonymous services that enable exchanges between different assets without creating an account or submitting identity verification.

The findings of this report show the urgency for regulatory and law enforcement actions to tackle the growing menace of cross-chain crime. 

The crypto community and authorities must collaborate to effectively develop strategies and technologies to combat these increasingly sophisticated illicit activities. We can mitigate the impact and prevent further exploitation of blockchain technology for criminal purposes through a joint effort.