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Cybercriminals Change Strategies: Cross-Chain Bridges Surpass Crypto Mixers in Money Laundering Activities
In a notable change, cybercriminals have significantly decreased their dependence on crypto mixers, opting instead for cross-chain bridges over the last year, as reported by blockchain forensics company Elliptic. This developing trend highlights the adaptability of cybercriminals and the difficulties law enforcement agencies encounter in monitoring illegal activities within the cryptocurrency sector.
Data from Elliptic for June and July indicates a striking reversal compared to the first half of 2022, with almost all stolen cryptocurrencies being laundered via cross-chain bridges. This transition is linked to a phenomenon termed “crime displacement,” where offenders shift to new techniques when their current methods come under greater scrutiny and enforcement.
What is particularly noteworthy is that the transition to cross-chain bridges has progressed more swiftly than Elliptic had initially anticipated. The proportion of laundered funds moving through mixers compared to cross-chain bridges changed significantly between July and September 2022. This alteration coincides with the U.S. Office of Foreign Asset Control’s sanctions against Tornado Cash in August 2022, which led many cybercriminals, including the North Korean-affiliated Lazarus Group, to switch to Avalanche Bridge.
The same Avalanche bridge was recently linked to the transfer of stolen funds associated with Stake’s $41 million exploit on September 4, according to blockchain security firm CertiK.
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Crypto mixers saw a temporary revival between November 2022 and January 2023, primarily due to the closure of RenBridge. RenBridge halted operations in December following the bankruptcy of its backer, Alameda Research, resulting in an estimated loss of $500 million in laundered funds throughout its operation.
However, the resurgence of crypto mixers was brief as cybercriminals quickly reverted to cross-chain bridges, with their usage exceeding previous levels. Elliptic notes that criminals may favor cross-chain bridges due to the challenges faced by blockchain forensic firms in tracking illegal activities across various blockchain networks in a scalable way.
“Criminals are aware that legacy blockchain analytics solutions do not have the means to trace illicit blockchain activity across blockchains or tokens in a programmatic or scalable manner,” stated Elliptic.
Moreover, many of the stolen tokens can only be exchanged through cross-chain bridges, and most decentralized finance (DeFi) services linked to these tokens do not necessitate identity verification. This combination renders cross-chain bridges appealing for money laundering and the movement of illicit funds.
Elliptic estimates that an astonishing $4 billion in illicit or high-risk cryptocurrencies have been laundered through cross-chain bridges since 2020. This trend underscores the necessity for ongoing efforts to improve cryptocurrency regulation and enhance blockchain forensics capabilities to effectively combat cybercrime in the evolving digital landscape.
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