Cryptocurrency theft abounds without regulations

New York – When Peggy and Marco Lachmann-Anke learned in January that hackers cracked a 40-character password and cleaned out their cryptocurrency wallet, they did not go to the police or alert the tokens’ issuer, the Berlin-based technology group IOTA. They bought more coins.

The Cyprus-based German couple, who describe themselves as financial educators, figured they had no chance of recovering the coins and it was not even clear who might take up their case. They took the $14 000 (R201 222) loss in their stride as something that comes with the territory when one bets on a new, exciting technology in a yet unregulated market.

Far from unusual, the episode is emblematic for a market where few rules apply and where investors’ faith in the blockchain technology goes hand in hand with the belief that it also helps criminals cover their tracks so well that trying to catch them is a fool’s errand.

Patrick Wyman, FBI supervisory special agent at the financial crimes section of the agency’s anti-money laundering unit, acknowledges cryptocurrencies pose unique challenges.

“A decentralised currency system like bitcoin, or another form of virtual currency, is not governed by any entity, suspicious reporting activity, and any anti-money laundering compliance,” Wyman said.

Various estimates show cryptocurrency crime is on the rise, keeping pace with the market’s rapid growth. That forces investigators to focus on high-profile cases, security professionals and officials say, effectively leaving small investors to their own devices. “We do not pretend that every law enforcement agency is devoting resources to every single crime. That would not be possible,” said Jaroslav Jakubcek, an analyst at Europol, which serves as a centre for the European Union’s law enforcement cooperation, expertise and intelligence.

Officials still encourage people to report cryptocurrency theft to local police like any other crime, saying failing to do so only emboldens criminals.

Yet because many victims simply do not see the point, cryptocurrency theft is far more common than any published estimates suggest, security professionals say.

According to financial research firm Autonomous NEXT and Crypto Aware, which works with investors affected by crypto scams, about 15% of cryptocurrencies have been stolen between 2012 and the first half of 2018, representing a cumulative $1.7 billion in value at the time of the theft and with a rising tendency. In the first half of this year alone, more than $800 million has already been stolen, according to the data.

Reuters interviews with half a dozen victims paint a similar picture. Out of that group, only two reported their losses to the authorities and one soured on cryptocurrency investments.

Dave Appleton, a blockchain developer for HelloGold, a gold trading app company in Kuala Lumpur, lost about $3 000 of ether coins when scammed by a fake site touting a startup’s token presale. He just moved on. “There’s no one to report the crime to,” he said. “I am not sure what country or jurisdiction it would come under.” – Reuters