General

In the ever-evolving landscape of digital transactions and data sharing, blockchain technology has emerged as a game-changer. Its decentralized and transparent nature has revolutionized various industries, offering a secure platform for recording financial transactions, digital assets, and other valuable data. However, as with any technological advancement, blockchain brings its own set of challenges, particularly in the realm of forensic investigations.

Introduction

With the crypto ecosystem suffering from a loss of $3.9 billion in 2022 due to smart contract vulnerabilities, ransomware, price oracle manipulation, and many more criminal activities, and the figures of 2023 surpassing $656 million in the first half of the year itself, serious efforts are being made to ensure the yearly figures don’t exceed the previous one. Though it still remains too early to make a comment on what’s about to happen in the world of digital assets, law enforcement agencies remain focused on implementing methodologies to prevent crypto hacks. 

The Office of Foreign Assets Control (OFAC) has intensified its unwavering commitment to combating the deplorable web of unlawful activities that plague the crypto-sphere. With a firm resolve, they have established stringent requirements and comprehensive frameworks to stem the tide of illicit trade. 

The world of crypto-crime is ever-evolving and just a month into 2023, a new crypto scam is on the rise. Known primarily as address poisoning, but also referred to as address spoofing, this scam has already prompted a consumer alert from a major cryptocurrency wallet, MetaMask, to its users on Twitter.

On January 18, the U.S. Department of Justice (DoJ) confirmed the arrest of Anatoly Legkodymov, the creator of the cryptocurrency exchange Bitzlato, which is registered in Hong Kong. He is accused of using the platform to handle $700 million in illegal money. 

When we look back at the state of cryptocurrency in 2022, it’s easy to focus on the headlines. The news cycle was dominated, after all, by a handful of articles that captured the public’s attention with extraordinary stories, where digital currencies were stolen, hacked, laundered, and more. Like a soap, there was drama at every turn, including even tragedy - during the Luna crash, when the contagion effect between Luna and UST dropped the value of both in a never-ending death spiral, one man committed suicide after losing US$2 million. 

As we settle into the new year, 2022 will likely be remembered by web3 and technology enthusiasts as the crypto ecosystem’s first major downturn. Throughout the year, crypto hacks led to over $3.7 billion in losses and the downfall of huge names such as Luna, Celsius, and FTX spread ripples across the industry - even causing the price of Bitcoin to drop below $16,000 for the first time in years. In the final month of 2022, Certik reported that the total amount of hacks, exploits, and scams recorded in December was the lowest of the year, totaling around $62.2 million. 

This is the second of four pieces exploring how Proof of Reserve works in practice. Our next post will dive into the limitations of Proof of Reserve.