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97% of crypto hacks were against DeFi projects: report

That BlockchainAnalytics firm Chainalysis released a new report focusing on the illegal activity on blockchains, noting that DeFi-Logs are the number one target for hackers and that money laundering in this area has increased in the last two years.

DeFi as the primary target of hackers

Illicit DeFi transactions have steadily increased since the DeFi boom of summer 2020. Money laundering and DeFi hacking were the top two criminal activities in such protocols, Chainalysis’ report shows.

In all, $1.7 billion worth of digital assets were stolen by criminals in 2022, with 97% coming from DeFi protocols. The stash stemmed primarily from two alarming thefts: the $600 million Ronin Bridge break-in in late March and the $320 million wormhole attack in February. The report found that by 2022, most of the stolen funds — over $840 million — went to hackers linked to North Korea.

Aside from hacking, money laundering conducted via DeFi has also steadily increased in recent years, with DeFi protocols capturing 69% of crypto-based funds linked to criminal activity.

our recommendation 97% of crypto hacks were against DeFi projects: report, Crypto Trading News

The report attributed the nature of most of these protocols – which allow users to exchange one token for another – to the difficulty of tracking the movement of digital assets. Also, the lack of KYC requirements for most DeFi projects has made them more enticing to criminals.

The report used the example of the notorious North Korea-affiliated Lazarus Group, which last year cryptocurrencies laundered $91 million across multiple protocols. The group reportedly traded stolen tokens for ETH and BTCtransferred them to accounts on central exchanges, and then redeemed the assets.

NFT Wash trading

Another notable finding of the report focused on NFT wash trading – a form of market manipulation that artificially inflates an illiquid asset. Wallets controlled by the same entity can trade NFTs in between, giving market participants the wrong impression that demand for the asset is higher than its actual levels.

The report identified an example that generated over 650,000 wETH in transaction volume through manipulation. It found that the incidents occurred on the same platform because the marketplace paid out incentive rewards for trading NFTs in the form of the platform’s native token.

Users could earn additional tokens simply by trading between accounts more frequently. Meanwhile, NFT collectors could be fooled into believing that the marketplace has more transactional activity than it actually does.

Source: Crypto News Deutsch

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