Criminals have laundered $4 billion through DEXs, bridges and coin swaps: Elliptic

Elliptic researchers say financial criminals have laundered billions with the help of popular crypto tools.

Since 2020, cyber criminals have used decentralized exchanges (DEXs), cross-chain bridges and non-KYC exchange services (called coin swaps) to move nearly $4 billion in funds connected with illicit activity, the on-chain analytics firm said on Tuesday.

The firm clarified that while these tools usually have legitimate use cases, they are also being increasingly used to process funds linked with activities such as thefts, dark web services, mixing, scams and ponzi schemes, ransomware and others.

“To be clear, Elliptic is not saying DEXs or bridges are used exclusively by criminals, in fact, the opposite is true, they are mostly used by legitimate users. But Elliptic has traced illicit funds (from hacks etc) that have been moved through DEXs and bridges in order to obfuscate their origin,” a spokesperson for Elliptic told The Block.

In its report, Elliptic researchers broke down its findings for each of these blockchain tools, starting with DEXs. Since 2020, DEXs have facilitated the movement of $1.2 billion in ill-gotten assets, Elliptic said. DEXs are protocols that let users execute buy and sell orders with the help of smart contracts. The use of DEXs by criminals is closely associated with exploits in the decentralized finance (DeFi) space and hacks of centralized exchanges, the firm reported.

Cross-chain bridges are the second kind of tool found by Elliptic to be popular among criminals. Here, the Elliptic researchers reported that since 2020, criminals have funneled nearly $750 million of illicit funds via cross-chain bridges, an activity referred to as “chain hopping” by Elliptic. These bridges let users transfer assets among blockchain networks. The vast majority of these illicit assets moving through bridges (over $540 million) have been processed by RenBridge, a cross-chain bridge between Bitcoin and Ethereum.

The report went on to explain criminals use blockchain-based tools like DEXs and bridges primarily for money laundering or to obfuscate their on-chain activity so it’s harder to catch them. Both strategies serve to obfuscate transaction trails and make investigations more difficult.

The third tool detailed in the report are “coin swaps” or non-KYC cryptocurrency swap services. These allow users to swap assets both within and across blockchains without opening an account. According to Elliptic, coin swaps are mostly advertised on Russian cybercrime forums and cater almost exclusively to a criminal audience. These account for $1.2 billion in illicit transactions since 2020.

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