Cryptocurrency theft continues to be a pressing issue, with over half a billion dollars worth of digital assets stolen in the second quarter of this year alone. According to a report by bug bounty platform Immunefi, the losses amounted to more than $572 million, with hacking incidents accounting for 98.5% of the total losses.
Two major hacking incidents were responsible for the bulk of the stolen funds. The first occurred on May 31 when Japanese cryptocurrency platform DMM Bitcoin fell victim to a hacking attack, resulting in a loss of approximately $305 million. The second incident took place on June 23 and targeted Turkish crypto exchange BtcTurk, leading to the theft of $55 million worth of funds. These two incidents made up 62.8% of the total losses.
Centralized finance (CeFi) entities were the primary targets of these hacking exploits. CeFi refers to the trading of cryptocurrencies through a central exchange, while decentralized finance (DeFi) operates without an exchange. CeFi losses accounted for 70% of the total losses, while DeFi made up the remaining 30%.
Immunefi CEO Mitchell Amador emphasized the devastating impact that infrastructure compromises can have in the crypto space, as a single compromise can result in millions of dollars in damages. Despite a smaller number of hacks, CeFi infrastructure was targeted more heavily than DeFi during this quarter.
Recovering the stolen funds remains a significant challenge. The U.S. Federal Trade Commission (FTC) explains that payments made with cryptocurrencies are typically irreversible, making it difficult to retrieve the hacked funds. In Q2, only around 5% of the total losses, amounting to $26.7 million, were recovered. While this represents a slight improvement from the previous year, when only 3.9% was recovered, it still shows the uphill battle in retrieving stolen cryptocurrencies.
The prevalence of crypto hacking incidents has prompted the U.S. Department of Justice to take action. In the past year, several individuals involved in crypto hacking have been arrested. In May, two brothers were apprehended for allegedly stealing $25 million worth of cryptocurrency through a sophisticated scheme that allowed them to manipulate and tamper with transaction validation processes on the Ethereum blockchain.
Not only are hackers causing significant losses, but crypto fraud is also impacting ordinary citizens. The FTC reports that Americans lost over $10 billion to fraud last year, with fraudulent bank transfers and cryptocurrencies being the primary methods used. Investment and cryptocurrency scams were identified as the riskiest scams in a 2023 report by the Institute for Marketplace Trust, with over 80% of victims experiencing monetary losses.
As the cryptocurrency market continues to grow, it is crucial to implement robust security measures to protect users and the entire ecosystem. Safeguarding infrastructure and raising awareness about potential scams are vital steps in mitigating the risks associated with crypto theft and fraud.
