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Hackers stole more than $600 million in crypto – but they’re struggling to launder it

The openness of blockchain technology means that money laundering has almost become a spectator sport in some corners of the internet. After all, transaction records on public blockchains give authorities a bird’s-eye view of stolen funds.

Author June 10th, 2022

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On the Ethereum blockchain, there’s a 42-character address that’s home to around $600 million of cryptocurrency. 

It’s unknown who owns the address, but we do know that the money was stolen from players of the online game Axie Infinity. Hackers stole the money on March 23. However, despite moving millions of dollars since, the hackers have left most of the funds in place.

Victims and outside observers are now waiting to see what happens next. “When there’s a hack like that, everyone is watching the wallets,” said Kimberly Grauer, director of research at Chainalysis Inc., a blockchain-analytics firm. “So you better damn well know what you’re going to do.”

The openness of blockchain technology means that money laundering has almost become a spectator sport in some corners of the internet. After all, transaction records on public blockchains give authorities a bird’s-eye view of stolen funds.

Due to this, the fate of the stolen money has become a topic of speculation. For its part, the developer behind Axie Infinity, Singapore-based Sky Mavis Ltd., said it intends to reimburse or recover the stolen funds. Earlier this month, the company said it raised $150 million from investors in a funding round.

Regulators are watching on

The individuals behind the theft targeted the Ronin Network, a software bridge developed by Sky Mavis that allows Axie Infinity players to transfer assets earned in the game. They then moved ether worth about $20 million to crypto exchanges based in the Bahamas and Seychelles. Following this, an additional $12 million of assets flowed into a mixer, which blends different cryptocurrencies to help obscure their sources.

Now though, the thieves are struggling to exchange the dirty cryptocurrency for cleaner funds. After all, governments around the world have ramped up law-enforcement efforts to seize stolen funds and bolstered money-laundering regulations for crypto exchanges. Such efforts make transferring the funds to exchanges difficult. 

Similarly, the thieves are also aware that mixers like the one they used have their own security compromises and are dependent on having enough crypto on hand to exchange illicit deposits for cleaner funds. If they choose to launder the money in this way, then it would take several years based on current liquidity amounts. So, a huge deal of patience will be required.

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