The percentage of funds passing through crypto mixers from the custody of cyber criminals touched $51.8 million (roughly Rs. 413 crore) in April 2022. This marks the highest volume of crypto funds so far to have been wired to destination wallets via crypto mixers. These crypto mixers are privacy tools that remove any digital signatures associated with a trade and allow complete anonymous crypto transactions between two wallets. These tools have become popular among scamsters who wanted to hide the source and final destination of their crypto exchanges.
More often than not, crypto mixers do not ask for Know-Your-Customer (KYC) information, that make them appealing for scammers churning capital from duping non-suspecting investors.
“Nearly 10 percent of all funds sent from illicit addresses are sent to mixers — no other service type cracked a 0.3 percent mixer sending share,” a report by Chainalysis said.
Crypto funds from high-risk exchanges, gambling platforms, peer-to-peer exchanges, decentralised finance, as well as centralised exchanges are also being routed to destination wallets via crypto mixers.
In a normal BTC trade for instance, the coins go from person A to person B and the transaction is recorded on the blockchain.
With a crypto mixer however, person A wires their holdings into a private pool. The deposited virtual tokens are then mixed with other people’s tokens before being transferred to the destination – person B.
Blockchain validators, whenever they check these transactions—will be able to see that BTC was sent into a mixer by person A. They will also see that these tokens reached person B, but there will be no transaction links between the two parties involved.
“The increase in illicit cryptocurrency moving to mixers is more interesting though. Illicit addresses account for 23 percent of funds sent to mixers so far in 2022, up from 12 percent in 2021,” the report noted.
In fact, funds sent to mixers by cyber-criminal groups linked to Russia and North Korea, have risen dramatically between 2021 and 2022.
“Russian darknet market Hydra, which was sanctioned in April 2022, leads the way here, accounting for 50 percent of all funds moving to mixers from sanctioned entities this year,” Chainalysis added.
Blender, ChipMixer, FoxMixer, and Anonymix are some examples of crypto mixers available out there.
Earlier this year in February OpenSea NFT marketplace was hacked, and losses worth $1.7 million (roughly Rs. 12.5 crore) were reported.
At the time, PeckShield security firm claimed that privacy mixer tool Tornado Cash was used by the OpenSea hacker(s) to wash 1,100 ETH. Tornado Cash can hide the final destination of the Ether tokens that were stolen.
While crypto mixers are not really illegal, they could be dragged under the legal scanner depending on where the user is from and the laws applicable there.
Governments of the US and the UK have arrested crypto mixer users and have also laid out rules – marking these tools as less viable for regular members of the crypto community.
Crypto exchanges can also flag details of those users who use crypto mixers very frequently to carry out transactions.
The study however, claims that crypto mixers may soon become useless for scammers to use because firms like Chainalysis continue to demix transactions and see the original source of funds.