Chainalysis Report Unveils Surge in China-Based CSAM Networks and Sophisticated Scams

Chainalysis Reports Major Increase in China-Based CSAM and New Scam Wallets for 2024

Chainalysis Report – Chainalysis has released its comprehensive report, “2024 Crypto Crime Mid-Year Update Part 2,” shedding light on a significant increase in China-based Child Sexual Abuse Material (CSAM) networks and a surge in sophisticated scam operations. The report provides a detailed analysis of the current trends in cryptocurrency-related crime, focusing on key findings from the first half of 2024.

Rising CSAM Networks and Their Operations

The report indicates a troubling rise in CSAM networks based in China. Since late 2023, reports of these illicit sites have been steadily increasing. A significant majority of wallet holders are purchasing extended access to these networks, ranging from a month to nearly 20,000 days, which equates to over 54 years. This trend underscores the ongoing use of instant exchangers by CSAM vendors to liquidate their assets.

Scams: Shifting Tactics and Rising Revenue

Scammers are continuously adapting their strategies, conducting shorter but more dynamic and profitable scam campaigns. Among these, “pig butchering” scams have emerged as the largest revenue-generating scheme year-to-date (YTD). For instance, a scam operation based in Myanmar, first detected in 2022, has accumulated at least $101.22 million in 2024 alone. Scammers are moving away from broad Ponzi schemes, focusing instead on targeted scams such as pig butchering, work-from-home scams, drainers, and address poisoning.

Huione Guarantee: A Major Player in Crypto Crime

The report highlights the role of Huione Guarantee, a marketplace tied to the Cambodian conglomerate Huione Group. This platform has processed over $49 billion in cryptocurrency transactions since 2021, significantly more than previous reports suggested. Huione Guarantee is involved in a variety of illicit activities, including pig butchering scams, stolen funds, and connections to the OFAC-sanctioned Russian exchange Garantex.

Historical Context and Changing Scam Patterns

Chainalysis also provides historical context to its findings, comparing current trends with past cases. For example, in 1976, the SEC ruled that art galleries did not need to register as securities dealers, even when buyers had investment motives. This historical precedent is cited to illustrate the inconsistency in regulatory approaches, particularly regarding new and evolving scams.

Scam Landscape Trends for 2024

The report reveals that illicit on-chain activity has decreased by nearly 20% YTD, but inflows from stolen funds have nearly doubled. Additionally, annual ransomware payments are on track to be the largest ever recorded. The latest trends show that scammers are quickly evolving their tactics, using both on-chain and off-chain tools to conduct more effective and shorter-duration scams.

Increased New Scam Wallets

A noteworthy trend in 2024 is the surge in new scam wallets. Data shows that 43% of YTD scam inflows have been directed to wallets that became active this year. This marks a significant increase from 2022, where only 29.9% of total YTD flows went to new wallets. This suggests a rise in new scams and a continuous evolution in scam methodologies.

Chainalysis’ report underscores the growing complexity and scale of cryptocurrency-related crimes. The rising prevalence of CSAM networks and the adaptation of scam tactics highlight the need for enhanced vigilance and regulatory measures in the crypto industry.

FAQ: Chainalysis 2024 Crypto Crime Mid-Year Update