Ransomware payments are on track to record levels in 2023 despite cryptocurrency-related crimes, including traditional Crypto Scams, declining significantly.

Blockchain analysis firm Chainalysis found that illicit crypto transactions dropped by 65%, with crypto scams earning 77% less revenue in 2023, while ransomware payments increased substantially.

Having earned $175.8 million more than last year, Chainalysis predicted that ransomware payments would record the second-biggest year in history.

A decline in crypto scams as digital asset prices surge in 2023

Crypto scams are usually the top earners for cryptocurrency-related crimes. While that still held in 2023, their profits plummeted in the first six months.

Chainalysis found that crypto inflows to illicit entities (except those sanctioned or subject to special measures) reduced by 65% in H1 2023 compared to H1 2022. The sanctioned entities accounted for 44% of all crypto crimes in 2022.

All crypto-funded illicit activities, including darknet markets, fraud shops, ransomware actors, crypto scams, and child abuse materials, earned $2.8 billion in H1 2023, down from $8 billion in H1 2022.

The report noted a 42% reduction in digital asset inflows to risky entities, which usually include high-risk exchanges and mixers.

However, crypto scams recorded the most significant drop of 77% by earning only $1 billion during the first half of 2023, which is $3.3 billion less than H1 2022. The fall sustained a steady year-over-year decline since 2021.

Ironically, crypto scams declined while the price of digital assets such as Bitcoin surged by up to 80% by June 2023.

“Usually, positive price movements translate to higher scam revenue, likely because increased market exuberance and FOMO make victims more susceptible to scammers’ pitches. But 2023’s drastic scam decline bucks that long-standing trend,” the report stated.

The exit scam of two large-scale crypto scams VidiLook and Chia Tai Tianqing Pharmaceutical Financial Management contributed significantly to the crypto scam revenue dip.

However, deposits to impersonation scams, where scammers impersonate an authority figure to extort money from victims, increased by nearly half (49%), while inflows reduced by 23% by June 2023.

The significant increase in deposits and the modest decrease in inflows suggest that more investors were falling for impersonation scams, although for smaller amounts.

“Those data points go to show that even with total scam revenue down, law enforcement and crypto compliance teams can’t rest on their laurels,” the researchers warned.

Highlighting that transaction volumes for legitimate services dropped by only 28% compared to 65% for illicit activities, Chainalysis painted a rosy picture of the state of crypto crime.

“In other words, there’s been a market pullback, but illicit crypto transaction volume is falling much more than legitimate crypto transaction volume.”

Ransomware payments are approaching record levels in 2023

The researchers observed an upward trend in ransomware payments, despite a significant decline in all other crypto-related crime categories.

By June 2023, threat actors had extorted $175.8 million more than last year, earning $449 million by June 2023.

Subsequently, ransomware payments would reach $898.6 million by the year’s end, just shy of the $939.9 million record set in 2021. The amount would reverse the downward trend set in 2022.

“This year-over-year growth likely means the reversal of the positive downward ransomware trend we saw in 2022,” the researchers noted.

Noting that “ransomware is big big, big business,” Jon Miller, the CEO & Co-founder of Halcyon, believes that the report underestimated the amount lost through ransomware attacks.

“After the FBI spent seven months lurking in the attack infrastructure of the Hive gang last year, they assessed that only one-in-five attacks are reported to law enforcement,” Miller said. “If we do some simple extrapolation, the figure above jumps to about 2.5 billion dollars extorted in the first half of the year. That would put the Ransomware Economy on pace to post $5 billion in extorted funds for the year. And it is growing.”

Chainalysis attributed the rise in ransomware payments to both large and small ransomware attacks.

“Big game hunting – that is, the targeting of large, deep-pocketed organizations by ransomware attackers – seems to have bounced back after a lull in 2022. At the same time, the number of successful small attacks has also grown,” Chainalysis said.

According to Avishai Avivi, CISO at SafeBreach, smaller victims are most likely to pay since they lack the resources necessary to prevent or weather an attack.

“The unfortunate reality is that the smaller victims, the ones who fall prey to the “spray and pray” attacks, are less likely to have a mature cybersecurity program with proper awareness and controls to defend against ransomware attacks. They are also less likely to validate their security controls continuously or even annually,” Avivi said.

The report attributed the 2022 ransomware payments drop to organizations’ unwillingness to pay due to law enforcement efforts, the availability of decryptors, improved cybersecurity, and data backup. However, organizations’ unwillingness to pay increased the ransom demanded to squeeze “most money possible” from victims willing to pay.

Additionally, ransomware groups resorted to more drastic measures, such as harassing employees of organizations that refuse to pay.

Ultimately, the record-setting figures indicate ransomware payments bounced back in H1 2023 after a brief hiatus.

“The data serves as an important reminder that ransomware remains a significant threat and that businesses should continue to shore up their cybersecurity and data backup procedures for added protection,” the researchers concluded.

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