The conviction of former Microsoft employee, Volodymyr Kvashuk, who used Bitcoin (BTC) to convert his stolen gift cards to cryptocurrency, highlights the accountability of cryptocurrency and cryptocurrency platforms. Crypto assets can’t hide criminal behavior, which is one more reason to incorporate cryptocurrency into our current banking and finance systems.
How the Bitcoin fraud started…and ended
The fired employee was hired by Microsoft to test its online retail sales platform. This position entrusted him with digital gift cards, which was the first phase of his multi million dollar fraud plan orchestrated between 2016 and 2018.
Gift cards are well known for their roles in credit card fraud, which involves purchasing gift cards and reselling them on the black market. Reasons being, gift cards leave a minimal paper trail compared to bank transfers.
Once the gift cards were stolen, he used his technical expertise to cover his activities. One of the methods that he used to erase his trail was a Bitcoin mixing service, which he used to convert his gains to cryptocurrency, in an attempt to hide the source of his funding before transferring the funds to his bank account. Cryptocurrency also has a reputation for being the currency of choice for ransomware developers. Another method that Vlodomyr made use of, was to utilize his co-worker’s test email accounts to cover his trail. The IRS stated that Kvashuk filed fake tax return forms claiming that he had received the BTC as a gift.
In total, Kvashuk’s fraudulent spree totaled $10 million worth of goods, of which $2.8 million found its way into his personal bank account. A vehicle to the value of $160,000 and a $1.6 million waterside home were part of his spending spree before he was apprehended.
The case in question clearly shows that cryptocurrency can’t be used to hide criminal activities. IRS-CI Special Agent in Charge Ryan L. Korner issued the following statement:
“Simply put, today’s sentencing proves you cannot steal money via the Internet and think that Bitcoin is going to hide your criminal behaviors. Our complex team of cyber crimes experts, with the assistance of IRS-CI’s Cyber Crimes Unit, will hunt you down and hold you accountable for your wrongdoings.“
The IRS hails the successful prosecution as the nation’s first Bitcoin case that has a tax component to it.
Is Bitcoin and cryptocurrency really that safe?
Cryptocurrency crimes have decreased in 2020. As reported by Reuters on 10 November, total losses from crypto theft, fraud, and hacks have dropped from $4.4 billion in 2019 to $1.8 billion in the first ten months of 2020. CipherTrace CEO Dave Jevans says that the decline of criminal activity in the crypto industry is a direct result of increased security measures.
CipherTrace CEO Dave Jevans stated “What we have seen is that exchanges and other cryptocurrency players have implemented more security procedures. They have taken the guidance and implemented the procedures to secure their funds better. So you’re going to see less mass-scale hacks.”
VPN provider Atlas VPN released a study in late October claiming that the tally of block-chain related hacks has decreased more than three times in the first half of 2020, in comparison to the same time frame in 2019.
Although crypto related crimes are showing a downward trend, a growth of hacking incidents in decentralized finance, or DeFi, seems to be on the rise. As DeFi projects are permissionless by design, they mostly lack the security verification tools of centralized projects.
Crypto currency is just as secure, traceable and accountable as traditional currency. Which leaves some of us waiting in eager anticipation for the merging of crypto currency with traditional financial and banking institutions. Hopefully it won’t be too far from now.