Substantial growth in cryptocurrency mixer volume this year was driven by one particular darknet market and one particular state-sponsored hacking actor, say leading blockchain forensics experts.
Hydra, the former darknet marketplace that was shut down by US and German law enforcement in early April, sent more funds to cryptocurrency mixers than any other sanctioned entity this year, according to a new report by researchers at Chainalysis. The company found that Hydra accounted for slightly over 50% of funds sent to mixers from sanctioned entities in 2022, followed by the North Korea-associated Lazarus Group at 30% and clearnet-based mixer Blender.io at 18.8%.
According to data provided in the report, crypto mixer usage has exploded since 2020, first by deposits from DeFi platforms and more recently by deposits from sources deemed “illicit,” which include proceeds from ransomware attacks, scams, and darknet markets like Hydra. Chainalysis estimates that a record $760+ million was sent to mixers from sanctioned entities in the second quarter of 2022, with most funds coming from “North Korea-based cybercriminal groups.” The total amount of crypto funds sent to mixers was estimated at around $2.6 billion during the same period.
Interestingly, another graph included in the Chainalysis report demonstrates a massive uptick in cryptocurrency mixer volume in the first two weeks of April, which coincides with the period right after the shutdown of Hydra and right before the US tax filing deadline of April 18.
Cryptocurrency mixers have been the targets of US law enforcement efforts in recent years. In May, the US Treasury Dept. sanctioned Blender.io for its role in helping to launder $20.5 million in proceeds obtained by Lazarus Group in the previous month’s Axie Infinity hack.
In November 2021, US courts denied the motion of Roman Sterlingov – former operator of the longest-running Bitcoin mixing service, Bitcoin Fog – to revoke his detention pre-trial. Sterlingov was arrested in April of that year after he entered the country and has been held there since then as he awaits trial.