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Dogecoin may have earned a significant market capitalization due to its association with Elon Musk and the fluffy appeal of its Shiba Inu mascot, but that hasn’t stopped it from being targeted by illegal actors in the heaviest types of crime.
Known as the first of many “meme coins,” Dogecoin was created in December 2013 and has since enjoyed a surge in popularity thanks to celebrity endorsements, including Tesla CEO Elon Musk.
Despite its initial reputation as a joke, the property has gained significant traction as a payment method, including used by the Ukrainian government to accept donations for its defense against Russian invasion.
Currently, Dogecoin is among the top 10 cryptoassets by market capitalization – fast approaching $10 billion in market capitalization.
Dogecoin linked to illegal activities
Dogecoin’s growing popularity means it hasn’t gone unnoticed by criminals. In addition to being used as a means of payment for legal goods and services, Elliptic has identified millions of dollars worth of Dogecoin transactions associated with illicit activity. While the vast majority of this activity consists of scams, fraud and ponzi schemes, it also involves the most serious types of crime, including terrorist financing and child sexual abuse material (CSAM) sellers.
Cracking down on illegal use of Doge.
Financing of terrorism
In July 2021, Israel’s National Counter-Terrorism Financing Bureau issued a seizure warrant for 84 cryptoasset addresses believed to be controlled by Hamas or otherwise used in terrorist-related activities. This included Doge addresses, which received a total of $40,235.
Although a small amount compared to Bitcoin and Tether, this example shows the awareness and growing adoption of a wide range of cryptoassets by groups such as Hamas. It also reinforces the importance of blockchain analytics solutions in the compliance toolkit to enable financial institutions and law enforcement agencies to screen for risks beyond the most popular cryptoasset.
Materials on child sexual abuse
In collaboration with industry partners, Elliptic monitors suppliers of child sexual abuse material (CSAM) operating on both the darknet and the clearnet that accept crypto-assets as a form of payment. Again, while most crypto payments to CSAM vendors are made using Bitcoin, a small and growing number of these vendors accept other crypto assets – including Dogecoin.
To be clear, the level of Dogecoin usage within the CSAM community is currently very low, with less than $3,000 in payments identified globally to date. However, the fact that the Dogecoin adoption trend has reached this community further demonstrates the appetite of criminal actors to adopt a wide range of cryptoassets in an attempt to avoid notice, and highlights the growing challenge that legitimate market participants face in quickly de-risking a growing range of assets.
Wallet with address.
Darknet markets
Elliptic has identified several darknet markets – including those selling drugs and stolen data – that accept Dogecoin as a payment method.
Just-Kill describes itself as a “call and email flood service”, which also provides credit card verification, allowing users to verify the validity of purchased stolen credit cards. Just-Kill allows users to both deposit funds and donate to the site using various cryptoassets – including Dogecoin.
DogeCoin is also accepted on some popular darknet drug markets. One, namely Archetyp, previously used a coin exchange service to allow users to deposit funds into a range of other cryptoassets – including Doge. The market has since switched to accepting only Monero.
These services build on previous failed attempts to use Doge as a payment method for illicit goods on darknet marketplaces, including the now-defunct Doge Road marketplace, which was briefly active in 2014 before committing an exit scam and the operators disappearing from to clients. funds.
Screenshot in/chrono000 Reddit.
Malware
Several malicious campaigns involving Dogecoin theft have been identified. In October 2020, Kaspersky identified a malware family called Cliptomaner that hijacks computers to maliciously mine cryptocurrencies. This malware also performs clipboard hijacking, in which crypto addresses copied to the user’s clipboard are replaced with addresses controlled by malware swappers.
Cliptomaner is able to hijack various cryptoasset addresses – including Doge. The doge address used by Cliptomaner has received almost $29,000 to date, which shows the potential profitability of these campaigns – especially when considering the wide range of funds.
Malware campaigns have also been found to use Doge in more creative ways. In July 2020, researchers at Intezer identified a malware campaign called “Doki” that used information contained in Doge transactions to identify command and control servers, allowing the malware to increase its resistance to takedown by law enforcement. The technique has since been used in additional malware campaigns – including the Glupteba botnet – which was the focus of an investigation by Google’s Threat Analysis Group in December 2021.
Far right extremism
As noted in previous Elliptic research, far-right extremist groups are increasingly exploiting the Internet to build a following and raise funds. When faced with being shut out of mainstream financial services, extremists turned to cryptocurrencies instead.
A number of news websites, blogs and video sharing platforms have all accepted cryptocurrency payments. Elliptic has identified several far-right entities that have used Dogecoin to raise funds such as Infowars. To date, the organization has raised over $1,700 in Doge alone.
Theft, fraud and Ponzi schemes
By far the most prominent type of crime affecting Doge was found to be theft, fraud and Ponzi schemes. To date, Elliptic has identified over 50 thefts, frauds and Ponzi schemes that have yielded hundreds of millions of dollars worth of Dogecoin.
Just days after Dogecoin launched, Dogewallet – a storage solution for Doge users – experienced a hack resulting in the loss of over $14,000 in user funds. Additional notable examples include the Plus Token Ponzi scheme, which resulted in the seizure of over $20 million in Doge by Chinese authorities, and the alleged theft of $119 million in Dogecoin linked to a Turkish Ponzi scheme in 2021.
Expanding crypto coverage to ensure compliance
For retail investors and exchanges, transparency around Dogecoin ownership and usage is becoming increasingly important. Although originally developed as a joke memecoin, Dogecoin has dramatically increased its adoption and value among major companies, including Elon Musk’s SpaceX, creating a greater need to verify the origin of coins and payment counterparties.
Elliptic provides full compliance capabilities for Dogecoin in its Elliptic Lens crypto wallet and Navigator transaction monitoring solutions, enabling users to better identify illicit actors, fight financial crime and achieve anti-money laundering/know your customer (AML/KYC) compliance regulations, making the crypto market safer for everyone.
