Crypto losses from fraud and hacks in May have decreased by 12% year-over-year. May 2024 saw $52 million in losses compared to $59 million in May of 2023. Some of the major incidents in May included the $21 million hack of Gala Games as well as the $20 million smart contract exploit against Sonne Finance. Despite these improvements, Senator Elizabeth Warren is still concerned about cryptocurrency's role in the fentanyl trade, and demanded updates from drug agencies on their plans to fight this issue. Unfortunately, the implementation of legislation that can help clarify the roles of regulators responsible for dealing with crypto crime, like the Financial Innovation and Technology for the 21st Century Act (FIT21), is expected to be very slow.
Another Month of Declining Crypto Losses
Crypto losses from fraud and hacks have declined by 12% year-over-year, according to a May 30 report from blockchain security firm Immunefi. Over the course of May, a total of $52 million was lost. This might seem high, but it is still down from over $59 million in the same month last year.
The figure also means that there has been a 28% decline compared to the amount lost in April. This is a very good sign as it means that the trend of declining losses from hacks and fraud in the Web3 industry is still ongoing. In March, Immunefi reported that losses in Q1 2024 declined by 23% compared to the previous year. In April, CertiK pointed out that the month saw its lowest losses ever.
According to the Immunefi report, most of the losses in May came from two major attacks. The first was a hack of the Web3 gaming protocol Gala Games, which resulted in losses of approximately $21 million.
The second major loss was due to a smart contract exploit against Sonne Finance, which led to $20 million in losses. Together, these two incidents accounted for 78% of the total losses for the month. Ethereum and BNB Smart Chain were the most targeted networks as they attracted 62% of the attacks. Interestingly, all attacks were against decentralized protocols, with no centralized exchanges losing funds.
Fraud only constituted a small portion of the overall losses seen in May, with only $1.7 million, or 13.6%, of the total losses coming from fraud. Most losses were caused by hacks and exploits.
Immunefi did not give any specific reasons for the decline in losses from exploits. However, in 2023, smaller losses compared to 2022 were attributed to developments and improvements in security technology. Additionally, in April, Blockaid reported that its software caused some crypto drainers to shut down, which helped reduce at least one type of threat that crypto users face.
Warren Demands Crypto-Fentanyl Update
Despite the progress being made with fighting crypto crime, Elizabeth Warren is still not convinced. The United States Senator is demanding an update from drug agencies on their latest findings and efforts around the use of cryptocurrency in the illicit fentanyl market.
In a May 29 letter, Senators Warren and William Cassidy requested information from the Office of National Drug Control Policy director Rahul Gupta and Drug Enforcement Administration’s administrator Anne Melissa Milgram. More specifically, he questioned what actions Biden Administration’s is taking to combat drug traffickers’ exploitation of cryptocurrency to grow their business and launder money.
The letter also reiterated their long-running claim that cryptocurrencies have played an increasingly prominent role in the fentanyl trade, with a lot of it ending up in the United States.
Warren and Cassidy asked the agencies to respond by Jun. 14 about the scale of crypto’s involvement in drug trafficking, upcoming initiatives to really address this issue, and the metrics that can be used to measure success when it comes to actually combating illicit cryptocurrency use in the fentanyl trade.
In support of their concerns, the Senators specifically pointed out a May 2023 investigation that found that about 80 Chinese companies supplying fentanyl precursors received close to $30 million in cryptocurrency payments. This amount was enough to produce $54 billion worth of fentanyl pills.
However, Warren has faced a lot of criticism in the past for citing misconstrued data in her anti-crypto stance. In an October 2023 article by The Wall Street Journal, Warren referred to incorrect information about the extent to which Hamas used cryptocurrency to fund its activities related to the Israel-Palestine conflict, a mistake the WSJ later corrected. Warren did not publicly respond to the correction.
Meanwhile, U.S. attorney and XRP advocate John Deaton announced his plans to challenge Warren for her Senate seat in Massachusetts. Deaton is also very eager to debate with Warren on certain issues like income inequality and the opioid crisis.
Trump Crypto Recovers After Guilty Verdict
Other US politicians are not so innocent. The largest meme coin tied to United States presidential candidate Donald Trump was able to somewhat recover after plummeting 16% following his conviction on 34 felony counts for falsifying business records.
The case involved Trump concealing a hush money payment to adult entertainment star Stormy Daniels and now moves to sentencing. Despite the conviction, Trump still maintains his innocence and even called the trial a “disgrace”. He is also convinced that the Biden administration is using it to harm a political opponent.
The Donald Trump-linked MAGA (TRUMP) token saw more than $130 million wiped from its market cap within just 20 minutes of the news, dropping from $13.48 to $11.27. However, its price quickly rebounded to $14.70. At press time, TRUMP was worth about $14.50. Other Trump-related tokens, Super Trump (STRUMP) and Baby Trump (BABYTRUMP), also fell but did not recover as strongly.
TRUMP price (Source: CoinMarketCap)
Trump’s case now moves to sentencing, which will be overseen by Judge Juan Merchan. U.S. attorney John Deaton is concerned that the verdict could end up deepening political divisions leading up to the November election.
Interestingly, over the past few months, Trump has completely changed his tune about crypto to try and win over the cryptocurrency industry. He even stated that he will support the right of the country's 50 million cryptocurrency holders to self-custody Bitcoin and other coins.
Implementation of FIT21 Expected to be Very Slow
Unfortunately, the legislation that is supposed to help regulators make an even bigger dent in crypto crime numbers might face some hurdles along the way. Implementing the Financial Innovation and Technology for the 21st Century Act (FIT21) could be a lengthy process, and could potentially require months or even years of coordination between United States regulators before rules go into effect.
Summer Mersinger, Commissioner of the Commodity Futures Trading Commission (CFTC), predicted a very slow regulatory process for the bill if it becomes law during a panel at the 2024 Consensus event. Mersinger pointed out that rulemaking is a slow process, and can very often extend well beyond the signing of a law. This was the case with the Dodd-Frank Wall Street Reform and Consumer Protection Act, which took years to fully implement.
After a bill becomes law, regulatory bodies like the Securities and Exchange Commission (SEC) and CFTC must draft detailed regulations, allow for public comments, and possibly revise the rules based on the feedback they receive. This phase can take several months or even years.
The FIT21 bill, which clarifies regulatory responsibilities between the SEC and CFTC when dealing with digital assets, has successfully passed the House of Representatives with bipartisan support.
However, Joe Biden’s administration is concerned about the bill as it could create possible regulatory gaps that might affect market stability, Biden even threatened to veto the bill.
SEC Commissioner Hester Pierce was also part of the event discussion, and she believes that Congress’ interest in crypto legislation is a response to the SEC’s enforcement approach toward crypto firms. According to Pierce, Congress is taking an interest in crypto due to the SEC's own failure to provide clarity.
