Although Bybit CEO Ben Zhou says 88% of stolen crypto is still traceable, the recent Bybit hack has been linked to an unprecedented money laundering operation. Is money laundering via crypto on the rise? Let’s break it down.
BlackRock’s Larry Fink famously called crypto an “index of money laundering” in 2017. Five years later, Fink realized that he shouldn’t dismiss Bitcoin, and BlackRock embraced Bitcoin. Now, the company’s iShares Bitcoin Trust holds over over 570,000 bitcoins, more than any other company. BlackRock started to work with Bitcoin in 2022. According to Chainanalyis, that year saw the peak evaluation of crypto used for crime, particularly for money laundering, at $54 and $31 billion, respectively.
Where are the funds stolen from Bybit?
On March 20, Ben Zhou of Bybit stated via his X account that over 88% of funds stolen during the February Bybit hack remain traceable, while 7.59% “have gone dark.” The rest of the stolen funds are frozen.
In the post, Zhou specified the crypto mixers used for money laundering and urged bounty hunters to help decode mixer transactions in the hope of recovering the stolen funds.
According to Zhou, the funds were sent to Wasabi, TornadoCash, Railgun, and Crypto Mixer. Some of the transactions were then exchanged via peer-to-peer platforms. Previously, Bybit accused eXch of allowing criminals to use its platform to launder the stolen funds. eXch representatives have dismissed these accusations.
Elliptic called the Bybit hack the biggest heist in history and linked the operation to Lazarus Group, a hacker organization allegedly sponsored by North Korea. Reportedly, crypto stolen by Lazarus Group has provided Pyongyang with 40% of funds necessary for its nuclear program.
Zhou called decoding the mixer transactions the “number one challenge.” It is unclear what the odds are of eventually decoding the transaction data. Several methods exist for decoding obfuscated transactions, but it is too early to predict if any of them will help in the Bybit hack case.
A blockchain data analysis company, Arkham Analytics, revealed that on March 20, 12.9 BTC from the funds stolen in the Bybit hack was sent to an unknown address.
How much money is laundered via crypto each year?
According to Europol, money laundering is the main criminal use for cryptocurrencies. The Europol report outlines that the COVID pandemic period was the time when money laundering volume through crypto began to rise, as the number of crypto transactions per se was on the rise.
The data gathered by Chainalysis shows that money-laundering volume nearly doubled in 2021 compared to 2020 or 2019. In 2021, the laundered crypto volume reached $18.3 billion, up from $9.9 billion to $11.1 billion in 2020 and 2019, respectively.
However, in 2022, the laundered crypto volume jumped to $31.5 billion, declining to $22.2 billion in 2023, which is still much higher than before 2021. Chainalysis stressed that in 2023, the overall crypto transactions volume dropped by 15%. However, the laundered crypto volume dropped by around 30%. It is hard to say if there is a positive change as, according to Chainalysis, the overall criminal use of crypto was more or less stable at around $50 billion per year in 2022, 2023, and 2024. More than that, Chainalysis states that in recent years, crypto criminal activities have become highly diverse and professionalized.
The 2010s saw a growing number of mixers and cross-chain bridges used by crypto criminals. However, law enforcement efforts are believed to be the reason for the relative drop in mixer use after a peak in 2022. The use of cross-chain bridges is increasing. Only five off-ramp services have been responsible for about one-third of all laundered crypto cash-outs between 2019 and 2023.
Are crypto mixers, privacy-focused coins, and similar tools responsible?
For years, the crypto community has supported developers prosecuted for creating services used to conceal the trails of stolen crypto. The developers of Tornado Cash and Samourai are examples. Just as the crypto community has been vocal in calling for Ross Ulbricht’s pardon, they are rallying for Keonne Rodriguez and William Lonergan of Samourai and Roman Storm of Tornado Cash.
Supporters argue that creating open-source tools used both legitimately and criminally is not a crime per se and cannot be regarded as participation in a crime committed by a third party. A pioneering crypto lawyer, Marta Belcher, whom we interviewed earlier this month, stated the following:
The fact that a technology could be used for crime doesn’t mean that there is something inherently wrong with that technology. Criminals also use cash to commit crimes, but we don’t call for a ban on cash as a result, just like we don’t blame Ford when one of its cars is used as a getaway vehicle in a bank robbery.
https://twitter.com/rstormsf/status/1882100012513186283
However, as of 2025, prosecutors generally strive to hold developers accountable for creating tools useful to criminals. For instance, Samourai founders, whose platform was used for money laundering by Silk Road and Hydra marketplaces, face up to 25 years in prison. The pardon of Ross Ulbricht may be seen as a hint of a paradigm shift, but it is too early to speak about real change.
