Crypto crime and money laundering
The real scale of illicit crypto, the cases that shaped the rules, and why public blockchains help investigators as well as criminals.
Crypto is used for crime, but it's a small share of all activity. Chainalysis counted $154 billion received by illicit addresses in 2025, a record driven by sanctions evasion, yet still under 1% of on-chain volume. The main categories are scams, theft and hacking (especially by North Korea), sanctions evasion, darknet markets and ransomware. Because most blockchains are public, investigators can often trace funds, and regulators respond with ID checks, the Travel Rule, sanctions and seizures.
This guide is for awareness: understanding the risks, the news and the rules. It doesn't explain how to hide or move funds, and we won't publish that.
How big is crypto crime?
The most-cited figures come from Chainalysis, a blockchain-analysis company that labels addresses linked to crime and adds up what they receive. Its 2026 Crypto Crime Report (published January 2026) found:
| Measure (calendar year 2025) | Figure |
|---|---|
| Received by illicit addresses | $154 billion, up from a revised $57.2 billion for 2024 |
| Share of all on-chain transaction volume | Below 1% |
| Share of illicit volume in stablecoins | 84% |
| Through the ruble-backed A7A5 stablecoin, linked to sanctions evasion | More than $93 billion in its first year |
| Stolen by hackers linked to North Korea | About $2 billion, including about $1.5 billion from Bybit |
Two cautions. These are lower bounds: Chainalysis only counts addresses it has identified, and its estimates for past years usually rise as more are found (2024's figure was first reported as $40.9 billion). And the jump in 2025 came mostly from state-linked sanctions evasion rather than from more everyday crime. For comparison, the United Nations has estimated that 2% to 5% of global GDP is laundered each year, overwhelmingly through traditional finance.
Scams are the crime most likely to touch ordinary people. The FBI reported that Americans lost more than $11 billion to crypto-related fraud in 2025. See crypto scams and red flags.
The main kinds of crypto crime
- Scams and fraud: investment and romance scams ("pig butchering"), impersonation, fake trading sites, rug pulls. See fake crypto trading sites and rug pulls.
- Theft and hacking: stolen keys, exchange breaches and bugs in DeFi apps and cross-chain bridges.
- Ransomware: criminals encrypt a company's data and demand payment in crypto.
- Darknet markets: websites selling drugs and stolen data for crypto.
- Sanctions evasion: sanctioned countries, banks and individuals moving value outside the dollar system.
- Market manipulation: wash trading and pump-and-dump schemes that fake demand for a token.
Darknet markets: from Silk Road on
Silk Road opened in February 2011 as a hidden website selling mostly drugs, paid for in bitcoin. The FBI shut it down in October 2013 and arrested its founder, Ross Ulbricht, who was sentenced to life in prison in May 2015. President Trump pardoned him on January 21, 2025. Years after the shutdown, investigators traced bitcoin stolen from Silk Road and seized tens of thousands of coins in 2020 and 2021 (the second announced in 2022), showing how long a public blockchain trail lasts.
Other markets followed. AlphaBay was taken down by an international operation in July 2017. Hydra, a Russian-language market that was once the largest by revenue, was shut by German police in April 2022. Each takedown has been followed by new markets, but the trail of public transactions has repeatedly helped police find operators and users.
Sanctions evasion and Tornado Cash
Sanctioned actors use crypto to move value without banks. The US Treasury's Office of Foreign Assets Control (OFAC) responds by listing individuals, exchanges and specific wallet addresses; dealing with them is illegal for US persons, and compliant exchanges freeze matching funds. Russia-linked exchanges such as Garantex and North Korea's hacking groups are frequent targets.
Tornado Cash is the case that defined the limits. It is a set of Ethereum smart contracts that mix deposits so withdrawals can't easily be linked to them, which privacy-minded users wanted and which North Korean hackers used to launder stolen funds. Here is what happened:
OFAC sanctions Tornado Cash, including its smart-contract addresses, saying it laundered more than $7 billion since 2019.
A Dutch court convicts developer Alexey Pertsev of money laundering (64 months); his appeal was pending when we checked.
In Van Loon v. Department of the Treasury, a federal appeals court (Fifth Circuit) rules that Tornado Cash's immutable smart contracts are not "property" that can be sanctioned under the law OFAC used.
The Treasury removes Tornado Cash from the sanctions list. A Texas federal court later bars it from reimposing the same sanctions.
A New York jury convicts developer Roman Storm of conspiring to run an unlicensed money-transmitting business but can't agree on money-laundering and sanctions charges. Prosecutors seek a retrial on those counts, now set for April 26, 2027.
The outcome so far: code itself was found not to be sanctionable property, but people who build and run mixing services can still face criminal charges. The founders of another mixing service, Samourai Wallet, pleaded guilty in 2025. The legal line between writing privacy software and running a money-transmitting business remains contested. See is crypto anonymous?
Wash trading and market manipulation
Wash trading means trading with yourself, or with a partner, to make a token look busier and more in demand than it is. It inflates volume rankings and lures real buyers. Chainalysis estimated up to $2.57 billion of suspected wash trading on decentralized exchanges in 2024. In October 2024, the US Justice Department announced charges against 18 people and companies, including market makers accused of selling wash-trading services; the FBI had created its own token to catch them ("Operation Token Mirrors").
What it means for you: trading volume on small tokens and lightly regulated exchanges can be fake. Liquidity you see may vanish when you try to sell. See how to research a cryptocurrency and market cap and liquidity.
How regulators and police respond
- Know-your-customer rules. Licensed exchanges verify identity and report suspicious activity. This is why most criminals eventually hit a wall when converting crypto to cash. See regulation by country.
- The Travel Rule. Exchanges must pass sender and receiver details along with transfers, as banks do for wires (no minimum in the EU; $3,000 in the US).
- Sanctions and freezes. OFAC listings, and stablecoin issuers such as Tether and Circle freezing tokens at addresses tied to crime.
- Tracing and seizure. Public ledgers let investigators follow funds for years; US authorities have seized billions in crypto, some now held in the Strategic Bitcoin Reserve.
- Takedowns and prosecutions of darknet markets, mixers, unlicensed exchanges and scam networks, often across several countries.
- Restricting privacy coins. EU platforms may not handle anonymity-enhancing coins from July 2027.
Critics argue some of these steps go too far, sweeping up law-abiding users who want financial privacy. Supporters say crypto must follow the same anti-money-laundering rules as banks. Both concerns shape current law.
If you're a victim
Report it quickly. In the US, file with the FBI at ic3.gov and the FTC at reportfraud.ftc.gov, and tell the exchange you sent from. Be wary of "recovery services" that contact you promising to get money back for a fee; they are a common second scam. See what to do if you've been scammed.
Related reading: Blockchain analytics: how on-chain analysis traces crypto · Crypto safety center
Frequently asked questions
Is crypto mostly used for crime?
No. Chainalysis estimates illicit activity at under 1% of on-chain transaction volume in 2025, although the dollar amount ($154 billion, a lower bound) was a record.
Can crypto transactions be traced?
Usually, yes. Most blockchains are public, and analysis firms and police link addresses to people, especially when funds pass through exchanges that check ID.
What happened to Tornado Cash?
The US sanctioned it in 2022. After an appeals court ruled in November 2024 that its immutable smart contracts weren't sanctionable property, the Treasury delisted it on March 21, 2025. Developer Roman Storm was convicted in August 2025 on one charge, with a retrial on two others set for April 2027.
What is wash trading?
Buying and selling with yourself or a partner to create fake trading volume, making a token look more popular and liquid than it is.
Was Silk Road's founder released?
Yes. Ross Ulbricht was sentenced to life in 2015 and pardoned by President Trump on January 21, 2025.
Where to next
Sources
- Crypto crime topped $150 billion in 2025: Chainalysis 2026 Crypto Crime Report (The Block, January 2026)
- Van Loon v. Department of the Treasury, opinion (US Court of Appeals for the Fifth Circuit, November 26, 2024)
- Tornado Cash delisting (US Department of the Treasury, March 21, 2025)
- Roman Storm's Tornado Cash retrial pushed to April 2027 (Decrypt, August 2026)
- Eighteen individuals and entities charged in crypto market manipulation (Kitco, October 2024)
- Money laundering (United Nations Office on Drugs and Crime)
- Virtual assets (Financial Action Task Force)
- Cryptocurrency and AI scams bilk Americans of billions (FBI, 2025 report)
Written for beginners and checked against the sources listed. Last reviewed November 4, 2026. This page is educational and is not financial, tax or legal advice. How we write and check pages.