A report by blockchain analysis firm Elliptic has linked Dogecoin with terrorism, child sex abuse material, far-right extremism and several other illicit activities.
While Dogecoin started as a joke, it has gained serious traction over the last few years, even figuring among the top ten cryptocurrencies by market capitalisation. However, its popularity has also caught the eye of nefarious individuals and entities, who are using the meme coin to finance their dirty work.
“While the vast majority of this activity consists of fraud, scams and Ponzi schemes, it also includes the most serious types of crime, including terrorism financing and vendors of child sexual abuse material (CSAM),” the Elliptic report reads.
One of the key observations made in the report is the rising use of Dogecoin in terror financing. It quoted a July 2021 seizure order released by the National Bureau for Counter Terror Financing of Israel (NBCTF), which listed 84 crypto wallet addresses controlled by the Hamas. The wallets using Dogecoin received a total of $40,235 in funding.
Bitcoin and Tether were the most used cryptocurrencies for the Hamas, with $4.1 million and $3.4 million worth of crypto assets routed through these currencies, respectively. Although the Dogecoin amount seems trivial compared to these two, the findings indicate the rising awareness about Dogecoin in the wrong circles. All cryptocurrencies combined, Hamas-related wallets received nearly $7.79 million.
In a more disturbing revelation, Elliptic also found that Child Sexual Abuse Material (CSAM) was also being funded using Dogecoin payments, but mainly over the darknet. Presently Dogecoin only covers $3,000 out of the total financing received by CSAM, and Bitcoin remains the dominant mode of payment here.
“The fact that the Dogecoin adoption trend has reached this community further demonstrates the appetite for criminal actors to adopt a wide range of crypto assets in a bid to avoid notice,” reads the report.
However, as mentioned earlier, the most prominent illicit use of Dogecoin was thefts, scams and Ponzi schemes. The report uncovered more than 50 such events involving millions of dollars worth of the ill-gotten Dogecoin. One of the cases involved a seizure of over $20 million in Dogecoin by Chinese authorities as part of a rug pull for a fake cryptocurrency called Plus Token.
Elliptic also cited concerns regarding the operations being run on the darknet as they majorly comprise drug trading and stolen-data trafficking. Dogecoin is now an accepted mode of payment for these illegitimate businesses. However, post the Elliptic exposure, these activities have switched to transacting in
Monero – a cryptocurrency focused on anonymity.
Hackers have also designed several malicious software (or malware) to infect target systems and hijack Dogecoin from the users’ wallets. In 2020, Kaspersky put the spotlight on a family of malware called Cliptomaner, which surreptitiously managed to mine cryptocurrency on the victims’ computers and made $29,000 in Dogecoin.
Also Read: GST breather for Crypto Eco-system, council may want a deeper study before deciding taxation
Finally, extremist groups have taken to Dogecoin to raise funds as traditional financial organisations shun them away. In December 2021, Elliptic had identified payments worth $8.9 million in cryptocurrencies into wallets associated with right-wing extremists. One such institution called Infowars has raised $1,900 in Dogecoin alone.
The burgeoning use of cryptocurrencies in financing unauthorised activities is quite alarming. While regulators strive to nip it in the bud with stringent laws, criminals continue exploiting the lesser monitored methods available.