Cryptocurrency wrench attacks: Pt. 2

What’s the deal with wrench attacks against crypto-holders?

We documented a few gruesome attacks and provided a list of many more in our last newsletter. One reasonable response might be, “What’s so special about wealthy crypto-holders getting kidnapped? Wealthy people in traditional financial systems get kidnapped as well.”

While there is truth to this, there are some special features about cryptocurrencies that make these attacks more appealing in contrast to holders of traditional financial instruments. Let’s go through them.

Cryptocurrency transactions are irreversible

From the criminal’s perspective, one of the appeals of targeting crypto-holders is that cryptocurrency transactions are irreversible. Code is law, and if the money gets sent then there is no way to get it back unless the recipient decides to transfer it back. This means that if you manage to get the crypto sent to an account under your control, it’s yours.

In contrast, traditional banking has things like chargebacks or clawbacks. Even if you get your victim to send you money from the bank, they might be able to reverse the transaction and claim it back. You could go to all that effort, putting yourself at great risk of imprisonment, and then have the money sucked back out of your account when you thought you were home free. This aspect makes targeting crypto-holders more appealing than those with money in traditional financial institutions.

It’s easier to disappear with crypto

If you force someone to make a bank transaction against their will, there’s a very clear record of where it goes, even if the money ends up in an offshore account. It’s possible to set up a complicated network of international accounts to escape the authorities, but this is hard to do, and probably out of reach for most normal people. There is also the risk of the money getting frozen at some stage of the journey, so you might not end up getting the money.

In contrast, cryptocurrency allows an attacker to quickly exchange the money to a private coin like Monero and essentially become untraceable. There are also cryptocurrency tumblers, which allow criminals to mix in tainted coins with legitimate ones, making it much harder to trace stolen funds across the network.

Bank policy can protect victims

If someone threatens you with a wrench for your cryptocurrency, all you have to do is make the transfer or give away the key. If someone threatens you with a wrench for your money stored in a traditional financial institution, the bank may have a series of checks that can get in the way, especially when significant or unusual transfers are taking place. Attackers may be reluctant to go through the legal risk of a wrench attack if there is the possibility that a bank may put a stop to the transaction after a victim initiates it.

Legal gray area

Crypto-holders often operate in a legal gray area. The regulation is complex, and some may opt out of declaring their crypto on their taxes. If a crypto-holder hasn’t declared their crypto on their taxes and they then suffer a wrench attack, they may be less likely to report it because they don’t want to get in additional trouble from the tax authorities. From the criminal’s perspective, this means that targeting a crypto-holder may make it easier to get away with the crime than if they targeted someone with their money in the traditional financial system.

The authorities may not take it seriously

According to Investigating Wrench Attacks: Physical Attacks Targeting Cryptocurrency Users, many victims of wrench attacks fear that the authorities won’t take the crime seriously because cryptocurrencies are seen as “magic Internet money”. This makes them reluctant to report the crimes. On top of this, many police forces simply don’t have the skills and technical knowledge to investigate cryptocurrency-related crimes.

The reluctance to report and the lack of skills within the police can mean that it is more likely for an attacker to get away with a crime when targeting a cryptocurrency holder instead of someone who keeps their money in a bank.

There’s a certain appeal to crypto-crimes

As we have discussed, there are multiple aspects of the crypto-industry that can make crypto-holders more appealing targets than those who keep their money in traditional banking institutions. From irreversible transactions to a lack of pesky bank policies that protect victims, targeting crypto-holders has its advantages.