Silicon Valley-based crypto intelligence firm CipherTrace has released its quarterly Anti-Money Laundering Report, and its findings are staggering.

All in all, the company estimates that cryptocurrency thefts, scams, and frauds already account for more than $1.2 billion in losses in 2019—and the year has only just begun.

By comparison, CipherTrace estimates that $1.7 billion was lost to fraud and scams in all of 2018.

“These thefts only represent the losses that are visible. CipherTrace estimates the true number of crypto asset losses was much higher,” the company’s report notes.

Among the total, CipherTrace counts the $850 million allegedly misappropriated by iFinex—the company that operates both the Bitfinex cryptocurrency exchange and the stablecoin Tether. The rest is made up of criminal theft “from exchanges and infrastructure” that the company says tallies up to more than $356 million—including the $195 million “exit scam” that was the “implosion of QuadrigaCX,” according to the report.

“Customers suffered losses of approximately US$195 million when Canada's major cryptocurrency exchange, QuadrigaCX, imploded after the CEO mysteriously perished in India, allegedly along with the passwords to virtually all of the exchange’s assets,” states the report. “CipherTrace analysis casts severe doubt that this was anything other than a theft, fraud, or foul play.”

The report provides a detailed analysis of the known facts surrounding the QuadrigaCX case, and while the company concedes that “the details may never be known,” it claims that the facts suggest the missing funds were the result of “either theft due to foul play or an insider theft—i.e., an exit scam.”

CipherTrace says its analysts are actively working to “uncover the true cause” of the mysterious $195 million loss in customer funds, “as well as any potential relationship to money laundering.”

The cryptocurrency intelligence firm also highlights the importance of the latest dubious character to enter the saga, Panamanian payment processor Crypto Capital—which the report notes also provided its services to the beleaguered Bitfinex.

“Somewhat analogous to QuadrigaCX, which also had an intimate relationship with Crypto Capital, fast-paced and casual relationships with non-bank entities raises a number of issues regarding regulation,” CipherTrace’s report states. “First, where these ‘intimate’ relationships exist—i.e., there was no contract in the case of Bitfinex and leaked emails from the late CEO of QuadrigaCX show a similarly cavalier way of conducting business—sound anti-money laundering controls tend to go out the window.”

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Bitfinex is accused by the New York State Attorney General of commingling customer and corporate funds with Crypto Capital, without a formal contract, and then raiding Tether reserves (assets that supposedly back the stablecoin at 100 percent) to cover an $850 million loss to the Panama-based “bank.” Bitfinex vehemently denied the allegations, suggesting that the attorney general’s “court filings were written in bad faith and are riddled with false assertions,” and that the Crypto Capital funds “are not lost but have been, in fact, seized and safeguarded.”

According to CipherTrace, the entire Bitfinex and Tether mess is the result of a lack of “sound regulation” in certain jurisdictions—holes in the global regulatory fabric that ultimately do more harm than good for the crypto businesses that choose to operate within them.

“[E]xchanges and other crypto asset that do business in less regulated countries, as is in the case of Tether and Bitfinex, typically have difficulty gaining traditional banking relationships,” the report states. “This forces digital asset businesses to deal with 'shady' operators, and often in geos like Panama where fraud is sometimes de rigueur.”

The allure of lax regulatory frameworks is understandable—but it isn’t worth the risk this causes for users and investors, or the headaches and potential legal trouble to which crypto businesses are exposing themselves, says CipherTrace.

The same rules that keep “bad actors out of the crypto economy” will also ensure legitimate businesses keep their customers happy and their money safe.

In the meantime, though, crypto has been struggling through a bear market for the first quarter of the year. At least the scammers are bullish.