The cryptocurrency landscape has undergone rapid evolution, particularly in the realm of financial crime and fraud.
As the industry matures, the threats facing digital assets have become increasingly sophisticated. From high-profile hacks to state-sponsored cybercrime, 2025 is shaping up to be a defining year for crypto security with the latest shock being the $1.5 Billion Bybit Heist last month.
Fraudsters are exploiting the anonymity, speed, and lack of regulation in the digital asset ecosystem to execute scams, including Ponzi schemes, rug pulls, and fraudulent initial coin offerings (ICOs). Such acts use deceptive marketing, fake identities, and insider manipulation to create artificial market hype, misleading victims into investing in non-existent or overvalued projects.
Thus, as the industry witnesses the shocking and traumatising saga of financial crimes and frauds in Web3, BrandTalk speaks to Erin Fracolli, the Global Head of Intelligence and Investigations at Binance, to understand the security threats facing web3 and the Strategies to Prevent such crimes from defrauding users and entities. Specializing in fraud detection, blockchain analytics, and cybersecurity, Erin also discusses the role of centralized exchanges vs. DeFi in Crime Prevention and the need for collaborative approach. Read on..
On the increasing numbers of financial crimes, Binance Intelligence Head Erin says, “Over the past year, the landscape of crypto-related fraud and financial crimes has evolved significantly. In February 2025 alone, cryptocurrency thefts saw an unprecedented surge, with nine major hacking incidents leading to a total loss of $1.53 billion, a 20-fold increase compared to the previous month.
One of the most notable incidents involved a leading cryptocurrency exchange, which suffered a security breach resulting in the loss of approximately $1.5 billion worth of Ethereum, the largest digital heist in cryptocurrency history. Investigations indicate that state-affiliated cybercriminal groups, particularly from North Korea, were responsible for over $1.3 billion of these stolen funds, underscoring the growing involvement of nation-state actors in large-scale crypto crimes. These events highlight the evolving tactics of cybercriminals and the increasing sophistication of illicit activities in the crypto space.
Evolving nature of financial crimes
In the year 2024 alone, the Web3 ecosystem experienced over 760 security incidents, resulting in losses exceeding $2.3 billion. This marks a 31.6% increase compared to 2023. Notably, phishing attacks became the most costly vector, accounting for $1.05 billion across 296 incidents.
In Bitcoin’s early days (2009-2013), fraud was mostly Ponzi schemes (e.g., Bitcoin Savings & Trust) and darknet market transactions.
From 2014-2017, ICO scams surged, with projects like OneCoin defrauding investors. The DeFi boom (2018-2021) introduced rug pulls, flash loan exploits, and governance attacks. NFTs (2021-2022) saw wash trading, phishing, and insider trading.
Today, AI-driven scams, cross-chain bridge attacks, and state-sponsored hacking (e.g., North Korea’s Lazarus Group) dominate, reflecting the increasing complexity of Web3 financial crimes.
Erin says, “However, they also reinforce the industry’s commitment to strengthening security measures. Crypto exchanges, blockchain analytics firms, and regulatory bodies are enhancing security frameworks, improving real-time monitoring, and fostering global cooperation to mitigate risks and protect investors
As the crypto ecosystem matures, proactive measures such as enhanced KYC/AML procedures, on-chain analytics, and industry-wide collaborations will be essential in addressing emerging threats and fostering a more secure digital asset environment.”
When asked if there are specific regions where she sees a higher concentration of illicit activities, Erin opines:
While we do not publicly disclose specific regions with higher concentrations of illicit activities, we continuously monitor and analyze transaction patterns globally to identify and mitigate any potential risks. Our goal is to ensure a safe and secure trading environment for all our users, regardless of their location.
Strategies for Preventing and Detecting Financial Crime
Cybercriminals exploit decentralized finance (DeFi), non-fungible tokens (NFTs), and cross-chain protocols, making fraud detection increasingly complex. From smart contract vulnerabilities to money laundering through crypto mixers, the risks are vast.
On the strategies to prevent such crimes, Erin argues, “Detecting and preventing financial crime in the digital asset space requires a multi-layered approach, combining advanced technology, regulatory collaboration, and user education.
The industry has seen increasing threats, from sophisticated hacks to state-affiliated cybercriminals, making robust security measures more critical than ever. Exchanges globally are leveraging transaction monitoring, strict KYC/AML protocols, and partnerships with law enforcement to track illicit activities and enhance transparency. At the same time, we’re exploring the potential impact emerging technologies like AI can have in improving systems and threat detection.
The Role of Centralized Exchanges vs. DeFi in Crime Prevention
Centralized exchanges (CEXs) serve as gatekeepers against financial crime, implementing KYC/AML checks, transaction monitoring, and regulatory cooperation to detect illicit activities. They can freeze assets and assist law enforcement. In contrast, DeFi platforms, while transparent, face challenges due to pseudonymity and decentralization, making enforcement difficult. As the entities that most often become target of financial crimes, Erin thinks CEXs such as Binance, Coinbase, Bybit, can inculcate certain practices to stop becoming victim of such crimes.
Centralized exchanges play a crucial role in preventing financial crime, trying to offer a structured and highly regulated environment.
Sharing an example from Binance, Erin says At Binance, we leverage a proactive, multi-layered security approach that includes transaction monitoring, KYC/AML verification, and real-time risk assessments. In 2024 alone, we helped prevent over $2.4 billion in potential fraud losses and froze millions in illicit transactions linked to high-profile cyberattacks. Our active collaboration with global law enforcement, including recent efforts at the APAC Regional Law Enforcement Day, has been instrumental in tracking illicit actors, recovering stolen assets, and setting industry standards for security
That said, we believe the future of crypto security lies in a hybrid approach combining the transparency and innovation of DeFi with the regulatory safeguards and security measures of centralized platforms. By fostering collaboration between regulators, industry leaders, and DeFi developers, we can build a safer and more resilient digital asset ecosystem
Emerging Threats in 2025 and Beyond
As digital assets and Web3 continue to evolve, so do financial crime tactics. Looking ahead, Erin, from her experiences of working in the security field for over a decade and currently serving at Binance, sheds light on the most pressing security threats, including:
The crypto industry faces increasingly sophisticated security threats, driven by AI-powered cybercrime, state-sponsored attacks, and vulnerabilities in emerging technologies.
Deepfake fraud and AI-driven phishing are enabling social engineering scams, as seen in a 2024 attack where a deepfake CEO tricked an exchange employee into approving fraudulent transfers.
State-backed hacking groups stole over $1.3 billion in crypto last year, targeting exchanges and DeFi platforms.
Cross-chain bridges remain a major weak spot, with the 2024 Multichain hack exposing their security risks.
Additionally, API exploits and wallet vulnerabilities highlight the need for stronger authentication and encryption.
To counter these threats, Binance and the industry are and must been investing in AI-driven fraud detection, real-time monitoring, multi-party computation (MPC) wallets, and robust frameworks, while strengthening collaboration with regulators and cybersecurity agencies. Proactive security measures will be critical in maintaining trust and resilience in the evolving digital asset ecosystem
Exchanges & Regulators Must Work Together, says Erin
In an era of rising financial crime in the digital asset space, Erin Fracolli emphasizes the need for greater collaboration between crypto exchanges and regulators.
Effective collaboration between crypto exchanges and regulators is essential for mitigating risks in the digital asset space. Binance emphasizes the importance of such partnerships, highlighting that obtaining licenses from crypto regulators facilitates international cooperation and attracts large investors
Furthermore, Binance’s partnership with regulators underscores its commitment to enhancing compliance standards in line with evolving global cryptocurrency regulations
By working closely with regulators, exchanges can foster a compliant ecosystem, ensuring transparency and security within the industry
Notably, in a response submitted by the Centre for Financial Crime and Security Studies (CFCS) at the Royal United Services Institute (RUSI) to the UK Parliament, CFCS also mentioned that regulators need to understand the emerging trends within the crypto and digital asset space and associated risks. Consistent training of regulators on these new avenues can aid in combatting financial crime. South Korea’s Financial Intelligence Unit (FIU) also recently strengthen its AML Rules to tackle crypto crimes.
How can investors protect themselves from financial crime
As financial crimes in the digital asset space grow, both institutional and retail investors must adopt robust security measures to safeguard their assets. Sharing her strategic advice, Binance’s Erin says,
For institutional investors, it’s crucial to use regulated exchanges, as they adhere to strict compliance and security standards. Additionally, implementing multi-factor authentication (MFA), using cold storage for the majority of assets, and conducting regular security audits are essential. Employee training and having a robust incident response plan are also key.
For retail investors, enabling two-factor authentication (2FA), using reputable wallets, and being cautious of phishing scams are vital. Regularly updating software, using strong passwords, and monitoring accounts for suspicious activity are also important steps.
Overall, staying informed about the latest security trends and diversifying storage solutions can help both institutional and retail investors protect their digital assets.
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