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Popular meme cryptocurrency Dogecoin (DOGE) has increasingly become connected to several illicit activities such as terrorism financing, Ponzi schemes, and child sex abuse, according to a new report by Elliptic.

The blockchain analytics company revealed in its report that the meme coin popularized by Elon Musk had become a popular choice for bad actors to facilitate transactions in the millions.

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).

In July 2021, Israel’s National Bureau for Counter Terror Financing issued a seizure order against 84 crypto addresses believed to be associated with the Hamas group. One of those wallets contained $40,235 in Dogecoin.

Additionally, the analytics company also discovered that a small but growing number of CSAM vendors on the darknet and outside now receive Bitcoin. Elliptics only identified $3000 in Dogecoin, which is a small amount.

But it warned that this could represent a growing “appetite for criminal actors to adopt a wide range of crypto assets to avoid notice.”

Darknets accepting Dogecoin

Several darknet markets and malware campaigns also accept Dogecoin. Elliptics identified darknet services such as Just-Kill that still accept Dogecoin while others no longer accept it.

Besides terrorists, far rights extremist groups also appear to have taken a liking for cryptocurrencies, including Dogecoin. These groups, far-rights blog sites, news, and video sharing platforms, use Dogecoin to raise funds when they can’t use traditional methods.

Infowars is one such website. The far-right globalism-battling news website has raised over $1,700 in Dogecoin.

This discovery is similar to the revelations of the Financial Action Task Force last year about far-rights groups using cryptocurrencies such as Bitcoin and privacy coins.

However, Ponzi schemes, theft, and fraud appear to be the biggest illicit use of Dogecoin. Elliptics claim to have identified over 50 cases where criminals cashed out millions of dollars in Dogecoin.

Popular instances include the alleged theft of $119 million in Dogecoin associated with a Turkish Ponzi scheme last year. In 2020, the Chinese government also seized more than $20 million DOGE in the $6 billion PlusToken Ponzi scheme.

Dogecoin is increasingly connected to illicit activity including Ponzi schemes, the financing of terrorism and child sex abuse material (CSAM), according to a new report by blockchain analytics firm Elliptic.

Per the report, the meme coin has enjoyed growing popularity as a method of payment; however, aside from legitimate causes, it has also caught the attention of bad actors, with “millions of dollars worth of Dogecoin transactions connected to illicit activity,” identified.

“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),” said Elliptic.

Pointing to the “increasing adoption” of Dogecoin for terrorism financing, the report cited a July 2021 seizure order conducted by Israel’s National Bureau for Counter Terror Financing against 84 crypto addresses believed to be linked to militant group Hamas or otherwise used in terror-related activity; among the crypto addresses were wallets containing $40,235 in DOGE.

The report also flagged up a “small and growing number” of CSAM vendors operating both on the darknet and clearnet that have received payment in Dogecoin. Although the actual amount of Dogecoin identified by Elliptic in this case is low—less than $3,000—analysts warned that it points to an “appetite for criminal actors to adopt a wide range of cryptoassets in a bid to avoid notice.”

Scams and Ponzi Schemes

The “most notable” crime relating to Dogecoin, according to Elliptic, is thefts, scams and Ponzi schemes.

According to the firm, to date it has identified more than 50 instances of thefts, frauds and Ponzi schemes which helped criminals to make “hundreds of millions of dollars worth of Dogecoin.”

These include the $6 billion PlusToken Ponzi scheme, which resulted in the seizure of more than $20 million worth of DOGE by Chinese authorities in 2020, and an alleged theft of $119 million worth of Dogecoin linked to a Turkish Ponzi scheme in 2021.

Far-right extremists embrace crypto

Far-right extremist groups—when excluded from traditional methods of raising funds—have also turned to cryptocurrencies including Dogecoin, Elliptic noted.

According to the firm, these include numerous far-right news sites, blogs and video sharing platforms.

One such news website, Infowars, which claims it is “battling globalism and promoting a pro-human future worldwide,” has so far raised more than $1,700 (£1,383) in Dogecoin.

Elliptic’s findings mirror those of the Financial Action Task Force, which last year reported that far-right groups are increasingly turning to cryptocurrencies including Bitcoin and privacy coins.

Dogecoin, which in recent months has been heavily promoted by Tesla CEO Elon Musk, is currently the world’s 10th largest cryptocurrency with a market capitalization above $8 billion.

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Venture capital firms and other investing institutions have continued pouring funds into the blockchain sector

A statement released on Monday confirmed that London-based crypto analytics and insight firm Elliptic had closed a $60 million Series C funding round led by Evolution Equity Partners. The round saw two of Europe’s well-known investors in tech, Octopus and AlbionVC, participate. Other major firms like Wells Fargo, Digital Currency Group and SoftBank also featured.

“As announced in the Wall Street Journal today, we have closed a $60m Series C funding round. The round is a milestone and a recognition of our critical role in the crypto ecosystem,” a blog post by CEO Simone Maini read.

The post also pointed out that the funding would be invested in expansion efforts, with a portion directed into research and development. Elliptic sees these areas as critical in adapting to the ever-growing crypto space and remaining relevant in service provision to institutional customers. The firm further maintained that it has sought to remain ahead in accuracy, scale and reliability.

Maini acknowledged the latest funding round as a result of the analytics firm’s contribution to the crypto industry. The chief executive told Reuters that Elliptic’s efforts played a critical role in the ecosystem’s growth and in enhancing the adoption of digital assets.

“Without really robust basic insights and tooling that can help facilitate financial crime, protection and risk management, it’s really hard for these businesses to be able to embrace the opportunity,” she noted.

Richard Seewald, the founder of Evolution Equity Partners, also recognised Elliptic’s role in the safe adoption of crypto in a digital world, adding that the funds will boost the analytics firm’s reach.

“The latest fundraise provides Elliptic more resources to expand their market-leading crypto asset risk management to financial organizations, businesses, and regulatory authorities around the world.”

The blockchain intelligence firm provides transaction analytics for conventional financial institutions, FinTech firms and government bodies. It also offers risk management services for crypto companies. Elliptic has bagged over 100 customers along the way since its establishment eight years ago.

Financial crime compliance has become increasingly crucial. According to SoftBank Investment Advisers’ Neil Cunha-Gomes, Elliptic’s early entry into the space has given it the benefit of trust from financial institutions. He thus feels that Elliptic is in a convenient position to facilitate the secure adoption of crypto.

Several other crypto analytics firms have been expanding through funding in recent months. In June, Chainalysis raised $100 million in a Series E funding round that saw its valuation cross the $4 billion mark. Around the same time, San Francisco-based TRM Labs gained an initial $14 million in fundraising.