▶What is a Ransomware Attack?

A ransomware is a form of malware that encrypts or locks access to a victim’s digital assets, like their data, systems, or networks, until a ransom is paid, typically in cryptocurrency. The goal is digital extortion: attackers disrupt business continuity or threaten sensitive data leaks to force victims into payment. Victims may include individuals, businesses, hospitals, government agencies, or infrastructure operators.

With increasing regularity, attackers now double down by stealing data before encryption and threatening to publish it unless a ransom is paid. This tactic, known as double extortion, increases the pressure on victims.

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1. Types of Ransomware Attacks

• Locker Ransomware: Locks users out of their devices or systems. Examples include early “police-themed” ransomware that mimicked law enforcement notices.

• Crypto Ransomware: Encrypts files and demands cryptocurrency payment for decryption keys. Unlike locker ransomware, it focuses on rendering data inaccessible rather than denying device access. This form is more damaging and the focus of this article.

• Wiper Malware: Masquerades as ransomware but irreversibly destroys data (e.g., NotPetya), often as a smokescreen for sabotage.

• Ransomware-as-a-Service (RaaS): Ransomware developers lease out malware to affiliates who execute the attacks. This scalable model mirrors legitimate SaaS businesses, often complete with “customer support” for victims.

5. Who They Target

Ransomware attackers typically target organizations that hold valuable or sensitive data, yet lack sufficient cybersecurity measures. Mid-sized financial institutions and accounting firms are often targeted because they store crucial financial data and capital, making them prime candidates for exploitation.

Hospitals and healthcare systems are also common victims, as downtime for these institutions can be life-threatening, with ransomware crippling critical patient care systems.

Educational institutions and government bodies, often operating with limited budgets and outdated IT systems, are also frequent targets. Cybercriminals exploit these vulnerabilities through methods like fake job applications or compromised HR portals, gaining access to sensitive data or networks.

Finally, critical infrastructure and strategic targets, such as utilities, defense contractors, and government servers, are prime objectives for state-backed actors, who use ransomware not only for financial gain but also for geopolitical motives.

2. The role of cryptocurrency in ransomware attacks

In ransomware attacks, crypto is the preferred medium for ransom payments due to its pseudonymity, speed, and global accessibility. Attackers demand payment in Bitcoin, Monero, Zcash, or other privacy coins, knowing that these assets allow them to operate without the same level of scrutiny that conventional banking systems impose.

Once the ransom is paid, laundering the funds becomes the next critical step. Criminals often use mixers and tumblers, decentralized exchanges (DEXs), or cross-chain swaps to obscure the trail of stolen funds. Additionally, peer-to-peer (P2P) exchanges and over-the-counter (OTC) platforms allow for the seamless conversion of crypto into fiat currency, further complicating investigations.

3. The Lifecycle of a Crypto Ransomware Attack

A typical crypto ransomware attack follows a five-phase lifecycle:

Phase 1: Initial Compromise

Here, attackers gain access through various means such as phishing emails containing malicious attachments or links, malvertising campaigns that place harmful code in ads on legitimate websites, and the exploitation of vulnerabilities in remote desktop protocols, virtual private networks (VPNs), or third-party software.

Phase 2: Payload Deployment & File Encryption

Once inside a system, the malware scans for files like .docx, .pdf, .jpg, .zip, and .db, then encrypts them using AES, RSA, or a hybrid of both (e.g., AES for speed and RSA for secure key storage). After encryption, the ransomware often renames the affected files with extensions like .locked, .enc, or .crypted to clearly signal that they have been compromised and to psychologically pressure the victim into complying with ransom demands.

Phase 3: Ransom Demand

Victims typically receive ransom notes in the form of .txt, .html, or even image files that are left on their systems after encryption. These notes outline the attacker's demands, including the exact ransom amount, which is usually requested in cryptocurrencies such as Bitcoin or Monero due to their privacy-focused nature.

Often, the note includes a countdown timer, warning that the ransom will increase or the encrypted files will be permanently deleted if payment is not made within a specified timeframe. To facilitate communication and payment, attackers usually provide links to Tor-based portals where victims can find detailed instructions and, in some cases, engage in live chat with the attackers.

To establish credibility and pressure victims into compliance, some attackers even offer to decrypt one or two files for free as proof that they possess a working decryption key and will fulfill their promise if paid.

Phase 4: Negotiation and Payment

Victims often attempt to negotiate the ransom amount to lower the financial burden. These negotiations can involve significant back-and-forth, with the attacker typically willing to reduce the ransom, but only under certain conditions.

For instance, in one case involving the notorious ransomware group REvil, the initial demand was $50,000 in Monero, a privacy-focused cryptocurrency that offers enhanced anonymity. However, the group agreed to accept $25,000 in Bitcoin, but with a catch—an additional 10% surcharge added due to Bitcoin's relatively higher traceability risk.

Payment is typically made to a wallet address provided by the attackers, and in some cases, a third-party “negotiator” may be involved to facilitate the conversation, helping both sides reach an agreement while offering some level of protection and confidentiality for the victim.

Phase 5: Decryption (Not Always Guaranteed)

If the attacker honors the ransom payment and provides a decryption tool, the victim may be able to recover their files, but this is not always the case. In some instances, the decryption key provided may not work at all or may only partially decrypt files, leaving them corrupted or incomplete.

In cases involving state-sponsored actors or politically motivated attacks, there is also the possibility that the attacker may never provide a decryption key, rendering the ransom payment useless.

4. Who’s behind these attacks—and who they target

Ransomware actors typically fall into two major categories:

(1) Organized Cybercriminal Syndicates:

These groups, often based in Eastern Europe, Russia, or former Soviet states, operate at scale, leveraging Ransomware-as-a-Service (RaaS) models to automate key components of their operations, such as infection, ransom collection, and even decryption.

They collaborate through darknet forums and underground marketplaces, creating a network effect that amplifies their reach and operational efficiency. Over time, these groups have evolved from launching indiscriminate attacks to focusing on highly targeted "big game hunting", aiming for high-value, high-profile targets with the potential for million-dollar payouts.

Notable examples of such groups include Conti, LockBit, REvil, and BlackCat, each responsible for numerous high-profile attacks.

(2) State-Affiliated Actors:

These actors often use ransomware to cause disruption and inflict damage on their targets, rather than seeking financial gain. One notorious example is WannaCry, which was linked to North Korea’s Lazarus Group. Their attack targeted unpatched Windows systems worldwide and was notable for its poor ransom collection mechanisms, leading many experts to believe it was less about making money and more about testing capabilities, sending a message, or experimenting with large-scale cyber disruptions.

6. The tools and methods used to launder ransom payments

Once the ransom is paid, laundering the funds becomes a critical step for attackers to obscure the origins of the money and avoid detection. Common techniques include:

(1) Peel Chains

The laundered funds are gradually split and sent in small amounts from one wallet to many others over time. This process serves to "peel off" untainted coins, making it harder for investigators to trace the source of the funds.

For example, a large sum like 1 BTC may be broken down into 0.01 BTC and sent to 100 different wallets. This creates multiple, smaller chains of transactions, each with its own set of addresses and movements, further complicating efforts to trace the funds back to their source.

(2) Mixers and Tumblers

These services enhance privacy by breaking the direct link between sender and recipient, making it more challenging for blockchain forensics to trace transactions.

There are two main types of mixers: custodial and non-custodial. Custodial mixers take control of the cryptocurrency, mixing it with other users' funds and then returning the funds to their original owners in a randomized manner. Whereas non-custodial mixers allow users to retain control of their funds while still participating in the mixing process, providing greater security and reducing the risk of theft

In addition to traditional mixing services, some actors use privacy coin swaps to further obscure transaction paths, such as exchanging Bitcoin (BTC) for Monero (XMR) and then back to Bitcoin.

(3) Chain Hopping (Cross-Chain Swaps)

This involves moving assets across different blockchains, making it more challenging to trace transactions. It typically involves decentralized exchanges allowing users to trade assets directly without a centralized intermediary. Token bridges, such as RenBridge or THORChain, facilitate the transfer of tokens between different blockchain ecosystems by locking assets on one chain and minting corresponding tokens on another, enabling cross-chain liquidity.

(4) Flash Loans & DeFi Layering

Flash loans enable attackers to manipulate markets, arbitrage, or execute complex financial strategies. This process often involves using DeFi protocols such as Curve, Tornado Cash, and Uniswap, where assets can be quickly swapped, mixed, or laundered through smart contracts.

Additionally, criminals may use NFT marketplaces as a form of obfuscation, where they exchange stolen funds for NFTs or digital assets, which may then be sold or traded on various platforms.

By combining flash loans with DeFi platforms and NFT market obfuscation, attackers can significantly delay or even avoid detection.

(5) P2P & OTC Conversions

P2P platforms and OTC brokers provide an avenue for converting cryptocurrencies into fiat currency without the need for extensive KYC verification, which is often a legal requirement in traditional financial institutions. These platforms facilitate direct transactions between buyers and sellers, making it easier for users to bypass regulatory scrutiny. In regions with weaker or less enforced regulations, these platforms become even more attractive, offering a degree of anonymity that can be exploited by cybercriminals and ransomware actors.

7. Best Practices: Preventing and Responding to Ransomware Attacks

(1) For Individuals and Organizations:

To effectively prevent and respond to ransomware attacks, individuals and organizations must implement a series of best practices designed to minimize vulnerabilities and ensure rapid recovery.

First, maintaining offline, immutable, and regularly tested backups is important for ensuring that data can be quickly restored in the event of an attack. Regular updates to software and firmware are also essential, as they help to fix known vulnerabilities and prevent attackers from exploiting them.

Also, adopting a zero-trust architecture and limiting admin privileges ensures that only authorized individuals have access to sensitive systems, reducing the likelihood of lateral movement by attackers within the network.

Security awareness training for employees is equally important, as it helps them to identify and avoid common threats like phishing, malvertising, and social engineering.

Finally, having a well-prepared incident response plan, specifically tailored to ransomware attacks, ensures a swift and coordinated response. This plan should include clear communication protocols, legal considerations, and predefined roles and responsibilities, ensuring that the organization can quickly contain and mitigate the attack while also complying with relevant regulations.

(2) For Blockchain Investigators and Law Enforcement:

For blockchain investigators and law enforcement, specialized tools can be used to map transactions across the blockchain and trace the flow of ransom payments to identify the attackers' wallet addresses. By analyzing the inflows of ransom payments into these services, investigators can track the movement of stolen assets.

Collaboration with exchanges and their compliance teams is another crucial step in freezing ransomware funds before they can be converted into fiat currencies or further laundered.

Finally, ransomware groups often operate across multiple countries, so investigators need to work collaboratively across jurisdictions, sharing information and coordinating actions to maximize the chances of success in disrupting these global operations.

8. Conclusion

Ransomware attacks are no longer a niche cyber threat, but a global criminal economy. As attackers evolve, so must the defenders. What makes it especially challenging is the integration of cryptocurrency, which, while offering privacy, also provides a clear trail of funds for those equipped to follow it.

At Chainvestigate, our expert blockchain investigators are adept at analyzing ransom addresses, service providers receiving funds, and laundering patterns. We work to illuminate that trail, identify the perpetrators, and empower organizations to fight back.

Ransomware attacks continue to grow in scale, complexity, and cost. Once seen as random malware campaigns, they have evolved into sophisticated operations strategically targeting high-value victims.

At Chainvestigate, we specialize in dissecting the blockchain component of these attacks—tracing ransom payments, identifying laundering methods, and working closely with law enforcement to shut down these criminal operations.

This deep dive breaks down:

• What ransomware is and how it works

• The types of ransomware attacks

• The role of cryptocurrency in ransomware attacks

• The lifecycle of a ransomware incident

• Who’s behind these attacks—and who they target

• The tools and methods used to launder ransom payments

• Best practices for protecting against these threats