According to data from the blockchain analysis company Chainalysis, in 2021, cryptocurrency-based scammers and cybercriminals obtained up to 7.7 billion U.S. dollars worth of cryptocurrency from victims, which represents an 81% increase in losses compared to 2020.
It said that of the US$7.7 billion in losses, approximately US$1.1 billion was attributable to a single program purportedly targeting Russia and Ukraine.
Chainalysis stated: “As the largest form of crime based on cryptocurrency, and a unique form of crime against new users, fraud is one of the biggest threats to the continued adoption of cryptocurrency.”
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At the same time, the number of deposits in fraudulent addresses fell from less than 10.7 million to 4.1 million, which may mean fewer victims of individual fraud – but they lose more.
A major source of the increase in cryptocurrency losses in 2021 is the so-called “carpet pull”, that is, the developers of new cryptocurrencies disappear and take away supporters’ funds. By 2021, carpet handles will account for 37% of all cryptocurrency scam revenues for a total of $2.8 billion-up from 1% in 2020.
“Rug pull is very common in DeFi, because with the right technical knowledge, it is cheap and easy to create new tokens on the Ethereum blockchain or other blockchains, and let them go without code auditing. Listed on centralized exchanges (DEXes),” it warned.
The characteristics of investment fraud networks are changing. Chainaylsis found that the number of active financial scams rose from 2,052 in 2020 to 3,300, and their personal life span decreased from more than 500 days in 2016 to 291 days in 2020 and 70 days in 2021.
“Previously, these scams may last longer. As scammers become aware of these behaviors, they may feel more pressure to close their doors before attracting the attention of regulators and law enforcement,” it said.
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Unsurprisingly, as the value of popular cryptocurrencies such as Ethereum and Bitcoin has risen, scams have also increased, although this connection may have been broken last year.
Chainalysis pointed out: “The most important point is to avoid using new tokens that have not been code audited. Code auditing is a process by which a third-party company analyzes the smart contract code behind new tokens or other DeFi projects, and publicly confirms that the contract’s governance rules are Ironically, it does not include a mechanism that allows developers to use investor funds for plunder.”
It added: “Investors may also want to be wary of tokens that lack public-facing materials expected by legitimate projects, such as websites or white papers, and tokens created by individuals who do not use their real names.”
