Chainalysis came up with Crypto Crime report 2022, and unveiled the biggest threats to cryptocurrencies in 2021 in the form of scams. In the preview of its Crypto Crime report, Chainalysis explained the rise in scams in 2021 compared to 2020. The report was published on December 16, 2021. The report found that scams were the largest form of cryptocurrency-based crime by transaction volume, with above $7.7 billion worth of cryptocurrency stolen from victims worldwide.
An overview of the cryptocurrency crimes in 2021 highlighted by Chainalysis :
An overview of the cryptocurrency crimes in 2021 highlighted by Chainalysis :
- Cryptocurrency scams rose to 81% compared to 2020.
- In 2020, scamming activity decreased considerably compared to 2019, mainly due to the absence of any large-scale
Ponzi schemes. - In 2021, a Ponzi scheme named
Finiko , primarily targeting Russian speakers throughout Eastern Europe, stole more than $1.1 billion from victims. - Another scam that led to an increase in scam revenue in 2021 were rug pulls.
- Rug pulls, where crypto developers abandon a project and run away with the investor funds, were particularly common in the
DeFi ecosystem. - In the year 2021, the scams did not typically follow up the sustained price growth in popular cryptocurrencies as happened from 2017-2020.
- The relationship between asset prices and scamming activity remained constant and even decreased irrespective of the price of the cryptocurrencies in 2021.
- The new and less savvy users were more prone to be attracted to cryptocurrency’s growth than the experienced ones.
- Up until 2021, crypto scams increased with the price rise of Bitcoin and Ethereum.
- The total scam revenue increased significantly in 2021 with rug pulls and Finiko ponzi crypto scam.
- However, the number of deposits to scam addresses decreased from little below 10.7 million in 2020 to 4.1 million in 2021.
- This implies that the average amount taken from each victim increased.
- This could imply fewer individual scam victims as well.
- Active scams means that their addresses were receiving funds.
- The money laundering strategies haven’t changed much either, as most of the cryptocurrency sent from scam addresses ended up in mainstream exchanges.
Now a detailed look at the rug pulls and Finiko Ponzi scheme that begun in 2021 according to the Chainalysis report :
- Rug pulls – These were the latest innovation and the most rampant scams in the DeFi ecosystem, being responsible for 37% of all cryptocurrency scam revenue in 2021, against only 1 % in 2020.
- These scams siphoned off above $2.8 billion worth of cryptocurrency from victims in 2021.
- Rug pulls are rampant in DeFi because with the right technical know-how, it’s cheap and easy to create new tokens on the Ethereum blockchain or others and get them listed on decentralized exchanges without a code audit.
- The biggest rug pull of 2021 was by Thodex, a Turkish centralized crypto exchange that swept away cryptocurrency worth $2 billion, which was almost 90% of the total value stolen in rug pulls.
- Finiko Ponzi scheme
- It was a massive Russia-based Ponzi scheme that ran for 19 months from December 2019 to July 2021, that targeted mainly the users in Russia and Ukraine.
- Finiko lured users to invest with either Bitcoin or
Tether , for getting monthly returns of up to 30%, and later also launched its own coin Finiko that traded on several exchanges. - The Ponzi scheme received over $1.5 billion of bitcoin in 800,000 separate deposits.
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