Crypto Scam Falls

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Chainalysis Analysis: After naive newcomers leave the market, crypto frauds decrease by 65%

Crypto Scam Falls
Crypto Scam Falls / Image Credit: CRYPKYP
1660720227 17 Aug / 07:10

Less naïve retail investors and decreasing asset prices have made fraud less tempting, but hackers salivate the onslaught of new DeFi apps.

A recent crypto crime study suggests that fewer individuals have fallen victim to cryptocurrency scams in 2022 due to dropping asset values and the departure of naïve crypto users from the industry.

According to a survey published by Chainalysis on August 16, the year-to-date revenue from crypto scams stands at $1.6 billion, a 65% decrease from last year. This dip appears to be related to the falling values of cryptocurrencies.

“Since January 2022, fraud revenue has decreased roughly tandem with Bitcoin’s price. The total number of individual transfers to frauds in 2022 is the lowest it has been in the preceding four years.

The report’s author, Chainalysis’ Cybercrimes Research Lead Eric Jardine, adds that crypto investors are more susceptible to fraud during bull markets when investment possibilities and outsized profits are most alluring to victims.

Jardine further theorized that bull markets are characterized by an increase in the number of new, novice cryptocurrency users, who are more susceptible to falling prey to frauds.

The study also distorted the numbers by the relatively significant PlusToken and Finiko scams of 2021, which generated $3.5 billion in fraudulent money.

In contrast, Jardine observes that the most significant fraud of 2022 has only amassed $273 million and is associated with the cannabis investing site, which has allegedly locked investors out of their accounts on their cannabis-focused “e-growing” service.

While scam income has decreased this year, Jardine observes that crypto-based hacking has increased by 58.3% to $1.9 billion through July 2022, excluding the $190 million Nomad bridge attack that began on August 1.

Jardine stated that this increase is mainly related to the exponential growth of DeFi applications in 2021:

The open-source code of DeFi protocols makes them unusually susceptible to hacking, as thieves may study it endlessly in search of vulnerabilities.

However, according to Jardine, it’s not all terrible, as smart contract programming languages such as Solidity are relatively new, and these flaws might “benefit security by allowing code audits.”

The investigation also highlighted that a substantial proportion of these hackers originated from North Korean elite cyber teams, such as the Lazarus Group, and that these groups were responsible for almost half of the stolen cryptocurrency.

Jardine also reported that darknet market income is down 43% thus far in 2022, mainly owing to German law authorities’ April 5 server shutdown of the Russian darknet Hydra Marketplace.

Darknet marketplaces are black markets on the dark web that provide unlawful products and services for sale, frequently accepting cryptocurrency as payment.

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