Scams in the crypto currency industry have grown a whole lot this year and once again, they have emerged as the dominant form of crypto-currency based crimes, according to Chainalysis’ Crypto Crime Report.
2021’s crypto scam earnings exceeded $7.7 billion, up 81% from 2020 as reported on the platform.
Crypto Scams in 2020
This year’s crypto scam revenue climbed significantly compared to 2020, yet it still fell short of the all-time high set in 2019.
The Finiko Ponzi scheme, which targeted Russian speakers throughout Eastern Europe and took in more than $1.1 billion from victims in 2021, was singled out in the report.
“While total scam revenue climbed dramatically in 2021, when we exclude rug pulls and confine our study to investment scams–even with the emergence of Finiko–it remained steady,” the paper stated.
This means that there were fewer individual scam victims, however the average amount taken from each victim grew, according to Chainalysis.
The report also stated that, in comparison to prior years, criminals’ money laundering techniques remained unchanged, since most coins sent to fraudulent addresses ended up on mainstream exchanges.
The emergency of Rug Pulls
Rug pulls plagued the DeFi ecosystem in 2021, netting victims over $2.8 billion in cryptocurrency.
Rug pull is a relatively new sort of exit fraud, in which project insiders drain funds from the liquidity pool, causing the token’s price to plummet.
In 2021, they contributed 37% of all bitcoin scam earnings, compared to just 1% in 2020.
“It’s crucial to recall that not all DeFi projects start as rug pulls,” Chainalysis said, citing the year’s largest rug pull, which was centered on Turkish CEX Thodex.
Nearly 90% of the value stolen in rug pulls this year is due to the Thodex fraud, in which consumers lost over $2 billion in cryptocurrency.
All of the other 2021 rug pulls started out as DeFi ventures, with AnubisDAO and Uranium Finance being the biggest of the bunch.
Compared to previous years
The average lifespan of financial scams has decreased, according to the research, which may explain why “the number of financial scams active at any point in the year–active meaning their addresses were receiving funds–rose dramatically in 2021, from 2.052 in 2020 to 3.300.”
According to Chainalysis, the long-standing statistical association between crypto prices and scamming activity has shifted this year, indicating that the crypto sector is maturing.
“Scams often come in waves corresponding with prolonged price growth in prominent cryptocurrencies like Bitcoin and Ethereum, which typically also leads to influxes of new users,” according to the paper, which noted that scamming activity peaked after bull runs in 2017 and 2020.