Buyer Beware: Crypto Scammers Raked In $14 Billion In 2021

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According to blockchain research firm Chainalysis, crypto scams reached an all-time high of $14 billion last year, a record figure that comes as regulators claim more power over the fast-growing sector.

Rising interest in cryptocurrency has fueled most scams

Crypto crime hit a new high in 2021, according to a recent analysis, as fraudsters stole $14 billion worth of cryptocurrency.

According to the “Crypto Crime Report 2022” released by blockchain data company Chainalysis on Thursday, January 6, this is double the $7.8 billion stolen by fraudsters in 2020.

The findings come amid heated debates about how to regulate cryptocurrency, with regulators keen to protect the growing class of small investors flocking to digital currencies.

With the recent surge in interest in cryptocurrencies, it is no surprise that “Olympic-level scammers” are seeing new opportunities for illegal behavior, according to William E. Quigley, a prominent investor and co-founder of WAX blockchain. Quigley said during a panel discussion held by blockchain company Light Node Media last month that the high-tech aspect of cryptography will continue to attract savvy fraudsters.

Consider the recent “Squid Game” scam, in which investors claim that a new SQUID cryptocurrency token and an immersive online game was nothing more than a hoax. According to investors, the creators disappeared when the value of the coin rose and appeared to be paying more than $3 million.

In absolute numbers, crime is still increasing but the ecosystem is becoming much safer. Of course there is [are] “There are a lot of caveats to that,” said Kim Grauer, director of research at Chainalysis.

Related article | Knowledge is Power: How to Stay Protected from Crypto Fraud

Newcomers have been lured by the promise of quick returns that crypto proponents are demanding, as well as the idea that bitcoin can be used to hedge against rising inflation. Despite this, cryptocurrencies are still subject to inconsistent regulation, leaving investors vulnerable to fraud.

The majority of criminal profits always come from financial fraud, according to the company’s results over the past five years. However, with Bitcoin growing at such a rapid pace, overall economic activity across all blockchains has increased from $2.3 trillion to $15.8 trillion, reducing the importance of criminal activities.

BTC/USD continues to decline. Source: TradingView
DeFi transactions were a lot of cheating

According to Chainalysis data, DeFi transactions increased by 912% in 2021. Decentralized tokens like shiba inu have made impressive gains, fueling a feeding frenzy among DeFi tokens.

When it comes to dealing in this immature crypto economy, there are a number of red flags.

According to Kim Grauer, Head of Research at Chainalysis, one of the problems with DeFi is that many of the new protocols being introduced have coding weaknesses that hackers can exploit. In 2021, these vulnerabilities were used in 21% of all hacking attempts.

Related Article | DeFi Hype deck risks after an hour-long crypto scam

In 2021, criminals stole $3.2 billion in cryptocurrency, with 72% of the DeFi protocol being hacked or exploited.

SEC President Gary Gensler told Yahoo Finance in October that DeFi “will end badly” unless investor protections are strengthened.

The Commodity and Futures Trading Commission fined the DeFi Poly Market protocol $1.4 million earlier this week for operating an “unregistered binary options market,” ordering the protocol to “terminate” its operations.

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