Thursday, March 28

Cryptocurrencies: the bait that has made cybercriminals earn almost 12.4 billion euros in 2021

The use of cryptocurrencies begins to spread. Total transaction volume has reached $15.8 trillion (almost 14,000 million euros) in 2021. This represents 568% more compared to the previous year, according to data provided by Chainalysis, a company specialized in blockchain, in his report ‘Crypto Crime Report 2022’.

This adoption not only represents a change in the way in which people and companies interact with money, it also becomes one more route among those used by cybercriminals to carry out their actions. In 2021, they earned 14 billion dollars (about 12.4 billion euros) compared to 7.8 billion in 2020.

In the document they warn that the criminal use of cryptocurrencies not only harms the victims, it also creates “enormous impediments” to the adoption of these new currencies and increases the likelihood that governments will impose restrictions on their employment.

7.8 billion dollars in scams

The cryptocurrency-based crimes that increased the most in 2021 by transaction volume have been scams and theft of funds.

The first category totaled 7.8 trillion dollars, of which 2.8 trillion are due to what is known as rug pulls. This is a type of scam where developers build what looks like a new legit cryptocurrency project. They receive investments until, suddenly, all kinds of activity stops and they disappear with the money.

A single platform, Thodex, concentrated 90% of the money lost in this type of scam during 2021. Its CEO, Fatih Faruk Ozer, disappeared last April shortly after leaving the wallet he created in 2017 inactive and its users could not recover the investments.

The rest of rug pulls involved decentralized finance projects (DeFi, for its acronym in English), applications based on technology blockchain that do not depend on intermediaries (such as banks) to operate. In almost all cases, developers have tricked investors into buying tokens and then have taken its value to zero.

In the report they point out two main reasons why these types of scams are common in DeFi. On the one hand, the volume of transactions on these platforms has grown by 912% in 2021 and performances like the one registered by Shiba Inu make them very attractive.

At the same time, it is very easy for those with the right technical skills to create new tokens DeFi and getting them listed on exchanges, even without a code audit (process by which a third party company analyzes the smart contract code behind a new token or another DeFi project and confirm that it is trustworthy).

“It is likely that many investors would have avoided losing funds to credit scams. rug pulls if they had checked if DeFi projects had undergone a code audit,” the Chainalysis report states.

theft of funds

The second of the crimes in transaction volume during 2021 were the Cryptocurrency thefts worth approximately $3.2 trillion, an increase of 516% compared to 2020. Roughly 2.2 trillion of those funds (72% of the 2021 total) were stolen from DeFi protocols.

In 2020, just under $162 million worth of crypto was stolen from DeFi, 31% of the total for the year. A figure that represented an increase of 335% over that registered in 2019. In 2021, it increased another 1,330%.

This means that as DeFi platforms grow, so does the interest of cybercriminals to use them as bait.

“DeFi is one of the areas that presents the most opportunities in the cryptocurrency ecosystem, both for entrepreneurs and users. But it is unlikely that its full potential can be exploited if the same decentralization that makes it so dynamic also enables widespread scam and theft”, the report warns.

“One way to combat fraud is better communication,” they advise from Chainalysis. Both the public and private sectors have an important role to play in teach investors how to avoid dodgy projects. In the longer term, the industry may also need to take more drastic measures to prevent tokens associated with potentially fraudulent or unsafe projects are listed on major stock exchanges.



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