Photo Credit: Reuters
2021 has emerged to be nothing short of an eventful one for the world of cryptocurrencies. Amid crypto adoption becoming a thing, scams in this budding space also made it through the headlines throughout the year. In a recent report, research firm Chainalysis revealed that scams mooched off over $7.7 billion (roughly Rs. 58,697 crore) from investors this year. The most common form of scam was the classic rug pull, where developers launch a scam project, rope in investors, and then abandon the project, escaping with the investors' money.
In total, crypto scams rose by 81 percent this year from 2020 led by rug pulls, the blockchain data platform said in a blog post.
All in all, rug pulls took in more than $2.8 billion (roughly Rs. 21,333 crore) worth of cryptocurrency from victims in this year.
“Rug pulls are most commonly seen in decentralised finance (DeFi). The developers eventually drain the funds from the liquidity pool, sending the token's value to zero, and disappear,” the report said.
Rug pulls are prevalent in DeFi because with the right technical knowledge, it's cheap and easy to create new tokens on the blockchain and get them listed on decentralised exchanges (DEXes) without a code audit.
In November, for instance, investors of a new cryptocurrency called the “Squidgame Cash” or “SQUID” inspired by Netflix series Squid Games were potentially “rug pulled” after the token crashed by 99.99 percent overnight.
The scammers are believed to have collected around $3.3 million (roughly Rs. 22 crore) with this project. Investigations in the case are still ongoing.
The number of crypto scams targeting individual crypto investors have however, decreased in recent times. From around 10.7 million last year, the number of deposits to scam addresses fell to 4.1 million.
"While total scam revenue increased significantly in 2021, it stayed flat if we remove rug pulls and limit our analysis to investment scams,” the report added.
Chainalysis further highlighted that the money laundering strategies of crypto scammers have remained predictable. Most of the stolen cryptocurrencies in 2021 ended up on mainstream exchanges.
Earlier this month, crypto exchange Bitmart lost $196 million (roughly Rs. 1,479 crore) worth of crypto assets in a hack attack. According to a report by NewsRoomPost, a decentralised exchange aggregator called “1inch” was used by the hackers to swap the stolen assets in exchange for Ether tokens.
“Scams represent a huge barrier to successful cryptocurrency adoption, and fighting them can't be left only to law enforcement and regulators,” the report added.
The total crypto crime in 2020 reportedly amounted to around $10.52 billion (roughly Rs. 79,194 crores).
The same report also highlighted that scams and frauds are a major problem that made for 67.8 percent of the total cryptocurrency crime in 2020.
Earlier in November, US' Federal Bureau of Investigation said that cyber scammers are making innocent people use physical cryptocurrency ATMs and digital QR Codes to complete malicious transactions and dupe them off assets.
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