Crypto Fraud Drops 65% After Gullible Noobs Leave Market: Chainalysis

Fewer people have fallen victim to cryptocurrency scams in 2022 so far due to falling asset prices and inexperienced crypto users exiting the market, a new cryptocrime report reveals.

According to a Tuesday report from Chainalysis, total crypto fraud revenue so far this year is currently at $1.6 billion, a 65% year-over-year decline that appears to be linked to the falling prices of cryptocurrencies:

“Since January 2022, fraud revenue has fallen more or less in line with Bitcoin prices. […] it is not just fraud revenue that is falling – the cumulative number of individual transfers to fraud so far in 2022 is the lowest it has been in the last four years.”

Chainalysis’ cybercrime research lead Eric Jardine, the author of the report, explains that crypto investors are more likely to fall for scams during bull markets when the investment opportunities and big returns are most tempting to victims.

Jardine also surmised that bull markets also typically see a higher incidence of new, inexperienced crypto users, who are more likely to fall victim to fraud.

The researcher said the results are also skewed by the relatively large PlusToken and Finiko scams in 2021, which generated $3.5 billion in total fraud revenue.

Conversely, Jardine notes that the biggest scam of 2022 so far has netted just $273 million and is related to cannabis investment platform JuicyFields.io, which allegedly locked investors out of their accounts on its cannabis-focused “e-growing” service.

Hack and stolen funds

While fraud revenue has fallen over the year, Jardine notes that crypto-based hacking has bucked the trend, increasing 58.3% through July 2022 to $1.9 billion, a figure that does not include the $190 million Nomad bridge hack that began on January 1. August.

Jardine said this increase can largely be attributed to the rise of decentralized finance (DeFi) applications that skyrocketed in 2021:

“DeFi protocols are uniquely vulnerable to hacking, as their open source code can be studied ad nauseum by cybercriminals looking for exploits.”

But Jardine added that it’s not all bad, as smart contract programming languages ​​like Solidity are relatively new and these exploits can “be useful for security as it allows auditing of the code.”

The report also noted that a large concentration of these hackers came from elite North Korean hacking units such as the Lazarus Group, with roughly half of the cryptography stolen in hackers coming from these groups alone.

Jardine also noted that darknet marketplace revenue is down 43% so far in 2022, largely due to German law enforcement shutting down Russian darknet Hydra Marketplace’s servers on April 5.

Darknet markets are online black markets that offer illegal goods and services for sale, often using cryptocurrencies as a form of payment.