Losses from crypto hacks surged 60% to $1.9 billion from January to July, Chainalysis says

A representation of virtual currency Bitcoin and small toy figures are placed on the computer’s motherboard in this illustration taken Jan. 7, 2021. Picture taken Jan. 7, 2021. REUTERS/Dado Ruvic/File Photo

NEW YORK, Aug 16 (Reuters) – Losses from cryptocurrency hacking surged nearly 60% in the first seven months of the year to $1.9 billion, driven by a rise in funds stolen from decentralized finance (DeFi) protocols, according to a blog post. from blockchain analytics firm Chainalysis released on Tuesday.

In the same period last year, stolen funds from hacking amounted to 1.2 billion dollars.

DeFi applications, many of which run on the Ethereum blockchain, are financial platforms that enable crypto-denominated lending outside of traditional banks.

Chainalysis noted that the trend is unlikely to reverse anytime soon, given the $190 million hacking of cross-chain bridge Nomad and the $5 million hacking of several Solana wallets already in the first week of August. read more

“DeFi protocols are uniquely vulnerable to hacking, as their open source code can be studied ad nauseum by cybercriminals looking for exploits, and it is possible that the protocols’ incentives to reach the market and grow rapidly lead to a lapse in security best practices,” said Chainalysis in the blog.

Much of the funds stolen from DeFi protocols can be attributed to “bad actors” associated with North Korea, particularly elite hacking entities such as the Lazarus Group, the US firm wrote.

Chainalysis estimates that so far this year, North Korea-linked groups have stolen approximately $1 billion worth of cryptocurrency from DeFi protocols.

In terms of crypto fraud, the blockchain intelligence firm saw a sharp 65% drop through July, in line with the decline in digital asset prices. Total fraud revenue in the year to July was $1.6 billion, down 65% from around $4.46 billion in the same period last year.

Scammers may pose as legitimate businesses and offer fake crypto coins or tokens.

“Fraud is down primarily because of the crypto downturn, but also because of the many law enforcement gains against fraudsters and the product solutions that exchanges can use to combat fraud,” Kim Grauer, Chainalysis’ director of research, said in an email to Reuters.

Crypto market cap late Thursday was $1.1 trillion, according to CoinGecko, down more than 50% from around $2.35 trillion at the start of the year. Bitcoin so far this year has fallen roughly 48% in price and hovered between $20,000 to $24,000 in recent months.

Since January 2022, fraud-related revenue has fallen in line with the price of bitcoin, Chainalysis said. Not only did fraud revenue drop, but the cumulative number of individual transfers to fraud in 2022 was the lowest in four years.

“These numbers suggest that fewer people than ever are falling for cryptocurrency scams,” Chainalysis said in the report.

“One reason for this may be that with falling asset prices, cryptocurrency scams – which typically present themselves as passive crypto investment opportunities with huge promised returns – are less enticing to potential victims.”

Reporting by Gertrude Chavez-Dreyfuss Editing by Bernadette Baum

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