Cryptocurrency-based crime reached a new high in 2021

A report by Chainalysis has found illicit addresses received $14bn in deposits during 2021, which was almost twice the amount they collected in 2020.

According to Bleeping Computer, rather than digital extortion, Chainalysis found it was cryptocurrency-related scams – specifically investment-related fraud and straight theft – that saw the biggest climbs in 2021.

It was found that illicit revenue from scams shot up 82% in 2021 to around $7.8bn worth cryptocurrency. Chainalysis researchers attributed a big part of the growth to a climb in ‘rug pulls’, which is a fraud scheme where developers set up seemingly legitimate cryptocurrency projects with the aim of stealing investors’ money and then disappearing.

Around 90% of the over $2.8bn lost to the scams was attributed to Thodex, a Turkey-based exchange, who saw its CEO disappear with users’ funds. In total, Chainalysis tracked 24 rug pull scams in 2021.

Chainalysis also found that roughly $3.2bn in cryptocurrency was stolen over the course of last year, which was a 516% hike on 2020 numbers. Up to almost three-quarters of those losses were from decentralised finance (DeFi) protocols, which saw substantial growth in funds received related to money laundering.

According to Chainalysis head of research Kim Grauer, criminals have flocked to the new DeFi technology for a few different reasons.

She said, “The nature of DeFi means that a lot of the code in these different protocols are open source, which means that a potential criminal can look for bugs in the code that they can exploit.

“Some investors also might be skipping over the vetting process out of a fear of missing out on big returns, making them more susceptible to scams.All of these things are working together to have created an ecosystem where DeFi hacks just really exploded this year.”

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