Crypto scam revenue drops 65% in 2022 due to market downturn

As cryptocurrency prices declined, a new report showed, revenue from crypto scams fell to $1.6 billion so far this year, 65 percent lower than levels in July 2021.

The decline in scam revenue was essentially in line with Bitcoin prices from January 2022, blockchain data firm Chainalysis said in the report. Bitcoin currently trades at about $23,451, down from its all-time high of over $68,500 in November 2021.

It wasn’t just scam revenue that dropped – the total number of individual transfers to scams was at its lowest level in four years, suggesting that fewer people are becoming victims of crypto frauds, according to The Chainalysis 2022 Crypto Crime Report.

Eric Jardine, cybercrimes research lead at Chainalysis, said one explanation could be the fall in asset prices that made fraud schemes, which usually entice victims with substantially higher returns, less alluring.

Another reason, said Jardine, could be that there are fewer inexperienced people in the market now than when prices were increasing, which led people to fall for fraud schemes amid the hype and promise of quick gains.

Hacked services

Crypto thefts through hacking of services rose to $1.9 billion until July 2022 from just under $1.2 billion at the same time in 2021, Chainalysis said.

Jardine noted that thefts should not be expected to drop based on cryptocurrency prices. As long as crypto assets held in DeFi (decentralized finance) protocol pools and other services have value and are vulnerable, bad actors will try to steal them, he said.

“The only way to stop them is for the industry to shore up security and educate consumers on how to find safe projects to invest in. Law enforcement, meanwhile, must continue developing their ability to seize stolen cryptocurrency to the point that hacks are no longer worthwhile,” he added.

With a $190 million attack on the cross-chain bridge Nomad and a $5 million hack of numerous Solana wallets in the first week of August, the trend does not seem to be changing any time soon, Jardine said.

This is mainly due to the startling increase in funds being stolen from DeFi protocols, a trend that started in 2021.

Furthermore, North Korean-affiliated criminals, particularly top-tier hackers like Lazarus Group, are responsible for a large portion of the value taken from DeFi protocols. According to the firm’s calculations, entities connected to North Korea have stolen $1 billion or so worth of cryptocurrencies from DeFi protocols in 2022.

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