Crypto scammers lose out on billions as revenues drop 77%: Report

The Chainalysis ‘Crypto Crime Midyear Update’, released on Thursday, found that crypto crime declined by 65 percent while scam revenues dropped by 77 percent. 

This comes after arguably the industry’s most chaotic year in 2022, which included the fall of cryptocurrency exchange FTX. 

“Last year, the volatility of cryptocurrencies and the high-profile collapse of FTX no doubt shook consumer confidence. But interestingly, through all this, in 2022, illicit activities accounted for a meagre 0.24 percent of total cryptocurrency transaction volume as almost all conventional categories of crypto-related crime fell,” Director of Research at Chainalysis, Kim Grauer, told Arabian Business. 

“So far in 2023, this positive trend has continued and the ongoing decrease in crypto-related crime indicates that the efforts of both the private and public sectors are yielding positive results.”

Chainalysis believes that pressure from law enforcement agencies appears to have dampened illicit activity and that businesses operating in the sector have done their part in protecting users from scams and preventing hacks that have been an issue in previous years, especially for decentralised finance protocols. 

This year, however, crypto transaction volumes are down across the board, which may have factored into the significant drop in illicit activity to some extent. 

“It is worth noting that inflows to legitimate services are only down 28 percent over the last year. By comparison, cryptocurrency inflows to known illicit entities have declined by a staggering $5.2 billion compared to the same time last year, while inflows to risky entities, such as high-risk exchanges and crypto mixers, are 42 percent,” Grauer said. 

Although there has been a market pullback, illicit crypto transaction volume is falling much more than legitimate crypto transaction volume. 

Inflows to illicit addresses are also down in nearly every category, but no form of crypto crime has suffered more than scams, according to the report. 

During the first half of 2023, scammers took in nearly $3.3 billion less in crypto than they did last year, for a total of just over $1 billion.

“This revenue decline is largely driven by the sudden disappearance of two large-scale scams: VidiLook and, to a lesser degree, Chia Tai Tianqing Pharmaceutical Financial Management,” said Grauer.

“The perpetrators of both these scams appear to have exit scammed, as they’ve moved all cryptocurrency out of their primary wallets and ceased deposits and withdrawals for users.”

Ransomware on the rise

However, Ransomware has risen dramatically. Chainalysis is not the only company to confirm this as several cybersecurity reports over the last few months have specifically stated that this form of malicious activity has peaked in 2023 so far. 

But according to the report, ransomware was the only form of crypto-based crime on pace to continue growing this year as attackers have already exported $175.8 million more than they did in the corresponding period last year. 

Ransomware attackers are on pace for their second-biggest year ever, having extorted at least $449.1 million during the first half of 2023. If this pace continues, attackers will extort $898.6 million from victims by the end of the year. 

Expert urges caution

Despite the decline in crypto crime, people should not let their guard down. Like other traditional financial assets, criminals may continue to try to exploit crypto systems for malicious purposes, Grauer said. 

“But unlike their traditional counterparts, cryptocurrencies make it possible for law enforcement agencies to crack down more effectively on these activities.

“Blockchains are inherently transparent and with the right tools, the movement of funds can be tracked despite the efforts cybercriminals take to try to cover their tracks. There is of course room to improve and there are opportunities to connect off-chain data on liabilities with on-chain data to provide better visibility,” she added.