The Rising Tide of Crypto Scams: A Comprehensive Report on Illicit Losses in the Blockchain Space

The Rising Tide of Crypto Scams: A Comprehensive Report on Illicit Losses in the Blockchain Space

TRM Labs, a prominent firm specializing in blockchain analysis and the prevention of cybercrime, has recently published a detailed report outlining the significant sums of money lost to malicious actors within the crypto industry throughout 2022. These figures are particularly striking, given the decline in prices and waning interest in the market over the past year.

Despite the plummeting value of various digital assets due to the crypto winter and the subsequent collapses that ensued, the occurrence of scams and thefts within the industry has not seen a substantial decrease. Instead, it has remained proportionate to similar cases observed in previous years.

For instance, in 2021, a staggering $12 billion was lost to DeFi (Decentralized Finance) exploits. Although the $3.7 billion lost to exploits in 2022 may seem significantly lower in comparison, it is important to recognize that the $12 billion represented a sevenfold increase in DeFi exploits compared to the previous year. Hence, 2022 stands out as an anomaly in this regard.

Throughout 2022, a total of $3.7 billion was stolen across more than 175 incidents, resulting in an average loss of $20 million for investors who fell victim to these exploited projects. Notably, the smart contracts that were the primary target of DeFi exploits in 2021 appear to have improved, as only approximately 10% of cyberattacks in 2022 were protocol exploits. Instead, the remaining 90% targeted other infrastructure within the platforms.

Pyramid schemes and similar Ponzi platforms accounted for a loss of approximately $7.8 billion in 2022. When considering other scams, such as romance frauds and phishing attacks, the overall losses suffered by the crypto community in 2022 exceeded $9 billion. While pyramid scheme-type frauds may have provided some semblance of value to investors before their ignominious collapse, fraudulent investment platforms and tokens, often promising nothing more than a pipe dream, doubled in number during 2022. Consequently, a staggering $2.57 billion worth of crypto was outright stolen from investors worldwide.

Additionally, pyramid schemes constituted the majority of ill-gotten gains, with approximately $7.8 billion vanishing overnight once these schemes were unable to recruit new unsuspecting victims. Among the top 10 pyramid schemes that collapsed in 2022, Forsage and the Trade Coin Club took the lead, closely followed by Bitconnect.

It is worth noting that around 40% of pyramid schemes in 2022 were conducted on the TRON network, primarily involving USDT (Tether). The report also sheds light on the sums involved in illicit markets, which, although highly illegal, generated a relatively modest revenue of approximately $1.5 billion for the perpetrators, significantly less than the amount accrued through outright fraud.

The TRM Labs report paints a concerning picture of the crypto industry’s vulnerability to scams and cybercrime. Despite the declining market conditions, the persistence of malicious actors and the substantial losses incurred by investors serve as a stark reminder of the need for enhanced security measures and regulatory oversight within the blockchain space.


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