Cryptocurrency and blockchain technologies have exploded in popularity over the past few years. However, alongside this growth, crypto-related scams have also proliferated at an alarming rate. Scammers have become more sophisticated, and many crypto investors still lack understanding about securely storing and transferring digital assets.
According to new data, blockchain scam losses reached $610 million through the first three quarters of 2023. Throughout the whole of 2022, scammers got just half the amount of $300 million from blockchain projects.
The data is based on the numbers provided by Slowmist Hacked, which collects information about disclosed attacks against blockchain projects. Monetary losses were calculated based on the conversion rate of a particular cryptocurrency at the time of a hack or scam event.
Crypto scam activity in 2023 started slowly, with just $9 million stolen across 9 scams in the first quarter. It was just a small fraction of the $51 million stolen through 20 crypto scams in the first quarter of 2022. However, scam numbers and losses accelerated rapidly in subsequent 2023 quarters.
In the second quarter of 2023, scammers made off with $239 million in losses across 28 scams. That is three times as much as the $80 million stolen in Q2 2022. The third quarter of 2023 recorded staggering losses of $360 million, eclipsing total losses for all of 2022. The Q3 2023 also saw three times more scams than the previous year’s third quarter.
In the fourth quarter, 24 crypto scams have caused $10 million in losses, over twice as many scams as the 11 in Q4 last year. However, the losses are significantly lower than the $117 million stolen during the prior period across those 11 scams.
Overall, while cryptocurrency scams started slowly this year, their scale and impact rapidly exceeded 2022 levels by mid-year and continue to pose significant risks to crypto investors.
Commenting, TIDEX CEO Eric Ma says: “It’s not unusual for these numbers to increase as we come out of the bear market and see signs of a bull market. Scammers will go where the money goes. As we gain more knowledge of crypto, so do bad actors. They can be found everywhere from chats and digital media platforms, to fake enterprises that look like legitimate businesses.”
Biggest scams of the year
Many of the biggest crypto scams in 2023 involved fake investment programs that promised people big returns. Individuals just starting out with crypto and those who have been trading it for a long time sometimes get fooled by these scams when they do not look closely enough for warning signs.
The JPEX scam stole over $190 million of investors’ money. The alleged fraud surrounding the Hong Kong cryptocurrency exchange platform has erupted as one of the largest crypto scams worldwide in 2023. So far, Hong Kong police have arrested over 60 suspects related to JPEX, and over 2,600 victims have come forward.
South Korean company, “Blockchain for Dog Nose Wrinkles” scammed people out of $127 million. The business marketed a blockchain app to identify dogs through their nasal folds, promising up to 150% returns in 100 days, however it was a typical Ponzi scheme.
Legal authorities in India have successfully busted a $120 million cryptocurrency Ponzi scheme The Solar Techno Alliance. Two central figures in the fraudulent operation have been arrested. The investigation found that the company used various persuasive tactics and promises of profits in a short period of time.
Fraudulent investment scheme called CoinDeal cost $45 million to investors all around the world. Suspects promised victims they would earn 500K times more than what they paid. Founders of Fintoch, another Ponzi project, were able to steal over $31 million of user funds.
Lack of consumer confidence and security around crypto remains a major roadblock to wider participation. Lawmakers need to take responsibility to better prevent frauds like elaborate fake investment schemes. More consumer education is equally essential so potential cryptocurrency buyers or traders understand where threats exist.
Concluding, Eric Ma says: “It often takes just a simple Google search to discern whether a platform is safe or not to invest in. Greed is often at the root of our drive to invest in these sort of scams. A good rule of thumb is that if it seems too good to be true, it probably is. Take the time to do your homework before you decide to invest.”
