Crypto scams cost investors US$7.7 billion in 2021
While the momentum behind crypto seems like a runaway train, a lot of investors are being scammed out of a lot of money. Research from Chainalysis shows that the total cost of crypto scams hit US$7.7 billion in 2021, a massive 81 per cent increase on the previous year.
This news comes as a new scam that cost investors US$150,000 was reported from a new NFT platform, Fractal.
Incredibly, this is not the biggest year for crypto losses – that goes to 2019, where the total losses were just shy of US$10 billion.
Chainalysis puts the drop in stolen money in 2020 to an absence of large-scale ponzi schemes and suggests the renewed lift in 2021 has to do with a new, emerging type of scam. “Another change that contributed to 2021’s increase in scam revenue: the emergence of rug pulls, a relatively new scam type particularly common in the DeFi ecosystem, in which the developers of a cryptocurrency project — typically a new token — abandon it unexpectedly, taking users’ funds with them,” the report notes. A famous example of this rug pull scam was the Squid Coin scam, which attracted investors off the back of the popular Netflix show, but ended up making away with nearly $5 million.
Chainalysis acknowledges that the prevalence of these scams – which are increasing in frequency, though decreasing in how long they last – is one of the biggest inhibitors to trust in crypto investment. For many, the challenge is a lack of awareness and the ability to spot the red flags that highlight a likely red flag. As awareness grows, it follows that the effectiveness of these scams in the years ahead will be greatly reduced.