This year has been monumental for the cryptocurrency sector in terms of mainstream adoption . A recent report published by Grayscale Investments found that more than one-quarter of United States investors (26%) surveyed own Bitcoin ( BTC ), up from 23% in 2020. With the holidays around the corner, financial services provider MagnifyMoney also found that nearly two-thirds of surveyed Americans hope to receive cryptocurrency as a gift this year.
While crypto’s growth is notable, there has also been an increase in the number of scams associated with digital assets. A Chainalysis blog post highlighting the company’s “2022 Crypto Crime Report” revealed that scams were the dominant form of cryptocurrency-based crimes by transaction volume this year. The post notes that over $7.7 billion worth of cryptocurrency has been taken from scam victims globally. According to Chainalysis’ previous research, this number represents an 81% increase compared to 2020, a year in which scamming activity dropped significantly compared to 2019. Source: Chainalysis Scams are the biggest threat for building trust in crypto
Kim Grauer, head of research at Chainalysis, told Cointelegraph that while there are many different crypto-related crimes, scamming has become the largest in terms of value received by criminals. She added that scams represent a significant threat to building trust within the crypto ecosystem, as this may prevent people from investing in digital assets.
Grauer further mentioned that scams related to decentralized finance (DeFi) have been on the rise this year. With an annualized revenue in all DeFi protocols estimated at around $5 billion , this shouldn’t come as a surprise. More interesting, though, is that Chainalsyis has discovered that “ rug pulls ” have contributed to this year’s increase in scam revenue. According to Grauer, Chainalysis defines rug pulls as an instance when a person or developer decides to unexpectedly cease a project and run away with funds: “Rug pulls have accelerated the amount of scamming the crypto space has seen this year. In addition to financial scams, rug pulls have exploited different vulnerabilities in the crypto space. Overall, they have taken $2.8 billion of cryptocurrency.” Although rug pulls are a relatively new crime, Grauer believes these cases are becoming common in the growing DeFi ecosystem. To put this in perspective, the Chainalysis blog post notes, “Rug pulls have emerged as the go-to scam of the DeFi ecosystem, accounting for 37% of all cryptocurrency scam revenue in 2021, versus just 1% in 2020.”
The Chainalysis blog post also provides examples of some of the biggest rug pulls of 2021. For instance, the AnubisDAO case is mentioned as the second-biggest rug pull of this year , with over $58 million worth of cryptocurrency stolen. According to the post, AnubisDAO launched on Oct. 28, 2021, with claims of offering a decentralized currency backed by a number of assets. However, the project didn’t contain a website or white paper, and all of the developers went by pseudonyms. Miraculously, AnubisDAO still managed to raise nearly $60 million overnight, yet 20 hours later, all of those funds disappeared from AnubisDAO’s liquidity pool.
While AnubisDAO demonstrates a large-scale DeFi rug pull, new cases are occurring almost daily. An early Ethereum and DeFi investor who wishes to remain anonymous told Cointelegraph that they fell victim to a rug pull on Dec. 19, 2021. The anonymous source shared that the project is called “up1.network,” noting that many early Ethereum investors were discussing Up1 in a Discord chat group. They added: “People I trusted were mentioning the project so I checked it out. I thought it was strange to see Up1 giving away airdrops, but thought it could have been affiliated with a DeFi token I had. I then connected my MetaMask wallet and clicked on ‘get airdrop’ but kept getting an error message. I did this three times, which gave the project access to my account.” Unfortunately, once Up1 gained access to their account, three DeFi tokens worth $50,000 were instantly taken. “I revoked access after the fact on Etherscan so they couldn’t steal any more tokens,” they mentioned. The Ethereum investor then checked the DeFi platform Zerion where they saw the notifications that the DeFi tokens had left their wallet. Zerion also provided them with a wallet address to where the funds went, along with a message: “0xc28a580acc42294787f44cffbaa788eaa4958056; You gave a web3 site / smart contract unlimited access to your funds (check who you gave access to and revoke here).” While both AnubisDAO and Up1 are examples of DeFi rug pulls, it’s important to point out that the […]
source Beware of sophisticated scams and rug pulls, as thugs target crypto users
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