The “Crypto Hacks & Scams Report 2021” recently released as assessment of crypto losses through scam by Crystal Blockchain, a firm involved in investigative analytics for block chain and crypto currencies showed an over 80 per cent rise in crypto scams and thefts in 2021.
The latest report said the crypto currency markets had seen a volatile 2021, starting with a strong rally that took some prices to all-time highs over the spring before they crashed in May and attempted a recovery over the summer.
According to the Crystal database, over a third, or 39 per cent of all stolen funds (in Bitcoin or BTC) were distributed via fraudulent exchanges, which are defined as having been involved in exit scams, some illegal behaviour, or that have had funds seized by the government.
According to ThisDay report, exit scams involve a crypto currency profiting from early investors by “pulling out” all their funds from the market.
Amid the growing uncertainty due to the COVID-19 pandemic, crypto currencies, like Bitcoin and Ethereum, gained significant fame among investors.
Investment in the crypto market has been growing across the globe, with the crypto currency market size expected to grow from $1.6 billion in 2021 to $2.2 billion by 2026, at a compounded annual growth rate (CAGR) of 7.1 per cent, based on a report released in April 2021 by Markets and Markets Research, a market research firm.
A recent report by Chainalysis, a crypto currency exchange platform, also said crypto crimes rose by 81 per cent in 2021, with a loss of over $7.7 billion worth of crypto currency worldwide.
One of the major factors that led to the rise in crypto scam was the emergence of what the report described as “rug pulls”.
Rug pull is a new type of scam where “developers of a crypto currency project, typically a new token, abandon it unexpectedly, taking users’ funds with them.”
Despite a significant fall seen in crypto scams between 2019 and 2020, rug pull spiked the number in 2021, the report pointed out, stressing that in all the scams, users lost over $2 billion worth of crypto currency, which represents nearly 90 per cent of all value stolen in rug pulls.
The Chainalysis report noted that the number of financial scams active at any point in the year rose by more than 60 per cent, from 2,052 in 2020 to 3,300 in 2021
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