In Brief:
- Chainalysis reports show cryptocurrency scams made about $8 billion in revenue in 2021.
- Frauds increased by 81% from a year ago to $7.7 billion in bitcoin.
- Rug pulls accounted for 37% of all bitcoin scam earnings this year.
According to Chainalysis report, cryptocurrency scammers made about $8 billion in revenue in 2021, led by a relatively new method known as “rug pulls.”
Chainalysis said Thursday in a blog post that will be part of its broader Crypto Crime report coming in 2022 that revenue from frauds increased by 81 percent from a year ago to $7.7 billion in bitcoin.
Rug pull is a cryptocurrency fraud in which crypto engineers forsake a project and flee with the funds of investors. Rug pull scams are common in the Defi ecosystem, particularly on DEXs.
As per the blog post by Chainalysis, “as the largest form of cryptocurrency-based crime and one uniquely targeted toward new users, scamming poses one of the biggest threats to cryptocurrency’s continued adoption.”
The development of “rug plugs,” which leave investors in crypto-projects empty-handed, contributed to this year’s revenue growth.
According to Chainalysis, they have become the “go-to” scam in the decentralised finance, or DeFi, ecosystem. In these schemes, the creators of a cryptocurrency project — usually a new token — depart it unexpectedly and take the funds with them.
This year, rug pulls accounted for 37% of all bitcoin scam earnings, up from 1% in 2020, with victims getting $2.8 billion in bitcoins.
“Rug pulls are prevalent in DeFi because with the right technical know-how, it’s cheap and easy to create new tokens on the Ethereum blockchain or others and get them listed on decentralized exchanges (DEXes) without a code audit,” as per Chainalysis.
The largest rug pull of the year, however, did not begin as a DeFi effort, according to the report. According to the article, Thodex was a large Turkish centralized exchange whose CEO vanished shortly after the exchange banned user fund withdrawals. Rug pulls resulted in the loss of more than $2 billion in cryptocurrencies, accounting for roughly 90% of total value stolen.
AnubisDAO was the second-largest rug pull of 2021, with more than $60 million in cryptocurrencies taken.
Chainalysis also stated, “while code audits that would catch these vulnerabilities are common in the space, they’re not required in order to list on most DEXes, hence why we see so many rug pulls.”
