The cryptocurrency world is not without its pitfalls. While only a small fraction of crypto transactions are linked to illicit activities, the impact on individual investors can be devastating. A new study by Coin Kickoff sheds light on the most common types of Bitcoin scams, showing that blackmail leads the pack. The average value of BTC received by scammers in the first half of 2023 reached a whopping
Crypto Numbers Tell a Story
In 2022, a mere 0.24% of all cryptocurrency transactions were associated with illegal activities. Although this percentage decreased from 1.9% in 2019, it still represents a significant $20.1 billion. The study also highlights that the number of reported scammers has nearly halved from 23,799 in 2021 to 12,354 in 2022. During the last quarter, the hackers’ activity also fell. However, the financial impact remains high, with Bitcoin scammers receiving an average of $1,664,899 in the first half of 2023 alone.
The most common scams that can empty your crypto wallet are blackmail, sextortion, and ransomware. Blackmail scams often involve threats to release personal data or embarrassing photos unless a crypto payment is made. Sextortion scams prey on younger victims, tricking them into sharing explicit content and then demanding payment. Ransomware attacks lock up the victim’s data and demand cryptocurrency for its release.
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“Do your homework,” suggests Dr. Marc Tomljanovich from Lombardo College of Business, quoted in the study. “I strongly suggest that investors step away from social media to get these information sources, and only come back once they feel well informed.”
The types of scams evolve over time. While blackmail has been the most reported scam since 2018, ransomware scams are currently leading the pack in 2023. Investment scams have also seen a decline as people become more aware of the risks involved. However, giveaway scams have gained traction, often involving scammers posing as celebrities to lure victims.
The Financial Impact of Crypto Scams
The total value received by Bitcoin scammers peaked at $55.04 billion in 2021. This peak may have been influenced by the boom in decentralized finance (DeFi) transactions and related crimes. However, there has been a decline in investment scams as law enforcement begins to catch up with advancements in crypto technology.
Another report published by Comparitech at the end of August showed that investors lost over $20 billion due to rug pulls, financial pyramids, and other cryptocurrency scams.
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While the percentage of cryptocurrency transactions linked to scams may seem small, the financial and emotional toll on individual victims is significant. Awareness and caution are the first steps in protecting yourself from becoming another statistic in the growing list of crypto scam victims.
“Crypto scams are an expensive and sometimes life-ruining nuisance that largely depends on the foibles of human nature, be it the willingness to click an enticing link on social media or to trust an ‘investor’ who you never hear back from,” the authors of the report concluded.
We don’t have to look far for examples of such individuals. Finance Magnates recently reported on a crypto kingpin sentenced to over a decade in prison after running a $100 million Ponzi scheme for years. His activities had a detrimental impact on the savings of thousands of individual investors.
Coin Kickoff analyzed 251,806 abuse reports sourced from chainabuse.com. These reports were associated with 87,722 unique blockchain addresses. After eliminating redundant reports submitted by the same user about identical scams linked to the same blockchain address, the study focused on 232,455 unique abuse reports spanning from 2018 to June 2023.
