Crypto scammers ripped off over $7.7 billion worth of cryptocurrency in 2021, up 81% from a year ago, according to a new report.
One scam, Finiko, a Ponzi scheme primarily targeting Russian speakers throughout Eastern Europe, netted more than $1.1 billion from victims, the blockchain analysis firm, Chainalysis said.
A big factor this year was the emergence of rug pulls, the firm said, a relatively new type of scam common in the Decentralized finance, or DeFi, ecosystem, where developers of a cryptocurrency project — typically a new token — abandon it unexpectedly, taking users’ funds with them.
So-called rug pulls accounted for 37% of all cryptocurrency scam revenue in 2021, compared with 1% in 2020, taking in more than $2.8 billion worth of cryptocurrency from victims.
"While total scam revenue increased significantly in 2021, it stayed flat if we remove rug pulls and limit our analysis to investment scams — even with the emergence of Finiko," Chainalysis said.
At the same time though, the firm said, the number of deposits to scam addresses fell from just under 10.7 million to 4.1 million.
However, Chainalysis said that scammers' money laundering strategies haven’t changed much, as most cryptocurrency sent from scam addresses ended up at mainstream exchanges.
The number of financial scams active at any point in the year also rose significantly in 2021, from 2,052 in 2020 to 3,300.
Chainalysis said the average lifespan of a financial scam continues to get shorter and shorter.
The average financial scam was active for just 70 days in 2021, down from 192 in 2020.
Chainalysis suggested that one reason for the decline is due to stepped-up investigations and prosecutions.
In September, the Commodity Futures Trading Commission filed against 14 investment scams that claimed they provided compliant cryptocurrency derivative trading services.
However, the commission said, they had failed to register with the CFTC as futures commission merchants.
"Previously, these scams may have been able to continue operating for longer," Chainalysis said. "As scammers become aware of these actions, they may feel more pressure to close up shop before drawing the attention of regulators and law enforcement."