Crypto Scams Have Receded Alongside Bitcoin’s Price


Kim Grauer – Director of Research at Chainalysis – said there’s been a “pullback” in funds received by cryptocurrency scam addresses during the bear market. Other forms of financial crime in the digital asset world, such as ransomware, do not reflect the same trend.

Scams Track the Market

As Grauer explained to Yahoo Finance on Thursday, scamming is the largest subset of criminal activity on the blockchain. Chainalysis data shows that scams were the biggest source of revenue for criminals in 2021, netting $7.7 billion in 2021 alone.

Though still a “pack leader” in 2022, the director noted that their prevalence tends to expand and shrink alongside the broader crypto market. Thus, with Bitcoin’s price caught in a consistent downtrend across the year, scams have been less successful in turn.

Grauer believes the correlation is only natural. “[A scam] is someone willingly parting with their funds in hopes of seeking a higher return.”

“You can compare that to something like ransomware, where there’s not really a market basis for the amount of ransomware attacks there are,” she added. “It’s really just continually happening all the time.”

The scamming ecosystem is also evolving with every market cycle. Law enforcement is learning to proactively crack down on related schemes.

That said, scammers’ methods are also becoming more sophisticated with each crypto winter. Cryptocurrency romance scams and business/ government imposters netted over $300 million from victims spanning from January 2021 to March 2022.

At present, investment scams are still the most common and profitable in the industry. Grauer advised investors to watch out for projects with anonymous founders promising unrealistic returns when vetting for these schemes.

In late October, an anonymous party pretending to be affiliated with the hit Netflix series “Squid Game” pumped the “Squid Game Token.” After charting astronomical gains post-launch, investors were eventually rug-pulled while the founders vanished with barely a word.

The Growth of Ransomware Crime

Ransomware is malicious software used to block a victim’s computer access or threaten to publish their personal data until they forfeit a sum of money. Cryptocurrency is exceedingly popular as a payment method in such schemes, as it allows extortionists to stay anonymous and keep their transactions irreversible.

Ransomware netted over $602 million for scammers in 2021, according to official numbers from Chainalysis in February. The actual figure is expected to be higher.

In August, political comedy host John Oliver took aim at the privacy coin Monero for implicitly supporting ransomware attacks through its marketing. “There’s a pretty clear subtext to what they’re selling there,” he said in response to one of its advertisements.

While crypto crime weighs heavy on the minds of regulators and pundits, some stats suggest it’s not worthy of the coverage it receives. As the US Treasury Department admits, fiat money is still far greater than that of Bitcoin for money laundering. Furthermore, a Chainalysis report in February showed that the share of illicit transactions in crypto is trending far lower each year.


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