5 things you should be afraid of when owning crypto: researchers name the most common threats

The number of cryptocurrency-related crimes dropped sharply in 2022 due to the fall in the price of digital assets. This phenomenon is known as crypto winter. According to a report published by Chainalysis, total crypto fraud revenue for the past six months is $1.6 billion, down 65% from a year earlier.

“The cumulative number of individual transfers to fraudsters in 2022 is the lowest in four years,” the report said.

Eric Jardine, head of cybercrime research at Chainalysis, explained that crypto investors are likelier to fall for fraudsters during bull markets when it is on the rise. That’s when scammers become active in following their future victims: newcomers (and not only) who want to get rich easily and fast.

The two largest crypto scams of 2021 — PlusToken and Finiko — totaled $3.5 billion. And in 2022 (that is, in the past six months so far), $273 million are related to cannabis investment platform JuicyFields.io, which reportedly froze investors’ accounts on its “electronic growing” cannabis service.

At the same time, cryptocurrency theft through hacking increased 58.3% as of July 2022, to $1.9 billion (that is, this does not include the great Nomad bridge hack on August 1, when $190 million was siphoned off). This is largely due to the rise of decentralized financial applications (DeFi) in 2021, as cybercriminals can study their open-source code down to the last detail. Oh, BTW, we’ve collected the greatest crypto hacks in history here!

There’s always something to be afraid of: 5 most common types of cryptocurrency crimes

The number of cybercrimes related to digital assets has dropped. But that’s no reason to relax. There are and will be criminals of all kinds. And they are always ready to take advantage of the weakness of lazy users.

Blockchain technology has created an ecosystem where everyone can act anonymously, even internationally. This, in turn, has created fertile ground for the growth of crypto crime. Here are the five most common ways scammers can use against you.

1. Ransomware. This malware gets into your gadget after opening an infected attachment or embedded link. For example, through programs, attackers can block your computer from working and demand a ransom in cryptocurrency. Or blackmail you into revealing personal information (yes, never keep naked pictures and home videos). The largest global ransomware attack occurred in July 2021, when an affiliate of the hacker gang REvil, demanded $70 million in cryptocurrency. REvil ransomware encrypted data by infiltrating the network through a vulnerability in computer software. The fraudsters demanded a ransom for data recovery, but it is unknown if they received it.
2. Fraud. It can be a Ponzi scheme (a typical financial pyramid), phishing, investment theft, and so on. In 2019, a Ponzi scheme stole $2.35 billion from the cryptocurrency wallet PlusToken from millions of people. The scammers offered monthly payments to users. Chinese authorities arrested 109 people in the case. And in 2020, the creators of Mirror Trading International (MTA) promised lucrative investments but instead used a Ponzi scheme and scammed people out of $588 million.
3. Darknet and illicit data trafficking. It’s a dark unregulated internet where everything is anonymous, and you can find, buy or sell anything. There are also markets for weapons, illegal substances, and almost everything. It is accessed through anonymizing services and browsers (e.g., Tor). In 2020, the darknet accounted for more than $1.7 billion in cryptocurrency transactions. One of the largest darknet markets in terms of revenue was Hydra (serving Russia and Russian-speaking Eastern European countries exclusively). There was also Silk Road, but it was shut down in 2013. Such darknet markets actively use cryptocurrency.
4. Theft. Hacking, social engineering, and phishing scams manage to steal cryptocurrency that can be quickly hidden and withdrawn. The largest known cryptocurrency theft was the $600 million hack of cryptocurrency platform Poly Network in August 2021.
5. Terrorism financing. Terrorist organizations solicit funds on their websites, social networks, encrypted messaging apps, and the darknet. They circumvent authorities using cryptocurrency, mixers, and other tactics to launder funds. In August 2020, authorities dismantled three cryptocurrency terror financing campaigns involving the al-Qassam Brigades (the military wing of Hamas), al-Qaida, and the Islamic State of Iraq and the Levant (ISIS). $2 million in cryptocurrency was seized, and more than 300 cryptocurrency accounts, four websites, and four Facebook pages were blocked.

Catching cryptocurrency thieves is almost impossible because of the currencies’ anonymous nature. Therefore, more often, different wallets and platforms require clients to verify their identities. This is a minus (for anonymity) and a plus for protecting your funds (the ability to find the thief and get them back).

When dealing with crypto, always check several times where and to whom you are transferring funds. Use a test transaction to start with — transfer a small amount. Consider the difference and compatibility of different platforms, etc.