According to a new report, despite the FTX implosion sinking over $2 billion of investors’ money in the past month, close to double that amount was lost to scams and rug-pulls in 2022.
Published by cybersecurity and data privacy firm Privacy Affairs, the report revealed that the five biggest crypto losses, scams and hacks of 2022, ranked by the amount of money lost or stolen ($100 million and above), accounted for nearly $3.5 billion.
As of November 2022, the collapse of FTX had become the biggest case of money lost, with between $1 to $2 billion worth of cryptocurrency evaporating, while Axie Infinity’s Ronin Network was second in place with $615 million, followed by the Wormhole crypto bridge scam with $320 million.
Hackers stole $1.9 billion in cryptocurrency between January and July, 2022-which is a 37% increase in the same period last year. Accordingly, the report noted that 97% of all stolen cryptocurrency came from DeFi protocols in Q1 2022. Bitcoin, Tether and Ether emerged as the most preferred cryptocurrencies by scammers to set up their cons, with social media platforms led by Instagram, Facebook, WhatsApp and Telegram being the most used playgrounds for crypto scams.
Notably, the firm cautioned over a spike in cryptocurrency flash loan scams. Flash loans allow users to borrow large amounts of virtual funds for a short period without collateral. Attackers who secure the loans and have extensive voting rights can execute a malicious vote for a malicious proposal allowing themselves to send funds to a wallet they control.
According to the firm, 27 flash loan attacks resulted in a loss of over $308 million in Q2 2022, marking a 66.7% increase in losses resulting from the vice from Q1 2022. Notable firms that have fallen victim to this scam include Decentralized Finance (DeFi) project Beanstalk, which lost $182M in April and the crypto trading platform Mango Market which was siphoned of $100 million in October.
The firm also noted that more than 188,000 rug pulls were executed on various blockchains this year, representing a 20% jump from 2021. Last year, $2.8 billion was lost to rug pulls, with more than $2.5 billion being lost to the Turkey-based Thodex crypto exchange alone.
According to Privacy Affairs CEO and Founder Miklos Zoltap, people in the 20-40 age group were the most susceptible to crypto scams. “What our research shows is that cryptocurrency scams and related fraudulent activities are not plummeting anytime soon,” he said.
That said, crypto-related scams are showing zero signs of abating; the executive advised people to protect themselves by, “using established cryptos and tokens, avoiding cryptocurrency projects that guarantee significant returns, and never get crypto investment advice from dating sites and influencers.”