The losses related to the field of cryptocurrency have always been pointed to as the bane of the industry. Many naysayers have claimed that as long as the industry was not safe for outside investments, it would never thrive.
CipherTrace published 2019 Q4 reports to put the losses into perspective, which spoke about all the assets that were in the red zone due to crimes or fraudulent activities. This number was calculated to be a whopping $4.5 billion.
The report stated that 2019 was dominated by exit scams, Ponzi schemes and cryptocurrency frauds that would put any expert to shame. Comparing the activities from 2017 to that of 2019, one can see a clear gaping disparity. The total capital lost due to fraud and misappropriation was $1.58 million in 2017 while it jumped leaps and bounds to $4.15 billion in 2019.
The pattern of this growth was made evident in 2018 when the total crypto assets lost came to $1.74 billion. This occurred right after the stellar rise of Bitcoin towards the fag end of 2017. Multiple factors have contributed to this surge in losses. The death of QuadrigaCX’s former CEO had caused a lot of investments to perish due to the office being the only one holding the private keys.
There were several other schemes that took investors for a ride in 2019. Einstein, a Canadian Exchange was responsible for losses of more than $12 million after an exit scam. China-based IDAX exchange was also responsible for significant losses when its chief executive went missing. Dave Jevans, the CipherTrace CEO stated:
“We noticed a significant uptick in malicious insiders scamming unsuspecting victims or leaching on their users through Ponzi schemes. Attacks from the inside of organizations lead to significant exits with major consequence to the crypto-ecosystem.”
Compared to 2018, the number of funds lost due to fraud and misappropriation in 2019 jumped by 533 percent while hacks saw a slight upturn of 66 percent. According to the report, Bitcoin was the most preferred cryptocurrency to conduct hacks. Over ninety-seven percent of ransomware on the internet uses Bitcoin as a form of payment. This came at a time when the Internal Revenue Services asked taxpayers to list their cryptocurrency earnings on the task form.
The report also touched on the shady parts of the internet such as the dark web. CipherTrace discovered that 66 percent of the products offered by the Tor network consisted of stolen goods. Out of this, 40 percent came from stolen bank account credentials while 24 percent came from services accounts.
Experts believe that scammers will always exist in space. The only way to fish them out is by increasing regulations that will force organizations to comply with it. It has been a rule of thumb that most legitimate companies will accept legal scrutiny as long as they can keep their core features intact.