HomeCryptoA focus on the scams that have affected the crypto world

A focus on the scams that have affected the crypto world

The year 2022 has been a very difficult year for the crypto world, not only financial disasters but also real scams have put a strain on the entire industry, thanks to Chainalysis’ annual report we analyze the crypto asset from a fraud perspective. 

The “2023 Crypto Crime Report” puts criminal trends in the industry under the magnifying glass, especially on-chain. 

Due to the bear market in 2022, the market suffered a major downturn that resulted in most cryptocurrencies suffering losses for the bulk of their value, despite a cooling of transactions, the volume of illicit crimes increased compared to the previous year and this is the second year in a row that this occurs. 

This year also set an all-time record for illicit transactions, which reached 20.1 billion US dollars, rising from 0.12% in 2019 to 0.24% in the year just ended.

Although the numbers give evidence of a significant increase in criminal activity in the sector, fraud counted for less than 1% of the total asset volume. 

2022 was a bearish year that experienced defining events both positive and negative such as the bankruptcy of Celsius, Three Arrows Capital and FTX under the direction of fraud genius Sam Bankman-Fried.

Amidst the failures and scams, it became clear that although blockchain inherently protects transactions from malfeasance and is the quintessential transparency technology, there is still much to improve and some help could come from comparing off-chain data with on-chain data. 

The past year has seen lower transaction volume due to the bear market but, it could be seen that from the summer onward, there has been a real cooling of the market due to the various problems of many exchanges related to liquidity and hedging.

If you look at the total number of scams in the crypto market during the past year, you will be able to see that 2022 marks the second year in a row in which these have spiked.

To date, the data that was being monitored to measure the number and amounts of malfeasance was the on-chain data, but fraud could also be coming from the off-chain world so the analysis could even be optimistic. 

The data could be even worse than what was found because it does not take into account seemingly clear situations that are nevertheless the subject of bankruptcy and criminal proceedings that are still ongoing and therefore cannot be counted as crypto scams. 

The amounts received by Garantex according to the Chainalysis report make up the bulk of the 2022 fraud volume.

In 2021, illicit activities reached 14 billion US dollars while this year’s reached $18 billion. 

44% of the total fraud had originated from activities associated with fined entities. 

Last year OFAC produced some of the largest and most complex crypto sanctions being the ever-evolving cryptographic field. 

Garantex, the repeatedly sanctioned Russian exchange that is the main source of the transactions, was sanctioned in the spring of 2022, but because the company is Russian, it has not lost its permission to operate thus continuing to perpetuate in its deception of its investors.

Garantex also poses a compliance threat to companies under the US aegis from the standpoint of fines and criminal prosecution.

In one year, 7% more funds were stolen at the same time as a bear market. 

Crypto scams, in general, have always gone down during bear market periods, but, in this case, there was an exception despite low investment appetite, pessimism, and a lower predisposition to believe in easy gains. 

George Michael Belardinelli
George Michael Belardinelli
A former corporate manager at Carifac Spa and later at Veneto Banca Scpa, blogger and Rhumière, over the years he has become passionate about philosophy and the opportunities that innovation and the media make available to us, in particular the metaverse and augmented reality