According to a report released on June 28 by TRM Labs, a leading blockchain intelligence firm, $7.8 billion will be paid out to cryptocurrency pyramid and Ponzi schemes worldwide in 2022.
According to the researchers, the top ten cryptocurrency Ponzi and pyramid schemes accounted for approximately 54% of the total amount.
These are the 3 biggest Cryptocurrency Scams;
Pig Butchering
There was a rise in “Pig Butchering,” scams. Pig butchering scams operate by exploiting psychological manipulation and social engineering techniques to deceive victims into investing their life savings, promising substantial returns.
These scams frequently involve the utilization of Tether, a popular cryptocurrency, by scammers. They also exhibit significant interconnectivity among individual pig butchering scams and often have ties to transnational organized criminal networks.
Unfortunately, due to underreporting by victims, accurately quantifying the global scale of pig butchering scams is challenging.
Once cryptocurrency reaches the scammer’s wallet, it typically undergoes a complex network of transactions, shuffled from one wallet to another. Scammers and money launderers, who may be the same individuals, facilitate these transfers, with each wallet accumulating funds from additional victims along the way.
These funds often move through intricate paths, making it arduous for investigators to trace the money and distinguish victim funds from other tokens.
TRM Labs, through their data analysis, has discovered that cryptocurrency wallets receiving funds from individual pig butchering scams are frequently associated with other fraudulent schemes. In fact, over half of the pig butchering schemes investigated by TRM Labs until December 2022 exhibited clear links to large transnational organized crime groups. This suggests a broader network of criminal activity and organized efforts behind these scams.
Business Email Compromise (BEC)
Business Email Compromise (BEC) refers to a deceptive scheme in which criminals assume the identity of a genuine business or organization in order to deceive employees or partners into divulging sensitive information or making unauthorized fund transfers.
These scams often entail the compromise of email accounts belonging to individuals working at exchanges, wallet providers, or other organizations.
By gaining unauthorized access to these accounts, scammers can orchestrate the theft of funds or sensitive data, causing significant financial losses and potential harm to the victims. According to data reported to the FBI’s Internet Crime Complaint Center (IC3), victims reported losses of approximately $2.7 billion (in both cryptocurrency and traditional fiat currency) in 2022 as a result of BEC scams.
Exit Scams
Exit scams, commonly known as rugpulls, occur when the operators of a project, often related to investments or a new token, cease development and withdraw user funds for personal gain.
These scams can unfold abruptly, where project developers and funds vanish without warning, or they can unfold gradually, with funds gradually siphoned off while project developers become less active. In some cases, projects are labelled as rugpulls by the community when they fail to deliver on their promises, though determining outright fraud can be more challenging.
These scams frequently target decentralized finance (DeFi) projects. In rugpulls associated with a new token, project creators withdraw liquidity from the trading pool, causing the value of the associated tokens to plummet.
Investors are left with worthless tokens and no means to recover their funds. Many pyramid and Ponzi schemes conclude with exit-scam-like behaviour, where payouts to investors cease, and the scheme creators abscond with the remaining funds.
While exit scams have been on the rise, the actions taken by regulatory authorities demonstrate their commitment to combating such fraudulent activities and holding those responsible accountable for their actions.
It underscores the importance of conducting due diligence and exercising caution when engaging in investment opportunities, particularly within the cryptocurrency space, to mitigate the risk of falling victim to exit scams.
