DeFi: Over US$10.5bil of cryptoassets stolen this year


Scams in the crypto world are reaching new heights. — AFP Relaxnews

The 2020 boom in cryptocurrencies has brought a new surge in fraud in an environment that's still largely unregulated. An Elliptic report gives worrying figures, with an increase of more than 600% in cryptocurrency losses due to theft or scams between 2020 and 2021.

It’s the trend of the moment in the crypto world, with new cryptocurrencies coming out every day, all trying to make their mark and survive in a hyper-competitive and profitable universe.

Unfortunately for many investors, a certain amount of cryptoassets are actually scams in disguise, on a mission to steal the money supposedly invested. Most of these scams play on a current trend, like a TV series, to give themselves a semblance of credibility, or at least familiarity.

One example is the ‘Squid Game’ cryptocurrency. On closer inspection, it was clear that this investment looked particularly dodgy, with a site riddled with errors boasting prestigious partnerships with Netflix, Microsoft and even the support of Elon Musk. In a few days, the cryptocurrency jumped to just over US$2,800 (RM11,869), before seeing the creators make off with the money and drop its value to US$0.

A cryptocurrency named “Mando”, after The Mandalorian series, earned the approval of several American TikTokers. But it ended up being another scam, and the investments of hundreds of American students were placed in the hands of thieves.

A virtual gold rush

In August, the “JJR Token” was launched in an attempt to attract fans of Tolkien’s work. The author’s family and estate managed to get the cryptocurrency taken down, as well as its website.

Every day, new, and admittedly creative, scammers try to take advantage of the lack of regulation in the crypto ecosystem. And for the most ruthless, sentiment has no place in this virtual gold rush.

Thanks to the decentralisation of financial transactions – i.e. by bypassing banks – traditional financial systems could be redefined, allowing greater financial inclusion for people unable to access the services of regular banks, while also reducing the cost of day-to-day transactions. But for now, abuses are rife, benefitting money launderers more than anything else.

The blockchain data analytics company Elliptic has been crunching the numbers in a new report. According to the firm, losses due to theft and crime on decentralised finance (DeFi) platforms are valued at over US$10.5bil (RM44.50bil) since the beginning of the year. A substantial increase of 600% in the space of one year.

“The DeFi ecosystem is an incredibly exciting and fast-moving space, with financial services innovation happening at light speed,” said Tom Robinson, Chief Scientist at Elliptic. “This is attracting large amounts of capital to projects that are not always robust or well-tested. Criminal actors have seen the opportunity to exploit this.”

The need for regulation is clearly felt in the crypto universe. For scammers, it’s still all too easy to recover huge amounts of money with little in the way of risk. Such projects are mostly completely anonymous – or use fraudulent identities – and the majority of investors don’t even take the time to look into the merits of a given project. They only see profitability, dazzled by the numbers and curves that can often rise at lightning speed. – AFP Relaxnews

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