Illegal crypto activity hit an all-time high of $20.1 billion in 2022, new research has found, as criminals intensified their efforts to scam unwitting investors.
The share of cryptocurrency activity associated with crime has risen for the first time since 2019, according to an investigation by Chainalysis, a doubling of 2021 levels.
Chainalysis director of research Kim Grauer said consumers have become more alert to dodgy crypto investments in the wake of the FTX scandal.
“People have wised up big time,” she told the Standard, but cautioned that this means some crypto crooks may be shifting their focus.
“Now people have learned but at the same scammers are going after more and more vulnerable people…that’s why we’ve seen a huge explosion in romance scams.”
Grauer said so called ‘crypto winter’ was proving challenging for scammers, as users are more pessimistic and less likely to believe a scam’s promises of high returns at times when asset prices are declining. The Bitcoin price has plunged 58% over the past year, while the combined value of global crypto assets has dropped by over $1 trillion since January last year.
“In a bear market, scamming activity and market activity are highly correlated,” she told the Standard.
“When you send money to a scam contract you’re not thinking you’re sending money to a scam, you’re investing money and it will grow. But right now people don’t think crypto investment will grow.”
Over 40% of the $20 billion illicit transaction volume came from activity associated with sanctioned entities in the wake of the Russian invasion of Ukraine. However, the analysis has excluded firms under investigation by regulators, such as FTX, whose founder Sam Bankman Fried was charged by the US Securities and Exchange Commission with defrauding investors.
Despite 2022’s jump, crime as a share of all crypto activity is still trending downwards, Chainalysis said.
