For the crypto space, although revolutionary and promising, it has not been immune to fraudulent activities. In a recent report, it has come to light that 2022 witnessed an alarming rise in the prevalence of crypto Ponzi schemes. A prominent company specializing in blockchain analysis focused on combating cybercrime, RM Labs published an extensive report detailing the financial losses incurred due to criminal activity within the cryptocurrency world. Here are some details of the report:
Notable crypto Ponzi schemes that caused significant losses in 2022
In a report released on June 28, blockchain intelligence firm TRM Labs revealed that a total of $7.8 billion was paid out to cryptocurrency pyramid and Ponzi schemes globally in 2022. Also, TRM claimed that darknets allegedly used another $1.5 billion in crypto for illicit purposes.
Also, hackers or exploits are believed to have caused the loss of an estimated $3.7 billion in crypto.
According to TRM Labs, a staggering $9.04 billion in crypto was transferred to various financial fraud schemes. Despite declining crypto prices due to the ongoing bear market, there seems to be no corresponding decrease in criminal activities related to cryptocurrencies.
According to the firm’s report, there has been a notable rise in fraud cases involving soliciting funds for fraudulent investments or projects. It highlighted that the increase was especially noticeable in unregistered securities, counterfeit initial coin offerings (ICOs), and fraudulent investment platforms. In 2022, there was a substantial rise in investment fraud related to crypto. The amount of money involved in these fraudulent activities rose by nearly 200%, going from USD 907 million in 2021 to USD 2.57 billion.
Researchers say they can roughly attribute 54 percent of the total amount to 10 of the largest crypto Ponzi and pyramid schemes. Also, it is alleged that around forty percent of the overall influx of investment fraud schemes operational in 2022 had to do with Tron. This came to be through the use of Tether (USDT) on the blockchain. In comparison, the corresponding figure for 2021 was a mere 17%.
In 2022, two notable crypto Ponzi schemes that faced prosecution were Forsage and Trade Coin Club. These schemes were among the largest in terms of their scale and impact. Forsage enticed investors by offering the potential for substantial profits through Ethereum and BNB Smart Chain contracts. As a result, they managed to accumulate close to $974 million in funds from investors through two interconnected entities. In the meantime, Trade Coin Club attracted over 100,000 investors with promises of substantial earnings from its cryptocurrency exchange. They managed to gather a staggering $295 million before eventually facing collapse. Both companies have subsequently faced sanctions from the United States Securities and Exchange Commission.
The report on crypto Ponzi schemes in 2022 reminds both the crypto industry and regulators to be more vigilant. The losses of $7.8 billion experienced by investors highlight the pressing importance of heightened vigilance, regulatory actions, and investor education.