Crypto Crime Took a Hit in October Causing Only $32 Million in Losses
by Oskar Trotman
Crypto crime is the dark side of the blockchain industry. In a month when the public is witnessing the crypto fraud trail of Sam Bankman-Fried, CEO of failed crypto exchange FTX, overall criminal activities have experienced a lull. According to a CertiK report, the crypto industry lost $32 million in October through hacks, phishing scams, and rug pulls. However, this is the lowest amount stolen this year over a single month.
The total for the previous ten months of this year is $1.4 billion, and the data shows a downward trend. The decline in crypto crime started over the summer, with the number of reported incidences going from 79 in July to 38 in October. Although this info is encouraging, it’s worth taking into account that the second lowest month to experience crypto crime was January, with $33.7 million in losses, after which crime spiked again.
There is no evident downward trajectory in crypto crime in the long term. Quiet months happen for the Web3 community, but criminals are getting more crafty, with hacks and scams targeting exchanges and individuals. The biggest single loss reported for October is $7 million, and the absence of other big thefts is the reason for the smaller total amount stolen for this month.
Lack of Oversight Helps Criminals
Although crypto crime is typically associated with thefts of tokens from individuals and businesses, criminals are also starting to use cryptocurrency to fund illicit activities and sell illegal items. The decentralized nature of blockchain makes cross-border transactions nearly impossible to trace for law enforcement. Organized crime uses cryptocurrencies as an alternative to the banking system to hide their activities and move monetary value without oversight.
Cybercriminals have found tokens very practical for ransomware activities and other types of scams. One reason for the flourishing of illicit activities is the lack of oversight and regulation.
Many countries are playing catchup with the booming blockchain industry, working on adopting legal frameworks, not only to regulate the industry but also to protect individuals and businesses.
One good example is the US, where oversight is divided between multiple agencies such as IRS, SEC, CFTC, and FinCEN, leading to issues in stopping money laundering and sophisticated crypto fraud and money laundering. However, the U.S. government has started to be more assertive by imposing sanctions on individuals and entities and formulating new laws and strategies to combat the issue.
The Private Sector Is Stepping Up
Historically, most of the crime was a result of hacks, and this is how typically crypto crime is perceived. But old-fashioned Ponzi schemes are still in vogue. Some of the biggest frauds in the industry have been committed by companies that appear to be legitimate. Crypto scams have resulted in investors losing $20 billion over the previous 5 years, not including 2023. And from a statistical perspective, the volume of crypto funds stolen in 2022 rose by 7% compared to 2021.
The private sector is attempting to curtail criminal activities with more strict KYC inspection and encryption systems. Companies are becoming proactive by identifying and fixing vulnerabilities. It’s not the Wild West yet, but bandits are lurking in the crypto scene, ready to exploit any weakness in a system and take advantage of investors’ eagerness to join the hype. Vigilance and proactive measures are required to thrive in the emerging realm of blockchain.