Crypto crimes are on the rise and the growth rate is exponential. Looking just at numbers reported in the US, in 2016 there were only 340 crimes reported. This number increased significantly each year since and hit 82,135 in 2020. About 99% of these reports were related to Bitcoin, although, from a dollar amount, it appears that some of the major scams were related to smaller, or fake, crypto.
Common types of crypto crimes are the fake ICO, Pump and Dumps, and just plain old theft. Just for fun, here are some of the major ICO scams from a research report from cryptohead.io:
Bitconnect – $2.6 billion stolen. By far the biggest example of an ICO scam is that of Bitconnect, an open-source cryptocurrency that guaranteed investors 40% returns, but unfortunately turned out to be a Ponzi scheme that cost its investors an incredible $2.6 billion.
Pincoin – $660 million stolen. Another major scam that rocked investors was Pincoin, a Vietnamese cryptocurrency that raised about $660 million from 32,000 people. Rather than being paid back in cash, investors were rewarded with a new token called iFan, before the team behind Pincoin disappeared alongside all the invested money.
ACChain – $60 million stolen. ACChain was a highly promising ICO token created in Shenzhen, China, which managed to raise $60 million, but it quickly became clear that things weren’t as they seemed when a picture of the ACChain headquarters leaked and turned out to be nothing more than an empty room. As you can imagine by that point, the company suddenly went very quiet, vanishing without a trace.
Savedroid – $50 million thought to be stolen. Savedroid is an interesting case, as at first glance it seemed like one of the most audacious ICO scams of all time, with founder Yassin Hankir posting an image of himself on a beach on social media with the caption “over and out”, suggesting that he had fled with his investors’ $50 million. However, it appears that this was in fact a publicity stunt, but it still massively shook investor confidence and led to multiple lawsuits.
PlexCoin – $15 million stolen. The PlexCoin ICO scam was notable for the fact that it was shut down by the US Securities & Exchange Commission (SEC) and ordered to pay back much of the $15 million that it defrauded people of. The ICO initially promised people an incredible return of 1,354% which in hindsight probably should have seemed too good to be true.
Ok, back to the actual numbers. This data is from a report on “reported crimes.” Which begs the questions, how many were prosecuted, how many were actual crimes and what is the impact on cryptocurrency overall? As we can see, the SEC did step in on some of the above cases, but, without set guidelines, or even an actual governing body, is a “pump and dump” in crypto an actual crime? (I don’t see Elon Musk being dragged before a judge.)
CypherTrace and Chainanalysis, two blockchain forensic companies put the total of number of crypto illicit activities at under .5% and .34%, respectively. Now, this is said to be a win, but, that still seems like a pretty high number to me. Even so, this number may be low, as linking crypto activity to crime is not that easy. See this statement from thomsonrueters:
It is reasonable to assume that these reports do not account for a significant “dark figure of crime”, which has either not been detected or not been reported so far.
And why is this the case, mainly because law enforcement is not equipped to handle crypto cases. The US continues to pass around who should be in charge, and in Europe, only a small number of officers are being trained to handle crypto related crime.
Mostly, this is just interesting reading. The majority of people on this site are not laundering money, and more importantly are protecting themselves with smart crypto management, but, government officials like Janet Yellen can use these numbers to scare people and push congress to act on crypto in ways we probably do not want. There is a lot of good reading on this, please see the links below to dig in for yourself.
Resources