New research reveals the most common crypto scams in 2023

Blackmail and ransomware are the most common crypto scams, a new research shows. Explore how to protect your funds.

Cryptocurrencies have promised innovation but have also seen their fair share of wrongdoing, especially in the form of scams that have left investors counting their losses.

According to Chainanalysis, while the first half of 2023 saw a reduction in crypto scam revenue by nearly $3.3 billion compared to 2022, totaling just over $1.0 billion, ransomware remained a persistent issue. Ransomware attackers managed to extort approximately $175.8 million more during this period than in the previous year.

Meanwhile, in the third quarter of 2023 alone, the number of crypto hacks and scams skyrocketed by nearly 60% compared to the same period in 2022, with nearly $686 million lost to fraudulent activities. A notable incident within this period was the Mixin hack on Sep. 25, where attackers made away with roughly $200 million.

Let’s delve deeper and explore various types of scams, focusing on how they operate, their impact on individuals and the crypto community, and measures to mitigate such fraudulent activities.

Prevailing crypto scams in 2023

A new report by CoinKickOff provided a granular look into this dark facet, categorizing the scams that prevailed in the first half of 2023. The researchers collected 251,806 abuse reports from chainabuse.com, linked to 87,722 distinct blockchain addresses. After removing duplicates, they had 232,455 unique reports to analyze.

Type of scam	Cases
Ransomware	3376
Sextortion	2986
Blackmail	2043
Social media	1629
Giveaway	240

Unpacking the Bitcoin (BTC) scam milieu, blackmail scams top the list with 85,534 reported cases since 2018. However, ransomware scams are the current trendsetter, with 3,376 cases reported between January and June 2023. 

Despite a decline in investment scams as investors become savvy, giveaway scams have wriggled their way into the top five. These scams bait victims with offers of free crypto or prizes, exploiting their interest to steal data or install malware. 

Notoriously, scammers often masquerade as trusted figures like Martin Lewis in the UK or Elon Musk in the US to bolster credibility.

The report also tracked the ebb and flow of crypto scam reports since 2018, marking a dramatic peak in April 2020 when 35,175 scams were reported amidst a Bitcoin value slump and the pandemic onset. 

This period saw more individuals glued to their screens, coupled with a surge in crypto market cap as well as legitimate investments, albeit briefly.

Interestingly, there was a significant dip in reported scammers from 23,799 to 12,354 between 2021 and 2022, yet 2023 is on pace to mirror 2022’s numbers. 

The revenue pocketed by Bitcoin scammers hit its peak at $55.04 billion in 2021, with the average Bitcoin value received by scammers in the first half of 2023 standing at $1,664,899.

How scammers operate

Over time, scammers have become more skilled at their deceitful practices, using a variety of tricks to deceive both individuals and organizations.

They often resort to impersonation and deception, as seen in the case of the cryptocurrency exchange platform Wormhole. It fell victim to a scam that exploited a vulnerability in its smart contract system, resulting in a loss of 120,000 Wrapped Ethereum (WETH).

Within the murky world of crypto scams, you’ll find the infamous Lazarus Group, a hacking organization known for cyber espionage. They have a particular interest in decentralized finance (DeFi) protocols and steal cryptocurrencies from unsuspecting victims. Their methods demonstrate a high level of technical expertise, often employing advanced malware to breach security defenses.

Also, scammers take advantage of human trust and emotions to carry out phishing scams. They pretend to be reputable entities, tricking individuals into revealing sensitive information.

In the same breath, investment scams lure victims with the promise of substantial returns, only to siphon off the invested funds for the scammers’ gain. Sentimental scams exploit emotional connections, persuading individuals to part with their valuable cryptocurrencies.

Meanwhile, the cryptocurrency industry’s lack of robust know-your-customer (KYC) protocols has given rise to concerns about fake or anonymous identities. This gap allows scammers to carry out transactions while shrouded in anonymity, further stoking the flames of fraud.

Moreover, Bitcoin investment schemes are a favored arena for scammers. They establish fictitious investment platforms that flaunt enticing returns to entrap individuals. However, once the bait is taken, the scammers vanish into thin air, leaving victims in financial turmoil.

Protective measures and reporting avenues

While the potential rewards in crypto are enticing, the risks of falling into scam traps are real. Here’s how you can shield yourself from scams and what to do if you come across suspicious activities.

• Be informed: Knowledge is your first line of defense. Learn about common scams like investment scams, where you might be lured to a fake website promising quick profits. Once you invest, the scammers disappear with your money.
  
• Check and double-check: Scammers are crafty. They create websites that look like legitimate cryptocurrency exchange platforms. Always double or even triple-check the website URL to ensure it’s the real deal. A small typo could lead you to a scam site.
  
• Be skeptical: If something seems too good to be true, it probably is. Be wary of offers promising high returns with little to no risk.
  
• Secure your investments: Use trusted and well-known cryptocurrency wallets and exchanges. Ensure they have robust security measures in place.
  
• Reporting suspicious activity: If you stumble upon a suspicious offer or if you’ve been scammed, it’s crucial to report it. You can report cryptocurrency scams to federal agencies like the Federal Trade Commission (FTC) or the U.S. Securities and Exchange Commission (SEC). Local law enforcement and the FBI Internet Crime Complaint Center are also good channels for reporting scams.

Being cautious and well-informed will help you navigate the crypto maze safely. And if you do encounter a scam, reporting it can help protect others from falling into the same trap.