Crypto scams are down 77% — but this exploit is making a huge comeback
Cryptocurrency scams have fallen a massive 77% from $3.3 billion to $1.1 billion over the first six months of 2023, according to a recent report by blockchain intelligence firm Chainalysis.
The catch, though, is that ransom attacks are back in trend, with perpetrators pocketing 62.4% more revenue than the first six months of 2022.
On July 12, Chainalysis released its Mid Year Crypto Crime report, noting it’s the second consecutive year that scam revenue has trended downwards.
The firm observed that historically, scam revenue increases in bull markets — but that hasn’t been the case so far in 2023:
“Usually, positive price movements translate to higher scam revenue, likely because increased market exuberance and FOMO make victims more susceptible to scammers’ pitches. But 2023’s drastic scam decline bucks that long-standing trend.”
Inflows into known illicit entities fell 65% over the first six months of 2023 compared to the same timeframe last year, while inflows to risky entities — such as cryptocurrency mixers and high-risk exchanges — fell 42%.
While Chainalysis partially attributed the drop to decreasing transaction volumes, it explained that illicit inflows have fallen at a faster rate:
“Transaction volumes are down across the board, but declines are much less severe for legitimate services, which have seen just a 28% drop in inflows.”
Kim Grauer, director of research at Chainalysis told Cointelegraph that past scam victims may also be becoming more “scrupulous” with their investment decisions and, as a result, may no longer be falling for the bait thrown out by scammers. This may also be contributing to the fall in scam revenue.
“It’s entirely possible that scam victims have learned to be more scrupulous,” the firm said. “It’s also likely that government and industry awareness campaigns, as well as media reporting, has helped educate people on the risks of scamming.”
Chainalysis warned that artificial intelligence tools may increasingly be used to promote scams through the use of deepfakes, among other things.
“Given the growing prominence of romance and pig butchering scams, one thing to look out for is the use of AI to increase effectiveness and scale, since those scams are largely text-based.”
Hacks also fell by $1.1 billion from the first six months of 2022, according to Chainalysis.
Ransom perpetrators are ‘big game hunting’ deep pocketed firms
Not everything has improved across the board, however. Ransomware revenue increased 62.4% to $449.1 million in the first half of 2023. through June.
The reason, according to Chainalysis, is that attackers are now “big game hunting” large-scale organizations with deep pockets to extract ”the most money possible” out of firms willing to pay up.
“Why the reversal in fortunes? For one thing, big game hunting — that is, the targeting of large, deep-pocketed organizations by ransomware attackers — seems to have bounced back after a lull in 2022.”
These attackers are on track for their second-biggest year ever, trailing 2021’s full year figure of $940 million by 4.6%.
Chainalysis quoted Risk Officer Andrew J. Davis of cybercrime consulting firm Kivu said the decrease in 2022 could be attributed to stronger cybersecurity practices and new laws that impose stricter sanctions against paying ransoms.
As a result, ransom attackers are now likely trying to ”squeeze the most money possible” out of firms willing to pay ransoms, Davis added.
Chainalysis added payment sizes extracted by the largest perpetrators have increased substantially.
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The United Nations Office on Drugs and Crime unit found in October 2021 that ransoms take place every 11 seconds around the world, which resulted in a total damage cost of $20 billion in 2021 alone.
Cybersecurity Ventures predicted in June that ransomware will cost its victims $265 billion annually by 2031.
Chainalysis noted that all figures are a “lower bound estimate” and that illicit and risky transaction volume will likely increase over time as new illicit activity is found.
In addition, the data doesn’t include crime where cryptocurrency is used as a mode of payment.
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