According to a recent report published by blockchain intelligence firm TRM Labs, the year 2022 witnessed a surge in illicit activities related to cryptocurrencies, resulting in a staggering $7.8 billion lost to pyramid and Ponzi schemes. Despite an overall market downturn, the crypto sector experienced an increase in fraudulent practices.
TRM Labs alleges that an additional $1.5 billion worth of cryptocurrencies was spent on darknets for illicit purposes, while $3.7 billion was lost due to hacks or exploits. The total amount involved in various financial fraud schemes reached $9.04 billion.
Investment Fraud Soars
Investment fraud, which includes scams involving fake initial coin offerings (ICOs), unregistered securities, and fraudulent investment platforms, saw a significant rise of nearly 200% from $907 million in 2021 to $2.57 billion in 2022.
The report indicates that ten major crypto Ponzi and pyramid schemes accounted for around 54% of the total funds lost. Notably, Tron and its associated cryptocurrency Tether (USDT) played a substantial role, as approximately 40% of the incoming volume of investment fraud schemes in 2022 occurred on the Tron blockchain, compared to just 17% in the previous year.
Prominent Cases
Among the notable cases, Forsage and Trade Coin Club emerged as two prominent crypto Ponzi schemes that faced legal action in 2022. Forsage enticed investors with promises of high returns through Ethereum (ETH) and BNB Chain contracts, leading to a collection of nearly $974 million across two related entities. Similarly, Trade Coin Club solicited over $295 million from more than 100,000 investors by claiming high returns through its cryptocurrency exchange before collapsing. Both firms have since been sanctioned by the U.S. Securities and Exchange Commission.
The rise in crypto-related crime highlights a pressing need for enhanced regulation and investor awareness within the cryptocurrency industry. TRM Labs’ report serves as a reminder that while the market may experience fluctuations, fraudulent activities continue to pose significant risks.
Overall, the findings emphasize the importance of robust measures to combat financial fraud and protect investors in the evolving landscape of cryptocurrencies and blockchain technology.