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Whale Alert Analysis: Scammers Have Bagged Bitcoin Worth $24 Million in the First Half of 2020

Leading blockchain tracking and analytics provider Whale Alert has revealed that scammers have been on a stealing spree as they have made away with $24 million in Bitcoin so far in 2020. Cumulatively, they have siphoned Bitcoin valued at $38 million over the last four years, and this excludes Ponzi schemes as they are a billion-dollar sector on their own.

Over $130,000 gone in a day

Scammers have perfected their art as some of them are looting more than $130,000 in just a day, and all they need is vigorous YouTube advertising, a bitcoin address, and a single-page website.

As per the report, “So far we have been able to confirm 38 million US dollar in bitcoin alone stolen by scammers over the past 4 years (excluding Ponzi schemes, which are a billion-dollar industry on their own), 24 million of which during the first 6 months of 2020. Some of the most successful scams made over $130,000 in a single day.”

Some swindlers are presenting fake crypto exchanges with unsuspecting investors getting lured. For instance, one scammer has been able to rake in at least $1.5 million in 6 months by offering a fraudulent exchange consisting of an amateur website with numerous grammatical mistakes.

Some scammers have, however, not been so lucky as they have been nabbed. Recently. A Romanian programmer who orchestrated the BitClub Network, which siphoned off investors’ funds worth $722 million, admitted to being a key player in the scam and may face a maximum five-year sentence and a $250,000 fine.

Supernormal profits

The scam market is depicted by high revenue, zero risk, minimal effort, and no taxes. Whale Alert predicts that by the end of this year, it will have skyrocketed by over twenty-fold since 2017 as the annual revenue will stand at more than $50 million.

Figure: Total Scam Revenue Per Year (Until the First Half of 2020, Excluding Ponzi Schemes)

This growth is being driven by elevated aggressiveness and professionalism because the scam industry began with the sending of malware and sextortion emails. Nevertheless, it has become sophisticated that scammers are establishing fake enterprises with dozens of websites, fraudulent social media accounts, and round the clock “customer support.”

According to the announcement, “The most prominent type of scam at the moment is the Giveaway, which features either a celebrity like Elon Musk or a well-known exchange and can net between a few thousand and 300,000 US dollars depending on the skill and effort put in by the scammers.”

The numerous crypto scams are taking place as Bitcoin trading hit a six-month low of 51% characterized by a snail speed in June 2020.

Hong Kong Suffers Surge in Crypto Scams in 2022

A large increase in the number of financial losses brought on by bitcoin scams has been seen in Hong Kong in the year 2022. According to reports from the local police, victims of cryptocurrency scams lost a total of HK$1.7 billion in 2018, marking a 106% increase from the previous year. In addition, the number of incidents of fraud using cryptocurrencies increased by 67 percent from 2021, reaching 2,336 cases. According to the Hong Kong police CyberDefender website, these scams were responsible for more than half of the HK$3.2 billion that was taken from citizens of the city as a result of technological crimes.

The growing usage of cryptocurrencies has made it increasingly difficult for authorities to trace the origin of monies obtained via illegal activity. Fraudsters are able to conceal their names, transactions, and ultimate destination thanks to the anonymity given by cryptographic currency transactions. Because of this, following the money trail left by criminals has become increasingly difficult for law enforcement.

The Cybersecurity and Technology Crime Bureau of the Hong Kong Police Force has provided some insights into the profile of a typical fraudster operating in the cryptocurrency industry. These con artists will claim to have extensive knowledge in the financial markets, particularly when it comes to crypto assets, precious metals, or foreign exchange goods. They often use bait to entice unsuspecting victims into downloading phony investing programs that display fictitious transactions and profits.

In order to differentiate its approach to cryptocurrency regulation from China’s total ban on cryptocurrencies, which will be implemented in 2021, the government of Hong Kong has gotten actively involved in the development of bitcoin infrastructure. The Securities and Futures Commission of Hong Kong issued a request for public comment in February on the updated proposed licensing framework for cryptocurrency exchanges, which is scheduled to go into force beginning in June 2023. Despite this, it is still very important to exercise extreme caution while investing in cryptocurrencies, as con artists continue to develop new methods to abuse the weaknesses of the market.

Scammers adapt to survive during crypto winter

In a recent crypto crime webinar, Eric Jardine from Chainalysis revealed how scammers adapt their strategies to changes in market situations. While overall crypto scam revenue dropped in 2022, Jardine noted that not all scams behaved similarly. By sub-classing scams into types, he found that scammers were adapting to market conditions and turning to other strategies, such as giveaway and romantic scams, to prey on people’s emotions.

Jardine’s data revealed that as investment scams become less effective, romance and giveaway scams become more prevalent, indicating that scammers are not simply using the same script over and over again. They can adapt and change depending on market conditions. Additionally, Jardine highlighted that a multilevel marketing scam called hyperverse took a massive chunk out of the $5.9 billion lost to scams in 2022, racking up around $1.3 billion, which accounts for roughly 22% of scam revenue in that year.

The rise of romance and giveaway scams during the crypto winter is not surprising as scammers often prey on people’s emotions during difficult times. These scams are designed to target people who are feeling vulnerable and in need of support. Giveaway scams often promise free tokens or coins in exchange for personal information, while romance scams involve scammers posing as potential partners to gain access to victims’ personal information or money.

It’s important to note that these scams are not exclusive to the crypto world and have been used by scammers for years. However, the crypto world provides scammers with a new platform to reach a wider audience and target people who are investing in digital currencies. As the market conditions change, scammers will continue to adapt and find new ways to deceive people.

Investors and consumers must remain vigilant and educate themselves on the latest scams and tactics used by scammers. Platforms and exchanges can also play a significant role in detecting and preventing scams by implementing robust security measures and educating their users. By working together, we can help to mitigate the risks posed by scammers and protect the integrity of the crypto industry.

BNB Chain Dominates Q1 2023 Rug Pull Scams

In the first quarter of 2023, BNB Chain has been identified as the network with the highest percentage of rug pull scams, according to a report by blockchain security firm Immunefi. The report, titled “Crypto Losses in Q1 2023,” investigated a variety of crypto hacks and scams in the first quarter of the year. It found that BNB Chain saw 73.3% of all rug pulls in the crypto ecosystem, with Ethereum coming in second at 26.7%.

The report also revealed that BNB Chain and Ethereum were the two largest targets for hackers and scammers, accounting for 68.8% of total losses from these networks combined. Of these two networks, BNB Chain was hit the hardest, with 41.3% of total losses from hacks and scams.

One particular type of scam stood out on BNB Chain: rug pulls. This type of scam involves developers raising funds and then shutting down their project without delivering the promised product or service. According to Immunefi, BNB Chain saw 73.3% of all rug pull scams in the crypto ecosystem during Q1 2023.

The Immunefi report highlights the need for increased security measures in the crypto industry, particularly on BNB Chain. As the network continues to grow in popularity, it is likely that more hackers and scammers will try to exploit vulnerabilities in the system. This makes it essential for investors to remain vigilant and do their due diligence before investing in any crypto project.

While BNB Chain has faced its fair share of challenges in Q1 2023, it remains one of the most widely used networks in the crypto ecosystem. Its popularity can be attributed to its low transaction fees, fast confirmation times, and support for smart contracts. As the network continues to evolve and improve, it is likely that it will remain a dominant force in the crypto industry for years to come.

In conclusion, BNB Chain dominated Q1 2023 rug pull scams, accounting for 73.3% of all such scams in the crypto ecosystem. While this is certainly concerning, it is important to remember that the crypto industry as a whole is still in its early stages of development. As the industry matures, it is likely that new security measures will be implemented to prevent these types of scams from occurring in the future. In the meantime, investors should remain cautious and do their own research before investing in any crypto project, particularly on networks like BNB Chain that are more susceptible to scams and hacks.

Coinbase Rolls Out AI-Driven ERC-20 Scam Token Detection System

Coinbase’s Chief Legal Officer, Paul Grewal, recently shed light on how their Engineering team is harnessing Artificial Intelligence (AI) to root out ERC-20 scam tokens.This innovation was disclosed on October 6, 2023, by Yifan Xu, Indra Rustandi, Yao Ma, and Vijay Dialani from the engineering team at Coinbase. The innovative ERC-20 Scam Token Detection System is a blend of smart contract auditing and machine learning prediction aimed at identifying both known and emergent scam types, marking a significant leap towards ensuring a safer crypto space.

The burgeoning realm of cryptocurrency is not without its share of scams, especially surrounding new and unverified tokens. Fraudsters employ a variety of devious tactics, ranging from Honeypot scams, which are deceptive traps to ensnare investors, to Internal Fees scams involving hidden or unusually high transaction fees. The evolving nature of these scams presents a continuous challenge, with new scam types emerging daily, posing a significant threat to both investors and the broader crypto ecosystem.

To combat these challenges, Coinbase has developed the Scam Token Detection System which employs a two-pronged strategy:

Smart contract auditing is a proactive measure to identify and filter out known scam types. By meticulously examining the integrity of tokens, this step helps to mitigate the risk of fraud by excluding tokens associated with known malicious activities, capturing and cataloging them for future reference.

On the flip side, the system employs a machine learning framework to detect unknown scam types by identifying abnormal activity patterns. For instance, unusual patterns in time-series transactions among a concentrated group of accounts could be indicative of unknown scam types. This abnormality detection mechanism spots these irregularities, safeguarding against potential unidentified scams.

The Scam Token Detection System isn’t just a technological safeguard; it translates into tangible benefits for users. The establishment of a whitelist of trusted tokens is crucial for launching Coinbase’s asset recovery service for unsupported ERC-20 tokens. This feature, coupled with the ability to hide scam/spam tokens within the Coinbase Wallet, significantly enhances the platform’s capacity to filter out spam tokens, providing a cleaner, safer, and more user-friendly experience.

CertiK: Crypto Social Media Scams Surge

In light of the increasing number of cryptocurrency scams permeating social media platforms, blockchain security company CertiK has delineated a comprehensive examination of this menacing trend. On October 26, 2023, CertiK took to Twitter to elucidate how the meld of social media’s extensive reach and cryptocurrency’s decentralized, and often murky, nature concocts a fertile ground for scam artists.

CertiK initiated its discourse by referencing a report from the Federal Trade Commission (FTC). The report stressed that cryptocurrency scams led to a staggering loss of over $1 billion in the 18 months leading up to June 2022. Interestingly, nearly 50% of these losses stemmed from engagements on social media platforms, whether via an advertisement, post, or direct message.

A Kaspersky report also revealed a 40% increase in cryptocurrency phishing attack scams in 2022, with 5,040,520 attacks compared to 3,596,437 in 2021. These attacks involve duping investors through fake websites and communication channels, allowing attackers to access crypto assets. Despite uncertainty about the future of phishing attacks, one in seven Kaspersky survey respondents admitted to being victimized. The attacks usually involve giveaway scams or phony wallet phishing pages, but attackers continue to refine their strategies. Recent incidents like Trezor warning against deception and Arbitrum investors falling victim to phishing links highlight the need for enhanced vigilance, authentication, and hardware wallets for crypto asset storage.

The discourse proceeded to the ominous “pump and dump” schemes. These operations are characterized by artificial inflation of an asset’s value to reap profits. Small-cap cryptocurrencies, often hyped by celebrity influencers, are particularly susceptible to such manipulative practices. The Securities and Exchange Commission (SEC) hasn’t turned a blind eye and has taken steps against influencers who promote risky, unvetted tokens, underscoring the significant risks these schemes pose to unsuspecting investors.

Further in the discussion, CertiK highlighted the misuse of verification badges on social media platforms such as Twitter, Facebook, and Instagram. These blue checkmarks, emblematic of a verified account, are exploited by scammers who either acquire verified accounts deceitfully or fabricate the verification badge, misleading the platform users.

The dialogue also touched on counterfeit applications posing as legitimate crypto apps. These sham apps act as Trojan horses, either installing malware or draining funds from users’ accounts. Alarmingly, these apps have managed to infiltrate official app stores like Apple App Store and Google Play, further exacerbating the threat landscape.

Dubbed ‘pig butchering’, romance scams are yet another method that begins on social media and culminates in a loss of crypto assets. Here, scammers feign as traders pledging to amplify victims’ savings through trading, only to vanish with their money once trust is established.

In the culmination of the thread, CertiK suggested several measures to bolster security against these scams. Utilizing a hardware wallet, employing multi-signature wallets with timelock, and opting for smart contract security audits were among the recommendations. For a more thorough understanding, CertiK directed readers to their blog, which delves deeper into safeguarding oneself against crypto social media scams.

CBI and Liminal Collaborate for Digital Asset Security in India Amid Crypto Scams

Strategic Alliance for Digital Asset Security

India’s Central Bureau of Investigation (CBI) has engaged Liminal, a Singapore-based digital asset custodian, to manage and secure digital assets confiscated in criminal investigations. This strategic partnership emerges against the backdrop of a surge in cryptocurrency-related frauds in India, highlighting the growing concerns in this sector.

Rising Concerns Over Cryptocurrency Frauds

Recently, India has witnessed a spate of cryptocurrency scams, leading to significant financial losses and several arrests. Two of the most notable cases include a $300 million scam with 18 arrests and a $120 million fraud resulting in at least two arrests. These incidents underscore the increasing challenges in regulating the digital asset ecosystem and preventing its misuse for illicit activities.

Liminal’s Role in Enhancing Digital Asset Security

Liminal, under the leadership of Mahin Gupta, co-founder of ZebPay, an early player in India’s cryptocurrency exchange market, has stepped up to the challenge. The company, known for its robust security measures, raised $4.7 million in mid-2022 from prominent investors like Elevation Capital, Andreas Antonopoulos, Balaji Srinivasan, and Sandeep Nailwal. Liminal’s expertise in creating multi-signature and multi-party computation wallets positions it as a capable partner for the CBI in ensuring the security of seized digital assets.

Senior Vice President of Strategy and Business Operations at Liminal, Manan Vora, expressed pride in their collaboration with the CBI, stating, “We consider our partnership with the CBI as a testament to our unwavering dedication to building a safe and regulated digital asset ecosystem in India. As experts in the field, we feel it’s our responsibility to assist law enforcement agencies with rigorous security protocols.”

CBI’s Discretion in Ongoing Investigations

The CBI, known for its discretion in ongoing investigations, has not disclosed specific details of the operations involving confiscated digital assets. However, their gratitude towards Liminal for their assistance and involvement in securing these assets has been publicly acknowledged.

The CBI’s initiative to partner with Liminal for the custody of seized digital assets marks a critical step in addressing the security challenges in the cryptocurrency sector. This collaboration not only reinforces the need for enhanced security measures but also showcases the potential of public-private partnerships in regulating and safeguarding the digital asset ecosystem in India.

Binance Co-Founder Yi He Champions Transparency and Security Amidst Crypto Evolution

In an era where the crypto industry confronts continuous scrutiny and challenges, Binance, under the leadership of its co-founder Yi He, has taken significant strides to uphold transparency and security across its platform. Yi He’s recent communications via social media have cast light on Binance’s unwavering commitment to fostering a safe and equitable trading ecosystem amidst the dynamic landscape of cryptocurrency trading.

Yi He’s engagement with the community through social media brings attention to the intricate issues surrounding token listings and the precautions necessary to mitigate risks associated with scams and fraudulent activities. Her advocacy for vigilance and the need for an informed community resonate with Binance’s broader objectives to implement stringent security measures and compliance protocols.

Amidst growing concerns over listing scams and the impersonation of Binance executives, Yi He’s clarion call to the crypto community emphasizes the importance of skepticism towards unverified claims and the significance of relying on official Binance channels for authentic information. Her stance is a testament to Binance’s resolve in combating misinformation and safeguarding its users from potential scams that exploit the credibility of the platform and its leadership.

The crypto exchange’s initiative to enhance its compliance framework, as evidenced by the rehiring of Steve Christie as Deputy Chief Compliance Officer, aligns with Yi He’s messages of fortifying Binance’s regulatory adherence and operational security. This move is part of a broader strategy to navigate the regulatory landscape effectively and maintain Binance’s status as a leading and trustworthy crypto exchange.

Furthermore, Yi He’s insights into the internal adjustments and partnerships for better compliance and security measures reveal Binance’s proactive approach to addressing the evolving needs of the crypto market. Through collaboration with regulators, industry leaders, and stakeholders, Binance aims to reinforce its commitment to transparency and the protection of its community.

Yi He’s leadership and active communication underscore Binance’s dedication to building a fair, transparent, and efficient platform. By addressing the challenges head-on and engaging with the community, Yi He and Binance exemplify the role of leadership in steering the crypto industry towards a more secure and reliable future.

In conclusion, as the crypto industry continues to mature, the initiatives and leadership demonstrated by Yi He and Binance serve as a beacon for the importance of security, transparency, and community engagement in shaping the future of cryptocurrency trading.