2019 saw scammers and fraudsters steal over $4 billion in crypto

2019 still continues to find people susceptible to financial scams and theft. According to a recent report by CipherTrace, covering the third quarter of the year, several billion dollars’ worth of cryptocurrency has been lost to thievery or fraud this year. However, this is still much lower than the amount in the fiat realm which has been around for eons.

In its Cryptocurrency Anti-Money Laundering Report, 2019 Q3, the security research firm took a look at the crypto industry broke it down piece by piece. The most recent quarter saw the least amount of theft this year on exchanges (until the recent Upbit debacle) and CipherTrace explained, “This quarter, cybercriminals stole $6.5 million from cryptocurrency exchanges, while insiders bilked cryptocurrency users out of $9 million in exit scams and Ponzi schemes. This total of $15.5 million represents the smallest number of cryptocurrency crimes of any quarter in the past several years.” Last year, CipherTrace reported that $950 million had been stolen from exchanges. 

While fewer crypto fans are falling for scams and fraud, there will always be those who succumb to the illicit efforts of criminals. As the ecosystem gets smarter, though, these crooks are setting their sights on larger piles of crypto, which is part of the reason $4.4 billion was stolen. Last year, the figure was just $1.7 billion.

It’s worth pointing out that the $4.4 billion figure can be offset by one single scam. The PlusToken scheme took $2.9 billion away from the market, which means that, with the exception of that exit scam, the losses were just $1.5 billion. That isn’t much comfort for those who lost money held by the exchange, but it is for the industry as a whole. 

Consider financial scams in other realms. According to some reports, $10.5 billion was lost to phone scams last year. The elderly are scammed out of $3 billion each year. By some estimates, the increase in scams in the fiat space jumped 28% from 2017 to 2018 – and that’s just in the U.S. Overall, the crypto ecosystem is proving to be much more secure. 

CipherTrace also took a look at exchanges and how they’re managing know-your-customer (KYC) policies. In this regard, many are failing and crypto investors need to take note. The firm reviewed 120 exchanges and found that only 35% have strong KYC policies in place. Another 41% are described as having “porous” standards and 24% have weak standards. If exchanges aren’t willing to abide by established financial rules, they can’t be expected to implement policies to better protect their users’ assets, and those trading in crypto would be partly to blame for their own losses if they continue to use these weaker platforms.    

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