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by on January 17, 2023
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One thing can be said about crypto enthusiasts – they are a devoted bunch. It’s clear that 2022 definitely tested the loyalty of crypto users. From the crash in bitcoin price, catastrophic hacks, and myriad crypto scams, there was certainly a lot of drama on the blockchain in 2022. The data now proves what a rough ride the previous year was for the crypto industry. With losses to the industry of $3.7 billion for 2022, it was a record year – in a negative sense. 

The $3.7 billion that the crypto industry lost in 2022 is a full half-a-billion more than the comparable figure in 2021 according to the blockchain audit firm CertiK. It’s estimated that 80% of these losses were from DeFi or decentralized finance projects.

Functionality and Security Can Fight Crypto Scams

People flock to DeFi exchanges and other platforms because they want freedom from regulation and fees charged by traditional financial companies and banks. However, since DeFi is managed by users in a peer-to-peer network, there is no third party and little oversight. That’s why DeFi is often fertile ground for all types of crypto scams. 

CEO of CertiK Ronghui Gu  commented, “There’s a lot of work that needs to be done to secure the Web3 world…. we need to double down on the basics: functionality and security.” 

Crypto Scams Were Main Players in 2022’s Blockchain Catastrophes

One headline after another was published in 2022 about the fall of crypto exchanges, lenders and brokers. These seemed, at first glance, as unfortunate events. However, we often discovered that the bankrupt or hacked entities were involved in the bitcoin scams themselves. Often the players would disappear, complicating crypto recovery efforts on behalf of victims. 

Although the Axie-Infinity hack that cost the site $625 million didn’t seem to be an inside job (the FBI has identified North Korean hackers as responsible for the theft), many crypto companies didn’t just fail – they were involved in the crypto scams that brought them down. 

For instance, when the hedge fund Three Arrows Capital defaulted on a $650 million loan to Voyager Digital, the people who ran the fund disappeared with the cash. It’s clear that the money probably ended up in their bitcoin wallets or was laundered in a chain of criminal activity. 

Crypto lender Celsius filed for bankruptcy, but not before its founder and CEO Alex Mashinsky withdrew $10 million for his personal use. 

Of course, the most infamous example of crypto scam criminality in 2022 was Sam Bankman-Fried, founder of the FTX exchange. FTX was once the darling of the crypto sector and even got celebrity endorsements on Superbowl ads. However, in 2022, it was revealed that Bankman-Fried was illegally shuffling funds between FTX and his hedge fund Alameda Research. He and his companies have $5.1 billion in liabilities, and even though Bankman-Fried didn’t manage to evade authorities, crypto recovery for FTX victims is likely to be a slow and complex process. 

Will the Crypto Scam Problem Worsen in 2023?

Although many would like to believe there is an end in sight for declines in bitcoin price and crypto scams, the situation isn’t likely to improve without external remedies. Governments around the world are in the process of proposing, negotiating and passing crypto regulations. Recently, the IRS has stepped up procedures to investigate tax-evading bitcoin scams. 

However, until these procedures are implemented fully and take the form of actual legislation, the crypto scam problem will continue to be a vexing one. Although December 2022 showed fewer-than-average crypto losses, $595 million in stolen cryptocurrency was recorded in November. 

Added to the problem are the long-term effects of the fall of crypto companies and exchanges  such as Celsius and FTX. Just as the bank crisis of 2008 led to a general economic collapse, the fall of major crypto exchanges such as FTX sends reverberations throughout the sector for months or even years in the future. 

What About Crypto Recovery?

Fortunately, there is a bright spot amid all of this bad news. The authorities are becoming aware of the problem of crypto scams and how best to deal with them. In addition, as major corporations lose money to crypto fraud, they are likely to put more pressure on crypto exchanges and law enforcement to improve crypto recovery strategies. 

MyChargeBack is at the forefront of this change. We have the experience, advanced technology, and proven bitcoin forensics strategies to investigate crypto scams and assist clients on the path to successful crypto recovery. 

If You’ve Lost Money to a Crypto Scam, Contact MyChargeBack

It’s important not to give up if you are a victim of online fraud, but to seek recourse immediately. MyChargeBack has developed working relationships with law enforcement agencies worldwide, has extensive knowledge and experience with crypto tracking, and can improve your prospects of getting your funds back.

Posted in: Crypto
Topics: crypto
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