Scammers took home $14bn in cryptocurrency in 2021, a new all-time high, according to data from blockchain analytics firm Chainalysis.
Crypto received by digital wallet addresses linked to illicit activity including scams, darknet markets and ransomware jumped 80% from a year earlier. Still, the activity represented just 0.15% of total crypto transaction volumes, its lowest ever.
As of early 2022, Chainalysis said illicit addresses already hold over $10bn worth of cryptocurrencies, with the majority of this held by wallets associated with crypto theft.
Scamming was the greatest form of cryptocurrency-based crime in 2021, followed by theft — most of which occurred through hacking of cryptocurrency businesses.
"DeFi is one of the most exciting areas of the wider cryptocurrency ecosystem, presenting huge opportunities to entrepreneurs and cryptocurrency users alike," Chainalysis said in its annual Crypto Crime report.
Over $2.8bn of the total $7.8bn loses from scams came from a new but popular type of scheme known as a "rug pull," in which developers build what appear to be legitimate cryptocurrency projects, before ultimately taking investors' money and disappearing.
The founder of a Turkish cryptocurrency exchange fled the country with $2bn in funds which belongs to 391,000 investors. The creators of Squid coin, a currency named after the popular Netflix show, disappeard with $3.3m of investor funds.
Illicit addresses are defined as wallets tied to criminal activities such as ransomware, Ponzi schemes and scams. Cryptocurrency markets remain highly risky for investors but Chainalysis says that illicit activities are becoming less common.
"The yearly trends suggest that . . . crime is becoming a smaller and smaller part of the cryptocurrency ecosystem," Kim Grauer, director of research at Chainalysis, wrote in the report.
Digital assets, from bitcoin to non-fungible tokens, exploded in popularity in 2021 amid an embrace from institutional investors and major companies.