In the wake of recent hyperactive fluctuations, the market for cryptocurrency and non-fungible tokens is believed to have exploded to more than $3 trillion held by over 300 million people worldwide.
However, the current size of the market represents only a fraction of how much has been lost over recent years, according to at least one noted industry analyst. Recent findings suggest that “a whopping $25 trillion and counting has been lost to cryptocurrency and NFT rug pulls and scams to date,” according to a recent posting by Rebecca Moody, head of data research for Comparitech.
“As our cryptocurrency and NFT heist trackers have found, crypto is a lucrative business for hackers,” Moody pointed out. “These trackers don’t account for insider jobs and scams, such as Ponzi schemes, however.”
Hence, the researcher has created new tracking systems to count so-called “rug pulls” and scams, which are typically not included in this loss accounting.
Rug pulls incorporate losses within “both newly founded crypto tokens or NFTs, whereby the founders pull out before the project is fully built as well as exit scams from longer-running and more established projects,” according to Moody, who outlined her appraisal in a blog post earlier this month and updated it Aug. 24. The $25 trillion loss estimate also covers scams that are driven by Ponzi schemes, honeypots and posing as other types of digital currency.
But how could crypto losses have topped the gross domestic product value of many countries over the years without capturing as much attention, not to mention more intervention? Or, more accurately, why are losses so vastly underestimated according to Moody’s evaluation?
“From the research we've conducted, a lot of the scams for lower amounts or lesser-known tokens or NFTs go under the radar and aren't heavily reported, if at all,” she pointed out in an interview. She added that some of these low-profile attacks “may only appear in tracking tools like those offered by PeckShield and Certik.”
Hence, Comparitech sought to collect information on as many of these seemingly low-value scams as possible “along with all of the well-known ones it’s given us a clearer picture of the true scale of the problem.” And yet, despite the unbelievably high toll of crypto losses to-date, Moody said that the estimate still might not be all-encompassing.
“It’s likely there are others that haven't been reported on at all,” she pointed out.
“I think there is still a lot of confidence in crypto and NFTs as an investment, especially as it's still a relatively new industry and as it has become far more 'mainstream,’” she said in an interview. “There are also a lot of calls for greater regulation, which will add to confidence.”
And on the other end of the spectrum, a few recent individual heists are off-the-charts. Case in point: Nomad Bridge just recently was taken for more than $190 million in the third-biggest crypto heist of 2022 and the ninth-biggest of all time (so far). And losses are likely to increase as the embrace of digital currencies booms. Worldwide crypto adoption grew almost nine times over (880%) in 2021, according to Blockware Intelligence.
The biggest crypto rug pulls and scams of all time (per Comparitech)
Below are the biggest crypto rug pulls and scams (based on the U.S. dollar amount stolen at the time of the attack) to date:
- OneCoin – $4 billion stolen: This Ponzi scheme began in 2014 and lured investors in by promising high return rates with little or no risk. At its height, OneCoin is thought to have had more than 3 million members from across the globe, raking in from $4 billion to $19 billion. And to date, it is also the most “successful” crypto scam as the search continues for the so-called “Cryptoqueen,” Ruja Ignatova, who is said to have been behind the scheme. In July 2022, Ignatova was added to the FBI’s "Ten Most Wanted Fugitive List."
- Africrypt – $3.6 billion stolen: In April 2021, the BTC pool of Africrypt, which was valued at $3.6 billion, disappeared. The two founders (brothers Raees and Ameer Cajee) said the platform had been attacked and all of the funds drained. However, a week before the said attack, Africrypt employees found themselves unable to access the back-end of the platform. While the two brothers denied any involvement in the attack, they did disappear a month later. It is said that they have now settled in the U.K. with their families and continue to deny any involvement, suggesting they fled in fear of their lives. They also said the maximum sum they traded was $200 million and the amount lost was $5 million not $3.6 billion.
- GainBitcoin – $3 billion stolen: In India’s biggest crypto scam, from 385,000 to 600,000 bitcoins are said to have been collected. Comparitech's $3 billion figure is based on the lower estimate (at the time of the theft in March 2018), but the top estimate extends as far as $4.7 billion. The scheme reportedly offered investors monthly returns of 10% on bitcoin-on-bitcoin investments. In March 2018, two directors of the company (Amit Bhardwaj and Ajay Bhardwaj) were arrested. Amit died in January 2022 but the case against Ajay remains ongoing, with estimates of the monetary amounts involved continuing to escalate.
- BitConnect – $2 billion stolen: In the BitConnect fraud scheme which ran up until August 2021, investors were defrauded of $2.4 billion. BitConnect’s founders touted the platform’s technology as being able to guarantee returns and generate substantial gains by trading in the volatile crypto market. However, it was all an elaborate Ponzi scheme and in February 2022, the founder, Satish Kumbhani, was indicted.
- PlusToken – $2.25 billion stolen: From 2018 to 2019 investors were defrauded of 14.8 billion yuan (U.S. $2.25 billion) in the PlusToken crypto Ponzi scam. Millions fell for the scam whereby they paid a membership fee under the promise they would be offered high investment returns. In 2020, the ringleaders were jailed for up to 11 years.
- Wirecard – $2.1 billion stolen: In June 2020, Wirecard, a card issuer that supported crypto payments, issued a statement that said $2.1 billion in cash had gone missing. They pointed the finger at a third party’s “spurious” cash balances but three key men behind the company, including former chief executive Markus Braun, were charged with embezzlement, market manipulation, and gang fraud in March 2022.
- Thodex – $2 billion stolen: In this exit scam in April 2021, Thodex was said to be “temporarily closed” before the founder shut down the platform entirely and ran off with $2 billion of investors’ funds. The founder, Faruk Fatih Ozer, denied it was an exit scam but is still on the run. If caught, many want to see him serving a prison sentence of 40,000 years! Some estimates suggest that as much as $2.6 billion could have been stolen.
- WoToken – $1.1 billion stolen: Over 715,000 victims were impacted by this $1.1 billion scam. In this Ponzi scheme, investors were told exceptional returns would be generated by the platform’s algorithmic trading bots, but, as is the case with most of these schemes, the tech simply didn’t exist. Today, the stolen tokens (46,000 BTC, 2 million ETH, 292,000 LTC, 56,000 BCH, and 684,000 EOS) would be worth over $5 billion. Six defendants were trialed over the Ponzi scheme and each pleaded guilty and received recommended jail times of six months to 11 years (a far cry from the suggested sentence for Thodex’s founder).
- Arbistar – $1 billion stolen: Spanish police arrested the leader of this billion-dollar crypto scam in October 2020. The Ponzi scheme (run by parent company Arbicorp) duped around 120,000 users and raised more than $1 billion in bitcoin.
- BitClub Network – $722 million stolen: This cryptocurrency mining scheme ran from April 2014 to December 2019 and accumulated at least $722 million in funds. Investors were told they’d receive shares in the crypto mining pools while also being rewarded for introducing new investors to the scheme. In September 2020, a Californian man, Joseph Frank Abel, pled guilty to selling unregistered securities and to filing a false tax return.