DeFi ‘Rug Pulls’ Were Crypto’s Top Fraud Scheme in 2020: CipherTrace

Jan 28, 2021 | Decrypt News | 0 comments


DeFi “rug pulls” and exit scams made up 99% of all crypto fraud schemes in the second half of 2020, according to new data from blockchain analytics company CipherTrace. 

It’s part of CipherTrace’s year-end report examining cryptocurrency’s role in criminal activity over the course of 2020, similar to what Chainalysis released earlier this month.

Crypto Ransomware Payments Grew 311% in 2020: Chainalysis

According to CipherTrace’s data, criminals “netted” $1.9 billion in 2020. That’s down from $4.5 billion in 2019, and up from $1.7 billion in 2018.

The majority of that crypto-linked criminal activity falls under the general rubric of “fraud and misappropriation.” The second-most-popular category, per CipherTrace, was “hacks and thefts.”

A massive fraud scheme surrounding a coin called WoToken was responsible for $1.1 billion of last year’s figure. It was the single most expensive crypto crime of 2020, according to the report. Criminal activity surrounding the KuCoin hack and Fcoin came in second and third place.

DeFi was also particularly vulnerable to thefts last year, according to CipherTrace. And “rug pulls”—a kind of exit scam where attackers drain liquidity from a protocol, leaving investors unable to trade—reigned supreme.

“Half of all 2020 crypto hacks were of DeFi protocols—a pattern that was virtually negligible in all prior years—and nearly 99% of major fraud volume in the second half of 2020 stemmed from DeFi protocols performing ‘rug pulls’ and other exit scams in a pattern eerily reminiscent of the 2017 ICO craze,” says CipherTrace.

As the amount of money locked up in DeFi has grown—according to data from DeFi Pulse, it’s nearly $25 billion, up from around $10 billion at the beginning of November—so too have the risks.

“FOMO is fueling growth and an urgency associated with participating in DeFi, but the DeFi space overall lacks adequate due diligence, exposing individual investors to significant risks,” CipherTrace CEO Dave Jevans told Decrypt. “When protocols launch quickly to take advantage of the hype cycle, they put users at risk who could fall victim to loopholes or bugs in the code that would have been discovered in an in-depth security audit.”

CipherTrace’s list of targeted DeFi protocols and trading mechanisms included Pickle Finance, Uniswap, Harvest Finance, Bisq, and more.

“With the influx of billions of dollars into DeFi,” said Jevans, “expect more DeFi related hacks, frauds and a variety of exit scams in 2021.”

News Source from

Related Articles

Former Wall Street banker launches $1.5 billion crypto venture fund

Former Wall Street banker launches $1.5 billion crypto venture fund

Former Citigroup executive Matt Zhang has launched a $1.5 billion crypto venture fund called Hivemind Capital Partners, according to an announcement on Monday. Hivemind, a new crypto investment outfit based out of New York will focus on four strategies — yield...

Law Decoded: India ponders going full China on crypto, Nov. 22–29

Law Decoded: India ponders going full China on crypto, Nov. 22–29

The world's sixth-largest economy could adopt a hardline stance against decentralized cryptocurrencies as soon as this winter. Are big emerging economies more likely to gravitate toward blanket crypto bans? China has set a precedent, and now it appears as if India...

Pin It on Pinterest

Share This