According to recent reports, Bitcoin scammers are on a tear this year, and could be on pace to extract nearly $50 million in 2020, which doesn’t include ponzi schemes. With digital assets still being foreign to many newcomers, scammers continue to take advantage through various methods such as giveaways, fake exchanges, fake ICO’s, and many others.
Scams In 2020
According to a recent report, Bitcoin scammers have extracted about $24 million in the first 6 months of this year. It’s important to note that these estimations do not include ponzi schemes. The data comes from popular Twitter group, “Whale Alerts”, who provides blockchain analytics to 237K+ followers on a daily basis. According to a recent Medium post, the group of data professionals launched new tools for tracking criminal activity. By analyzing hundreds of thousands of data sets, the group believes that some of the top tier scammers are making nearly $130K / a day. The most disturbing part of the report is that Whale Alerts believes the scam market has grown more than “20 fold” since 2017, with annual revenue equating to at least $50 million.
Popular Scam Methods
The decentralized nature of Bitcoin has opened up endless opportunities for scammers. According to Whale Alerts, some of the most popular methods include giveaways, sextortions, fake exchanges, fake initial coin offerings, video scams, ponzi schemes, fake tumblers, malware, and many others.
Since inception, malware has been one of the most popular ways for scammers to earn crypto. Without even knowing, malware infects computers, and uses processing power to mine crypto. It’s been such a problem that giants like IBM and BlackBerry have joined forces to eliminate it. With so many newbies entering crypto on a daily basis, scammers have an arsenal of strategies that are being deployed. Until the education level in cryptocurrency is better, it is hard to imagine an environment where these numbers go down. In a normal world, the average person would not give somebody their bank or routing numbers. In the crypto world, new users are giving away their wallet addresses like it is nothing, due to the lack of education.
Deepfakes Are Next
Based on Whale Alerts research, the group believes that a technique called “Deepfakes” could be the next approach that scammers take. Deepfakes use artificial intelligence and machine learning to create fake content. A deepfake is an image, video, or audio that can pass to be a real person even though it's fabricated. It allows scammers to discredit anyone, with the goal of spreading misinformation. Deepfakes have been used to swap out celebrity faces for pornography videos. In the crypto world, it would open up the door for all types of scams. We have already seen scammers impersonating prominent figures like Bill Gates on hacked YouTube channels to broadcast fake crypto giveaways.
In a report by Visionary Financial, the founder of DeepTrust Alliance shared a presentation on YouTube regarding deepfakes that was taken down. Kathryn Harrison made a presentation at the Ethereal Virtual Summit, in which she explained how blockchain technology could prevent deepfakes. Even though the video was 100% legit, YouTube took it down because they believed it was an actual deepfake. Despite nobody talking about deepfakes right now, the method continues to scale. Aside from DeepTrust Alliance, it will be interesting to see what other companies attempt to disrupt the upcoming scammer paradise. In terms of YouTube, the platform is full of scammers promoting crypto. Most recently, Ripple filed a lawsuit against YouTube regarding fake crypto giveaways. The company behind XRP stated that they have received 350 complaints about impersonation and scamming.
With scam proceeds being directed to some of the largest exchanges in the world, it will be crucial for the industry to come together. Exchanges create off-ramps to traditional banking which makes it even worse. If regulators continue to see this type of behavior, it will be extremely difficult to ever see mass adoption. People can argue about centralized parties all they want, but at the end of the day if you get scammed you call your bank. If you get scammed in crypto, you end up calling your mom.
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