Chainalysis, a blockchain monitoring and research firm, has released a new report that reveals that, over the last two years, Ethereum has been the crypto medium of choice among scam artists and conmen. One beautiful characteristic of a blockchain is that its records cannot be altered, thereby yielding a complete online public audit trail of all transactions within its confines. Anonymity may withhold disclosure of the owners of addresses, but an analytical company with the know-how, software, and computing power can search for noteworthy patterns within the chaos of blockchain details.
Chainalysis has already recently released two other reports about fraud trends in the crypto eco-system. In this analysis, the company said: “The firm’s report “Crypto Crime Series: Decoding Ethereum Scams” explains how ethereum (ETH) is the top choice for crypto-related scams throughout the ecosystem. In 2017, there was only $17 million worth of ETH stolen in scams but in 2018 roughly 0.01 percent of ETH was involved in swindles worth $36 million. The number of scams declined through 2018, although those that remained were bigger, more sophisticated and vastly more lucrative.”
While other reports have studied crypto exchange compromises, its perpetrators, and scams in general, this one focuses on which addresses are known to be used by fraudsters, whether they have been for outright fraud, an ICO exit scam, a Ponzi product, or phishing attempts. Crooks are continually getting more sophisticated and organized in their illicit pursuits, in a similar way that viruses morph to evade detection and block any antibiotics use to destroy them.
Chainalysis explained: “From late 2016 through the end of 2018, Chainalysis has identified over 2,000 scam addresses on Ethereum that have received funds from nearly 40,000 unique users — Scam activity increased dramatically in 2018 with nearly 75% of scamming activity taking place that year. Innovative criminals executed more complex Ponzi and ICO exit scams that generated millions of dollars in income — These more sophisticated schemes dominated the second half of the year.”
The firm has created an Etherscam database, based primarily on known events and scams that it can confirm. It freely admits that its fraud totals are conservative because many frauds go undetected or unreported by their victims. Chainalysis starts by collecting data “on fake My Ether Wallet (MEW) websites, Punycode lookalike domains, phony exchanges, fraudulent impersonation giveaways, ICO exit scams, and Ponzi games tied to the Ethereum ecosystem with multi-level pyramid applications.”
The company has determined that there are 1,975 scam-related ethereum addresses, which have been used in 6,378 scams, of which there remain 924 scams that are still in process. The firm counsels ETH holders to protect their private keys by keeping them in a “cold storage” wallet, avoiding suspicious websites and “free-giveaway” campaigns, and bookmarking official cryptocurrency websites. You are also advised to double check all copied and pasted addresses, as well.
The latter piece of advice is due to a new form of malware that has been detected that replaces bookmarked addresses with criminal destinations. As Chainalysis said, crooks are becoming more sophisticated and adapting more quickly to changing conditions.