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A new report from Chainalysis shows that crypto scammers have stolen at least $9.9 billion in 2024. Although this represents a 29% decrease from the record amount of 2021, experts expect the final damage could reach as much as $12 billion. Scammers are increasingly using artificial intelligence (AI) and professional scam networks to further refine their methods.
Rise of Pig Butchering and Decline of Investment Fraud
A notable trend in 2024 is the sharp rise in pig butchering scams, where fraudsters build long-term relationships with their victims to subsequently rob them financially. This form of fraud grew by 40% year-on-year and is now responsible for 33% of total scam revenue.
Originally, these scams were mainly active in Southeast Asia, but are now spreading to other regions such as Nigeria and Namibia.
This compares to a 37% decline in high-yield investment scams (HYIS), a type of fraud that lures investors with inflated returns. One notorious example is Smart Business Corp, a Ponzi scheme that managed to raise $1.5 billion despite several warnings from regulators.
Crypto ATMs as a new target for fraudsters
Crypto ATMs are increasingly being used as a tool for fraud, especially to rob the elderly. In the first half of 2024, over $65 million was stolen through these machines in the US, with the average loss per victim being $10,000.
Huione Guarantee: A hub for money laundering and fraud
One of the driving forces behind the rise of modern crypto scams is Huione Guarantee, a peer-to-peer (P2P) marketplace linked to a Congolese criminal organization.
Huione acts as a money laundering platform, offering services such as AI-generated identities, fraudulent software, and other illegal tools. According to Chainalysis, Huione processed a total of $70 billion in crypto transactions, of which $375.9 million were directly linked to scam software providers.
AI makes fraud detection even more difficult
With the advent of AI, crypto scams are becoming more sophisticated than ever. Scammers are using deepfake videos, fake website clones, and AI-generated identities to deceive their victims.
In addition, new scam models are being developed, such as job fraud, in which job seekers are ripped off by jobs for which they must first pay “costs”.
According to the report, the number of deposits in pig butchering scams increased by 210%, while the average amount per victim decreased by 55%, suggesting that scammers are targeting a larger number of victims and refining their modus operandi.
Governments take action against crypto fraud
The explosive rise in crypto fraud is forcing regulators around the world to take action. In the US, the Senate Judiciary Committee proposed stricter requirements for crypto ATM operators in September 2024. States such as California and Arizona introduced laws to enforce daily transaction limits and require registrations as money transfer services.
In Europe, the introduction of the Markets in Crypto-Assets (MiCA) regulation has led to a tougher crackdown on illegal crypto ATMs. In August 2024, the German financial regulator BaFin seized 13 crypto ATMs on suspicion of money laundering.
The reins are also being tightened in the APAC region. Singapore and Australia have taken strict measures to combat the misuse of digital assets.
With AI and increasingly sophisticated scam techniques, crypto fraud seems to be far from being a thing of the past. Regulators are faced with the challenge of developing new legislation that effectively curbs the misuse of blockchain technology.
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