Chainalysis fraud data analysis! 2021 is the year of Rug Pulls.

The renowned on-chain data analysis organization, Chainalysis, released an analytical article yesterday, December 16, regarding cryptocurrency scams. The article delves into the most common patterns of fraudulent activities in the cryptocurrency space and where the funds flow post-scam. Let's take a closer look.

Chainalysis 2021 Fraud Analysis

According to Chainalysis' on-chain data, fraudulent activities in 2021 collectively scammed approximately $7.7 billion, an 81% increase compared to the previous year, marking the second-highest in nearly five years.

The significant increase is primarily attributed to the emergence of a new type of scam called Rug Pull, prevalent in new DeFi protocols, where the protocol creators abandon the project after token issuance, directly deceiving users' funds.

Investment Scams

Excluding Rug Pull, the focus shifts to investment scams. It is observed that the number of victim addresses has decreased, but the total amount scammed has increased, indicating that the average amount scammed per victim has risen.

The following chart illustrates the active investment scam quantities in the past year. "Active" refers to addresses that have received funds in the past year, reaching the highest in the last five years from 2,052 in 2020 to 3,300.

The data aligns with the trend observed in recent years ── the average lifespan of scams is decreasing. In 2021, the average active days for scams were only 70 days, down from 192 days in 2020. Chainalysis suggests that investigators are becoming more effective in investigating and prosecuting scammers.

Prior to 2021, as the prices of Bitcoin and Ethereum rose, the amounts scammed by fraud groups also increased. This phenomenon seemed unsurprising, as rapid price surges attract inexperienced users to the crypto industry, making them easy targets for scam groups.

However, the correlation between these two factors is gradually diminishing. In 2021, regardless of whether cryptocurrency prices rise or fall, scam amounts are stabilizing or even declining.

Rug Pull

Rug Pull is a new scam model exclusive to 2021, with the emergence of various new DeFi protocols, causing more individuals to fall victim to this type of fraud. Up to $2.8 billion in cryptocurrency was scammed through Rug Pull, accounting for 37% of total fraud in 2021, compared to only 1% in 2020.

The chart below shows the top 15 projects with the highest scam amounts this year, featuring well-known projects such as AnubisDAO, Snowdog Dao, and Squid, the game token.

Except for the first-place centralized exchange scam, the rest are DeFi projects, reinforcing the notion that DeFi is a breeding ground for Rug Pull scams.

Audit is Crucial and Safeguard Your Mnemonic Phrase

Chainalysis also emphasizes in the article the importance of ensuring that any DeFi platform used has undergone platform audits and verifying project participants before involvement. Additionally, the mnemonic phrase of a crypto wallet is crucial, and one should never easily provide it to unknown sources due to panic or greed.