ponzi

Illicit activities related to crypto increased across the sector in 2022 despite an overall market downturn.

According to a report published by blockchain intelligence firm TRM Labs on June 28, a combined $7.8 billion was paid to cryptocurrency pyramid and Ponzi schemes worldwide in 2022. In addition, another $1.5 billion in crypto was alleged by TRM to have been spent on darknets for illicit activities, while another $3.7 billion in crypto was lost in hacks or exploits.

In total, $9.04 billion in crypto was sent to all types of financial fraud schemes, as alleged by TRM Labs. Despite a collapse in cryptocurrency prices from the ongoing bear market, it appears that there has been no corresponding slowdown in crypto-related crime. The firm wrote:

“Investment fraud centers on the solicitation of funds for fraudulent investments or projects; these often involve fake initial coin offerings (ICOs), unregistered securities or fraudulent investment platforms. Investment fraud involving cryptocurrency rose by nearly 200% from USD 907 million in 2021 to USD 2.57 billion in 2022.”

Researchers said that 10 of the largest crypto Ponzi and pyramid schemes accounted for around 54% of the total amount. Moreover, an alleged 40% of the total incoming volume of investment fraud schemes active in 2022 was on Tron, mostly via Tether (USDT) issued on the blockchain, compared to just 17% in 2021. 

Two of the largest crypto Ponzi schemes prosecuted in 2022 were Forsage and Trade Coin Club. Forsage lured investors with the promise of high returns through Ethereum and BNB Smart Chain contracts, netting nearly $974 million in investors’ money through two related entities. Meanwhile, Trade Coin Club claimed high returns through its cryptocurrency exchange, soliciting more than $295 million from over 100,000 investors before its collapse. Both firms have since been sanctioned by the United States Securities and Exchange Commission.

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