Ethereum (ETH)-Related Scams Double Revenues in 2018: Chainalysis

The total number of fraudulent projects declined last year, but since the schemes were larger in scale, investors lost $36 million compared to $17 million in 2017, according to Chainalysis.

Chainalysis has published preliminary data from its new scam report, saying that revenues from fraudulent activities involving Ethereum (ETH) doubled in 2018. The affected users numbered 40,000, the New York-based blockchain security company said a blog post.

Criminals stole 0.01% of the ETH tokens in circulations last year. The overall number of the scams declined, but the surviving ones were larger schemes, which led to the revenue growth, Chainalysis noted.

“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,” as explained in the post.

Fraudsters relied on three main types of schemes when targeting Ethereum holders, according to Chainalysis. In the first place were phishing attacks, which accounted for 38.7% of ETH-related losses compared to 88.6% in 2017. Those types of attacks happen when hackers present themselves as trusted companies, for example, exchanges or wallet providers, and use similar names and URL address to target their customers via e-mails and social media channels.

“In 2018, scamming activity shifted in two ways. First, after the success of phishing scams in 2017, many more criminals jumped on the bandwagon. They saturated the market with phishing attacks, but fewer users took the hook,” Chainalysis explained.

The second trend was the rise of initial coin offering (ICO) exits and Ponzi schemes, executed in new and complex ways and leaving investors with million in damages. The former happens when an ICO issuer takes capital (in the form of ETH) from investors without sending tokens to them and creating the promised project, while the latter is a fake offer luring people with the promise of immediate high returns. Ethereum-related ICO exits accounted for 31.5% of the fraudulent activities in 2018, with Ponzi schemes being responsible for 15%. The remaining 14.9% were other types of scams.

Currently, Ethereum is the third-largest cryptocurrency with $11.3 billion in market cap, behind XRP (XRP) with $12.3 billion and market leader Bitcoin (BTC) with just under $61 billion.

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