Chainalysis, one of such firms, has recently released a report on crypto crime in 2022, analyzing its main components: scams, ransomware, darknet markets, stolen funds, fraud shops, and the rapidly growing category of sanctions.

Key takeaways from the report contain interesting general tendencies, as well as particularities of crypto scams, the most hacked crypto protocols, the relative efficiency of the OFAC sanctions, and law enforcement’s rapidly improving skills.

Crypto crime in 2022: general trends

  • illicit transactions volume has reached $20.6 billion, which is 0.24% of all crypto transactions,
  • this is a 14% increase vs 2021,
  • 43% of this amount is attributed to the new category of sanctions, as the OFAC was particularly prolific last year,
  • the volumes of scams and darknet-generated transactions have fallen, while those of hacker attacks have slightly increased due to the North-Korean hackers

Most popular crypto scams

According to Chainalysis, crypto scam revenue in 2022 dropped 46% to $5.9 billion - an expected decrease in the bear market.

All top-10 scams of the year were investment scams, where fraudsters promote a fake investment company with huge returns and then go away with the money.

Other popular scam types included romance scams (fraudster pretends to build an online romance only to convince the victim to send them money), impersonation scams (fraudster pretending to be in a position of authority, tricking victims into sending crypto), giveaway scams (fraudster asking victims to send crypto, promising to give back more), and NFT scams (fraudster selling fake NFTs resembling popular collections).

Most hacked protocols

The crushing majority (82%) of hackers’ efforts in 2022 were targeted at DeFi protocols: out of $3.8 billion of stolen crypto, $3.1 billion came from this sector.

Unsurprisingly, the most vulnerable part of the DeFi was cross-chain bridges, which introduce a point of centralization that hackers are always ready to exploit.

North Korea-linked hackers are believed to be responsible for $1.7 billion worth of stolen crypto.

Were the OFAC sanctions effective?

The American Office of Foreign Assets Control has been sanctioning crypto-related activity since 2018, but 2022 marked a particularly active year for the agency: North-Korean hackers Lazarus Group, Russian darknet market Hydra, Russian high-risk exchange Garantex, crypto mixers Blender and Tornado Cash were some of the notable additions to the sanctions list.

Overall, the OFAC’s actions can be considered successful, but only in jurisdictions friendly to the US.

Thus, Hydra (world’s biggest darknet marketplace at that time) went offline after its Germany-based servers were seized by the German police, while Garantex is still operating from Russia (its transactions compose the majority of the “sanctions” volume in the overall illicit activity count).

Sanctioning smart contracts of a decentralized crypto mixer Tornado Cash has created a massive outrage within the crypto community, and several lawsuits were filed against the Treasury. However, few people are willing to overtly defy American authorities, and the inflows of the mixer have fallen by 68%.

Fighting crypto crime

Unfortunately, some crypto crimes still go unreported or reported too late, because many people (including law enforcement) still think that crypto transactions are anonymous.

They are not, of course, and the number of successful police operations fighting crypto crime is increasing every year. The most notable stories of 2022 include:

  • $3.6 billion seized by the FBI from a couple involved in the Bitfinex hack,
  • $3.36 billion recovered from a Silk Road theft (seized at the end of 2021, but announced only next year),
  • $30 million hacked from Ronin bridge seized from Lazarus Group,
  • $25 million seized from Hydra,
  • Dutch National Police tricked a ransomware strain Deadbolt into giving up victim decryption keys,
  • London Metropolitan Police used blockchain analysis to track a drug trafficking organization.

As more people understand how the blockchain works, public opinion is slowly shifting from seeing crypto as a tool for helping crimes to seeing it as a tool for prosecuting them. Law enforcement is gearing up and learning to investigate crypto crimes more efficiently, and on-chain analysis is now an integral part of the compliance efforts deployed by most companies dealing with crypto.

Written by D.Center