Beware of sophisticated scams and stack draws, as thugs target crypto users | #daitngscams | #lovescams

This has been a monumental year for the cryptocurrency industry in terms of mainstream adoption. A recent report released by Grayscale Investments found that more than a quarter of U.S. investors (26%) polled their own Bitcoin (BTC), up from 23% in 2020. With the holidays approaching, financial services provider MagnifyMoney has also found that nearly two-thirds of Americans surveyed hope to receive cryptocurrency as a gift this year.

While the growth in crypto is notable, there has also been an increase in the number of scams associated with digital assets. A Chainalysis blog post highlighting the company’s 2022 Crypto Crime Report revealed that scams were the dominant form of cryptocurrency-based crimes in terms of transaction volume this year. The post notes that more than $ 7.7 billion in cryptocurrency has been taken from victims of scams around the world. According to previous Chainalysis research, that number represents an 81% increase from 2020, a year in which scam activity has declined significantly from 2019.

Source: chain analysis

Scams are the biggest threat to building confidence in crypto

Kim Grauer, head of research at Chainalysis, told TBEN that while there are many different crypto-related crimes, the scam has become the biggest in terms of value received by criminals. She added that scams pose a significant threat to building trust in the crypto ecosystem because it can prevent people from investing in digital assets.

Grauer further mentioned that decentralized finance (DeFi) scams were on the rise this year. With annualized revenue across all DeFi protocols estimated at around $ 5 billion, this should come as no surprise. More interesting, however, is that Chainalsyis found that the “carpet draws” contributed to the increase in scam income this year. According to Grauer, Chainalysis defines carpet prints as a case where a person or developer decides to end a project unexpectedly and run away with funds:

“The carpet draws have accelerated the number of scams the crypto space has seen this year. In addition to financial scams, carpet draws have exploited various vulnerabilities in the crypto space. Overall, they took $ 2.8 billion worth of cryptocurrency.

Although carpet pulling is a relatively new crime, Grauer believes these cases are becoming common in the growing DeFi ecosystem. To put this in perspective, the Chainalysis blog post notes, “Carpet draws have become the go-to scam of the DeFi ecosystem, accounting for 37% of all cryptocurrency scam revenue in 2021, up from just 1. % in 2020. ”

The Chainalysis blog post also provides examples of some of the biggest stack draws of 2021. For example, the AnubisDAO case is mentioned as the second biggest stack draw of this year, with more than $ 58 million in crypto. – stolen currency. According to the post, AnubisDAO launched on October 28, 2021, with claims to offer a decentralized currency backed by a number of assets. However, the project did not contain a website or whitepaper, and all the developers used pseudonyms. Miraculously, AnubisDAO still managed to raise almost $ 60 million overnight, but 20 hours later, all of those funds disappeared from AnubisDAO’s cash pool.

As AnubisDAO demonstrates large-scale DeFi mat traction, new cases are occurring almost daily. An early Ethereum and DeFi investor who wishes to remain anonymous told TBEN that he was the victim of a carpet attack on December 19, 2021. The anonymous source said the project was called “ “, noting that many early Ethereum investors were discussing Up1 in a Discord newsgroup. They added:

“People I trusted mentioned the project, so I checked it out. I thought it was weird to see Up1 giving out airdrops, but thought it could have been affiliated with a DeFi token I had. I then connected my MetaMask wallet and clicked “get airdrop”, but kept getting an error message. I did this three times, which allowed the project to access my account.

Unfortunately, once Up1 gained access to their account, three DeFi tokens worth $ 50,000 were instantly taken. “I revoked access to Etherscan after the fact so that they could no longer steal tokens,” they said. The Ethereum investor then checked the DeFi Zerion platform where he saw the notifications that the DeFi tokens had left their wallet. Zerion also provided them with a wallet address where the funds went, along with a message:

“0xc28a580acc42294787f44cffbaa788eaa4958056; You have given a website3 / smart contract unlimited access to your funds (check who you have given access to and revoke here).

While both AnubisDAO and Up1 are examples of DeFi carpet draws, it’s important to point out that the non-fungible token (NFT) ecosystem is also vulnerable to carpet draws. More recently the Bored Monkey Yacht Club The community was hit hard when some members decided to connect their wallets to NFTs from a link posted on the group’s Discord channel.

What’s even more surprising is that carpet-pulling scams target traditional NFT projects as well. For example, on October 28, 2021, the Miss Universe world beauty pageant sent a Tweeter announcing the launch of its NFTs on the Wax blockchain. Unfortunately, the people who hit those non-fungible chips were part of a stack draw.

Jessica Yang, an NFT photographer, told TBEN that when Miss Universe announced the launch of an NFT project, she did not ask if it was a scam or not, as the contest is widely known. . “The price of each NFT was 0.06 Ethereum. That translates to around $ 230 for one. The work of art also has the face and country of the beauty candidate with which it is associated, ”she noted.

Yang also mentioned that the project was aimed at women, noting that Paula Shugart, the president of Miss Universe, previously said:

“Miss Universe is going to be the first brand in the NFT space to talk about women, empower women, embrace technology and move forward. I love it; it’s the first one to is removed from other more masculine spaces.

Given the brand’s reputation and appeal, Yang and many others have created NFT Miss Universes, connecting their wallets to the platform. Still, Yang noted that the next day, Miss Universe deleted her official Instagram account. She then noticed that her funds were completely gone. Yang added:

”A red flag I saw was from their Discord. The moderators kept trying to get everyone to buy NFT Miss Universes, promising they were following the roadmap. Their roadmap promised monthly AMAs, signed prints and more. Even Steve Harvey approved the project.

Do your own research

As DeFi and NFT ecosystems continue to mature and develop, these environments will unfortunately be prone to scams until industrial solutions are developed. In the meantime, the best course of action is for users to do their own research.

For example, Grauer explained that every DeFi project should have a code audit to make investors feel more secure. “A lot of DeFi platforms that have been hacked don’t have a code audit,” she noted. The Chainalysis blog post also pointed out that “Carpet draws are prevalent in DeFi because with the right technical know-how it is cheap and easy to create new tokens on the Ethereum blockchain or others and register them. on decentralized exchanges (DEX) without a code verification.

In addition to code audits, the anonymous Ethereum investor said that after taking a closer look at the Up1 site, they could tell it was bogus. “For example, the team was completely anonymous, with just first names that couldn’t be clicked to open a Twitter or LinkedIn profile.” Even with these precautions, the anonymous source mentioned that wallet providers also need to do a better job of keeping users safe:

“If there is a questionable site, the portfolios should seek it out. I think this technology can evolve, but it has to be able to handle these scams. Otherwise people will lose all their money.

Following the draw for the Up1 mat, the anonymous source contacted MetaMask and said they received a response that they would report the website.

It’s also important to point out that while a clear industrial solution has yet to be developed, Grauer noted that unlike trust crimes, crypto payments can be traced back to their source. With that in mind, she added that some cryptocurrency platforms are starting to take steps to protect users from scams.

For example, crypto exchange Luno partnered with Chainalysis in 2020 to protect against a scam targeting South African crypto users. Eva Crouwel, head of financial crime at Luno, told TBEN that one of the requirements from a regulatory framework point of view is to be able to monitor and act on transactions suspected of money laundering, terrorist financing, sanctions or any other type. illicit activities. She noted that chain transactions need to be monitored, as well as the design and development of case management and user interface.

When it comes to crypto investors protecting themselves from scams, Crouwel recommends staying away from offers that sound too good to be true, adding:

“Start by doing as much due diligence as possible. Look at the company’s / token’s social media profiles to see what other users’ experiences have been. You should also go through the personal social media pages of company directors and examine their industry connections and professional backgrounds to make sure their story is solid.

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