The crypto community has been making headlines since the bull market’s peak. According to John Reed Stark, more than $11 billion belonging to investors has been lost since 2021.
Crypto hacks and scams in 2021
Since 2021, the DeFi industry has recorded numerous crypto hacks and scams that have resulted in investors losing funds to cyber criminals and on-chain hackers. In efforts to track and retrieve funds, various financial regulators have tried to intervene. However, the nature of decentralization in these DeFi protocols has rendered some hackers anonymous to date. Moreover, the industry is still emerging and, therefore, highly unregulated.
In February 2021, a crypto hacker obtained $37.5 million from Cream, an emerging crypto lending platform. The hack was executed through a malicious smart contract that ‘cheated’ the ecosystem of its authenticity, draining ETH and stablecoins.
April 13th saw Africrypt developers get involved in severe criminal irregularities. The officials made away with $3.6 billion from the South African digital asset investment firm after claiming that the firm’s wallets were compromised by unknown hackers who stole all funds. In March, Turtledex, an alleged decentralized storage service provider, $lost 2.5 million just hours after developers completed the presale. The project’s creators reportedly drained the funds from the liquidity pool that had been receiving funds from enterprising crypto enthusiasts.
March also saw a social token platform on Roll network hacked, draining $5.7 million. The social networks ultimately crashed after failing to identify, isolate and fix the vulnerability in the ecosystem’s algorithm. Among the DAOs affected during the raid is one dubbed “Friends with Benefits,” which charged $8,000 for exclusive membership deals to private parties. In an instant, the token dumped a whopping 96%. DoDo also suffered financial mayhem after hackers siphoned 3.8 million dollars. The hackers took advantage of a bug in the ecosystem’s V2 crowd pools smart contracts. The hack was only partially successful, as the team recovered $1.8 million.
Moreover, 3 million dollars vanished after Paid Network suffered an unexpected mint of 60 million PAID tokens worth over $160 million. In a couple of hours, Paid token price tanked more than 80% to less than $1. March also saw a peculiar ‘test’ that saw developers of Meerkat briefly rug-pull investors. The team allegedly completed the crime, reaping $31 million from oblivious crypto-savvy investors. Two days later, they resurfaced and refunded investors, citing a market drill to inform customers of the dangers of smart contracts. Reports surfacing the internet at the time indicated that these hackers reorganized plans to refund the depositors after Binance started looking into the case.
Mid-April, $80 million was stolen from EasyFi, a crypto lending platform, after hackers gained access to the founder’s computer, gaining access to the private keys holding users’ assets. The EASY token price plummeted to rock bottom as the attacker dumped the digital assets to cash out on oblivious investors. As April ended, the crypto community faced yet another hack that saw $50 million lost. Uranium Finance, a Binance Smart Chain Decentralized Exchange, experienced a hack leading to the loss of funds. Audit reports identified a bug the attacker took advantage of just hours before the patch went live on the mainnet, indicating leaked insider information.
It may also bore crypto hacks that compile to the 2021 crypto losses. On the 1st, an attacker siphoned $30 million from Spartan protocol’s liquidity pool. Mid-May also saw a compromise that drained $24.5 million from the xToken DeFi platform. This was one of two hacks experienced by the platform in 2021 alone.
In August, a flash loan exploits emptied $25 million from Popsicle Finance. The attack happened due to a bug that exposed the ecosystem to attackers through decentralized uncollateralized loans. In September, an unusual bug occurred on Compound DeFi protocol putting $160 million up for grabs. The founder Robert Leshner angrily took to Twitter asking the recipient to return 90% of the funds and keep the remaining 10% as white hat.
Crypto hacks and scams of 2022, How Billions were lost last year in crypto
Mid-January 2022, $34 million was stolen from crypto.com, a popular centralized crypto exchange. Crypto.com quickly halted activity after the malicious activity had been detected on users’ accounts. Transactions were resumed hours later with major security upgrades, including 2fa authentication following. Just the previous day, cryptoburgers, a play-to-earn game, was attacked by cyber criminals who made away with $770,000 that evening. The attack was executed through unauthorized smart contracts that allowed the hacker to obtain flash loans.
Crypto hackers have shown that not even government institutions are safe. On February 8th, IRA financial clients who diverted their savings into crypto lost $36 million from their retirement accounts. One of the administrator accounts was compromised. As a result, the hackers validated the transfer of these digital assets from the clients’ retirement Gemini accounts.
In March, cyber criminals attacked Cashio and made away with $52 million. The hackers manipulated the infinite mint glitch in the Cashio protocol to pull through the crypto hack successfully. Later, the attackers returned smaller amounts and reported donating the rest to charity.
April 30th turned disastrous as hackers attacked multiple liquidity pools in Rari to the Fei lending and borrowing protocol. The attackers managed to scoop $80 million from the DeFi platforms. In response, Fei halted all borrowing transactions and offered to give the hackers a $10 million bug bounty once they returned the funds. DIE crypto, developed as a stablecoin, lost its $1 peg in May after experiencing an asset drain of more than $16 million in the preceding months, March and April. The project issued an algorithmic stablecoin which garnered a total market cap of $88 million before losing its peg.
In July, the Federal Bureau of Investigations issued a red alert on fraudulent crypto trading and investing applications that were on the rise. According to the FBI, a sample of 244 victims had lost more than $42.7 million. In mid-August, a Brazilian crypto exchange BlueBenx suspended withdrawals and laid off employees after losing $32 million from crypto hacks. The exchange did not provide sufficient information concerning the loss of funds leading to an array of questions about whether the hack was actual.
In September, a Canadian teenager scammer known as ‘Crypto King‘ scammed crypto-savvy investors for more than $53 million. The alleged scammer was in his early 20s when he scammed his followers and squandered the cash on luxurious items, including expensive cars. In October, multiple crypto hacks surfaced in the crypto sphere. MangoMarkets, a Solana-based Defi platform, saw a $116 million hack.
The large amount flagged major exchanges that froze the attacker’s wallets, including Binance, Coinbase, and Kraken. In the same month, a famous media company was accused of a rug pull after abandoning their Vault NFT project. The company never mentioned the project was just an experiment leading to a loss of funds from investors.
November saw FTX collapse, which wiped out $32 billion in net valuation. The firm filed for bankruptcy, and the CEO, SBF, resigned, stepping down from his senior role. He has since been arrested and released on bail as legal proceedings continue to reveal how he used depositors’ funds irresponsibly. The firm also experienced a hack that drained more than $370 million. The account administrator Ryan Miller made the announcement on the firm’s official Discord channel.
These crypto hacks are just a minute fraction of the total funds lost in the last two years in the crypto community. Despite more than $11 billion disappearing in the hands of fraudulent projects, or scams, regulators worldwide have done very little to ensure victims get their funds back.
Fred Wilson Predicted the crypto crash of 2022
Fred Wilson is a partner at Union Square Venture. In an article written in February 2021, he predicted the bull market that pushed crypto prices to all-time highs. For instance, Bitcoin managed to surge to its highest price of $60k, dragging all other projects. He also predicted the markets would eventually crash as interest rates rise, narrowing down to Web3 as the field that would mostly be affected.
“When economies recover, and interest rates rise, the air will come out of the asset price bubbles that have built up, and the go-go markets will hit the brakes.” He wrote in February.
In his current post (published on December 31st, 2022), Fred highlighted the aftermath of 2022 in terms of his prediction written back in February 2021. In line with his analysis, most digital assets are down 70%-90%. Moreover, the entire crypto sphere has experienced multiple crypto hacks, scams, and embezzlement of investors’ funds (some highlighted above). Despite the crypto winter in 2022, Wilson has expressed his bullish opinion on Decentralized Finance protocols surfacing in the web3 space. He also mentions in the post that centralized entities are not to be trusted.
Final Thoughts
No one knows what 2023 bears for the crypto market. However, a glimmer of hope exists among individuals and institutions interested in the crypto markets. For instance, MicroStrategy is buying the dip. According to US SEC reports, the firm purchased an additional 2500 Bitcoins retaining its title as the world’s largest corporate Bitcoin holder, with a grand total of 132,500 BTC valued at $2.2 billion.