Record Number of Crypto Crimes in 2022 – Why and How It Happened

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We broke a lot of records in 2022. The Axie Infinity project was hacked for a total of $620 million in March 2022. This wasn’t a technical hack of the protocol but a simple phishing scam that convinced one of the engineers to download a trojan that was then used to commit the theft.

We saw multiple exchange hacks last year too. The record for the biggest exchange hack goes to Binance, which had $570 million stolen in October. Hackers stole a private key and used it to mint 6,000,000,000,000,000 tokens which were then converted to Binance’s BNB token and then laundered through Tornado Cash. 

As usual, FTX was close to Binance with an alleged $477 million hack in November. The timing is suspicious, and we still don’t know whether this was a real hack by an outsider, an insider attempt to extract funds before they were locked, or simply another weak play from SBF to keep up with CZ.

There were some smaller exchange hacks, too, with losing $34 million in a 2FA bypass. Unlike Coinbase, appears to have not only fixed the hack but also appeared to have a competent customer service team. They reached out to affected customers and ensured they were all reimbursed for their losses. Deribit also lost $28 million after their hot wallet was hacked, but they claim that customer funds have not been affected.

This wouldn’t be a complete crypto article without mentioning DeFi, the buzzword of the last bull market. The DeFi platform Wormhole was hacked for a total of $325 million, even after they had fixed a bug. 

The development team apparently had identified a bug and published the fix but had forgotten to patch the live deployment. As a result, it was simple for a hacker to read the update on Github, notice that it wasn’t patched, and then just exploit the “fixed” bug and walk away with 120 wETH, which is like ETH, except it isn’t. 

The hacker then swapped this for $250 million of Ethereum, left a cryptic message, and walked away. This was a close call for the Solana platform that offers the wETH tokens, but as we all know, SBF managed to completely tank the project when FTX failed at the end of 2022. Solana is sitting cozy at $21 per token at the time of writing, a 91% drop from its high of $258 back in 2021. As an old crypto trading joke goes: “What do you call a token that dropped by 90 percent?” “A token that dropped by 80 percent, and then dropped by half.”

On top of the hack of the Wormhole bridge and the Axie Infinity hack (via the Ronin bridge), hackers also stole $190 million from the Nomad bridge, $182 million from the Beanstalk Farms bridge, and $162 million from the Wintermute bridge. 

This is a total of $1.5 billion stolen from just the top 5 known cryptocurrency bridge hacks from 2022. You should think twice before using these “bridges” to swap in and out of “wrapped” tokens. You ultimately trust multiple third parties in the process, which in practice is the opposite of “decentralized” finance.

We honestly wish we could say we were done with this list. But, as mentioned at the start, 2022 was a record year for crypto thieves, not just those with bad haircuts who gave customer funds to their “trader” friends. 

The year 2022 also saw a record of 117,000 known scam tokens created, totaling 8% of all Ethereum tokens and 12% of tokens on Binance’s BNB Chain. These include “hard rug pull” scams identified when a scammer pumps a token and then cashes out in a hurry. This is up from 83,000 scam tokens in 2021 (including the infamous “Squid Game” rug pull) and 1,500 in 2020. 

There are many more “soft rug pull” scams that are less obvious, but where the smart contract itself is designed to steal user funds without them noticing right away.

It would be remiss to forget the Terra exploit that kicked off the bear market of 2022. Most people would argue that an investment that doesn’t do anything but offers a 20% yield is doomed to fail, despite what “tokenomics” experts may claim. 

Aside from the exorbitant yield, Terra suffered a fatal flaw where it wasn’t backed by a fixed amount of LUNA but by an equivalent dollar value of LUNA. This means that the lower the value of LUNA dropped, the more coins would be minted to “stabilize” the value of Terra. This would make LUNA and Terra both fall lower, meaning even more coins would have to be printed to fix the problem, leaving all other holders with worthless tokens that they would be desperately trying to sell. 

This is called a bank run. The thing that kicked off this bank run might have been simply bad luck and bad timing, but there are theories that it was similar to George Soros’s famous incident of shorting the Pound Sterling. None of this has been confirmed, but if so, this would be considered a multimillion-dollar attack on a DeFi ecosystem that ultimately took an $18 billion market cap down to zero in a matter of days, making even Scam Bankrun-Fraud’s collapsed exchange look like child’s play.

While it’s all fun and games to look at this from a distance, chances are you, or someone you know, have been impacted in at least one (if not more) of the billions of dollars of crypto hacks and scams in 2022. 

If you have lost funds, our team of experts is experienced in using legal methods to recover lost crypto through a variety of means, including registering your details in ongoing bankruptcy suits and potentially reversing fund transfers when possible. Feel free to contact Global Fraud Protection and see how we can help you.

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