In a report published on June 28 by TRM Labs, a prominent blockchain intelligence firm, an astonishing $7.8 billion was paid out to cryptocurrency pyramid and Ponzi schemes worldwide in 2022.

The report also suggests that an additional $1.5 billion worth of cryptocurrency was used for illicit activities on darknets, while approximately $3.7 billion was lost in hacks and exploits.

In total, TRM Labs alleges that $9.04 billion in cryptocurrency was funnelled into various types of financial fraud schemes.

Surprisingly, despite the ongoing bear market and the subsequent decline in cryptocurrency prices, there has been no apparent slowdown in crypto-related crime.

• According to the FBI’s annual Internet Crime Report, “Investment fraud centres on the solicitation of funds for fraudulent investments or projects; these often involve fake initial coin offerings (ICOs), unregistered securities, or fraudulent investment platforms.
• Investment fraud involving cryptocurrency rose by nearly 200% from $907 million in 2021 to $2.57 billion in 2022.”

Researchers further highlight that 10 of the largest cryptocurrency Ponzi and pyramid schemes accounted for approximately 54% of the total amount.

Furthermore, it is alleged that around 40% of the total incoming volume of investment fraud schemes active in 2022 was transacted on the Tron blockchain, primarily utilizing Tether (USDT), a stablecoin pegged to the US dollar, compared to just 17% in the previous year.

What You Should Know

In 2022, significant legal action was taken against several major cryptocurrency-based Ponzi schemes.

Among them were Forsage and the Trade Coin Club, both of which garnered widespread attention. Additionally, the founder of Bitconnect faced legal repercussions as the US Department of Justice (DOJ) indicted him following charges filed by the Securities and Exchange Commission (SEC) in 2021.

According to the SEC, Forsage operated as a cryptocurrency-based Ponzi and pyramid scheme. It enticed investors with the promise of substantial returns by utilizing various smart contracts on Ethereum and BNB Chain.

TRM Labs, a leading research firm, referred to this as a decentralized investment fraud scheme. Research conducted by TRM Labs revealed that since 2020, Forsage received nearly $400 million in funds. Its apparent successor, Meta Force, amassed approximately $574 million in 2022 alone.

The Trade Coin Club, on the other hand, presented itself as a Ponzi scheme that claimed to generate high returns through a cryptocurrency trading platform. The operators of the platform utilized funds from new investors to pay returns to earlier participants, resulting in a collapsing scheme that led to significant losses for many individuals involved.

According to charges filed by the SEC in November 2022, the Trade Coin Club raised over 82,000 BTC (equivalent to $295 million at the time) from more than 100,000 investors between 2016 and 2018.