Eastern Europe is fast emerging as a crypto scamming hub. According to a Chainalysis report, crypto addresses based in Eastern Europe have the second-highest rate of links to illicit addresses, and the region ranks second in terms of the value of cryptocurrencies sent to illicit addresses.
- Eastern Europe has a large cryptocurrency market with a transaction volume of US$400 million or more. Around 0.5% of this transaction volume or more is linked to illicit activities like darknet markets, terrorism financing, fraudulent shopping sites and ransomware.
- Scams make up the majority of funds sent to illicit addresses — Eastern Europe-based addresses sent US$815 million to crypto scams and ponzi schemes between June 2020 and July 2021, second only to Western Europe, according to Chainalysis. Many scammers are also located in Eastern Europe — the region received US$950 million worth of cryptocurrencies from scam addresses and US$46 million worth of tokens from addresses associated with ransomware.
- More than half of the US$815 million sent to illicit addresses went to the Russia-based ponzi scheme Finiko, which collapsed in July this year. Finiko asked users to invest with Bitcoin or Tether for up to 30% monthly returns. It also launched its own coin that traded on several exchanges. Between Dec. 2019 and Aug. 2021, Finiko received over US$1.5 billion worth of Bitcoin.
- Although Eastern Europe lags behind Africa in terms of the share of illicit cryptocurrency activities, it ranks first in terms of darknet transactions. This is possibly due to the Hydra market, the largest darknet marketplace that serves Russian-speaking countries.
- In Eastern Europe, Ukraine saw the most activity related to scam addresses over the study period. The country ranks first in terms of web traffic directed to scam websites and sends more than twice the traffic directed by the U.S., which ranks second.
- Cyber and crypto scams and crimes have been increasing at an alarming rate throughout the world. A study by Crypto Head found that cryptocurrency crimes in the U.S. grew by 300% every year from 2017 to 2020. In the first six months of this year, crypto crimes in Hong Kong reached a record high with losses totalling to US$27.58 million. Last month, a South Korean professor was jailed for two years for a crypto scam that cost victims a total of US$20 million.