Due to its anonymity, the cryptocurrency industry has become a target of identity-related fraudulent activities in recent months.

According to a fraud report, crypto-related platforms accounted for 29% of global identity fraud attempts in the second quarter of 2024, positioning the sector just behind the payments industry at 52%.

As payment providers tighten security protocols, identity thieves turn to decentralized exchanges and wallets. The anonymity of transactions on blockchain networks makes them attractive for criminals looking to create fake profiles and execute fraudulent schemes.

This increase follows a broader trend of cybercriminals shifting to less regulated industries. Per the report, one of the primary methods used by fraudsters is impersonation bots, now enhanced with deepfake technology.

These bots are designed to create realistic fake accounts, enabling criminals to infiltrate platforms and execute fraudulent schemes.

Some recent prominent targets of deepfakes promoting crypto scams include Ethereum co-founder Vitalik Buterin, Ripple CEO Brad Garlinghouse, Tesla CEO Elon Musk, and most recently, Apple CEO Tim Cook.

While some of these frauds fail, others have become successful. A June 2024 report confirmed that losses from scams related to deepfakes have exceeded $79 billion in the past two years, with a massive spike of 245% recorded this year.

In Q2 2024, the crypto industry recorded losses amounting to $572 million due to scams and hacks. Recent data shows that cryptocurrency crime overall accounted for $24.2 billion in illicit transactions in 2023, representing 0.34% of the total crypto trading volume.

This marks a reduction from previous years, indicating efforts to improve security measures. However, despite this improvement, ransomware and dark web market activity related to cryptocurrency has surged in recent months.

Meanwhile, the report confirmed that the rise in ID fraud across all sectors has particularly affected the Asia-Pacific region, with identity fraud rates rising by 24% between 2022 and 2023 to 3.27%.

Notably, the shift towards decentralized finance and the rise of Fraud-as-a-Service have also contributed to the crypto industry’s vulnerability. Reports show that DeFi platforms are particularly susceptible to exploits, with $739 million stolen in Q1 2024 alone due to phishing, hacks, and weak code security.

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