The rise of cryptocurrencies has also opened the door to a slew of Ponzi schemes and scams. In fact, Eastern Europeans have lost nearly $815 million in the last year alone as a result of the latter.
According to Chainalysis, a blockchain research firm that tracked the illicit share of crypto-activity by region between June 2020 and July 2021, addresses in Eastern Europe were solely responsible for sending the aforementioned sum to various scams and Ponzi schemes. According to the report,
“As in all regions, scams account for the majority of funds sent from Eastern Europe to illicit addresses — we can assume that the majority of this activity represents victims sending money to scammers.”
Eastern Europe currently trails only Africa as a hub of illicit crypto-related activities, with a significant gap in crypto-education playing a significant role.
This is a concerning discovery, especially given that the crypto-economy of Eastern Europe far outnumbers that of Africa and Latin America.
The report continued,
“In fact, Eastern Europe is the only region with a total transaction volume of $400 million or higher where illicit activity accounts for more than 0.5 percent of total cryptocurrency value sent and received.”
Meanwhile, as shown in the chart below, Eastern Europe sent the second-most cryptocurrency to illicit addresses of any region, trailing only Western Europe.
So, where are the con artists getting their money from?
The darknet market, you guessed it.
And not just any darknet market, but the Hydra darknet market. According to researchers, it is the world’s largest darknet market and only serves users in Russian-speaking countries throughout Eastern Europe.
Furthermore, a country-by-country breakdown revealed that Ukraine accounted for the majority of this activity. The study also discovered that the country sent the most web traffic to scam websites than any other.
Despite this, more than half of the money sent to scam addresses ended up at Finiko, a Russia-based Ponzi scheme that failed in July 2021. While Europe has been a keen observer of the crypto-world and has made efforts to understand and incorporate a CBDC, it may want to focus on crypto-education as well to limit the continent’s exposure to increasing scams.