Following the surge in popularity of cryptocurrencies over the past year, it appears fraudsters are now beginning to cash in on unsuspecting backers who think they're investing in 'Initial Coin Offerings', according to new research.
Phishing scams that trick would-be investors into thinking they are backing a new digital currency have accounted for over $225 million in losses this year, according to Chainalysis, a New York-based blockchain firm specialising in anti-money laundering.
This type of fraud is specifically related to the Ethereum blockchain. Its 'Ether' currency allows users to pay for services through the use of smart contracts, the most popular of which are 'tokens'. These tokens can then be redeemed for a variety of services, but are also issued for sale in 'Initial Coin Offerings' (ICOs).
The excitement around the price surges of Bitcoin and similar cryptocurrencies have attracted investors seeking to make a quick return on emerging digital token platforms. ICOs have generated over $1.6 billion in investments this year alone.
However $150 million of that is thought to have ended up in the hands of criminals - that means there's now a one-in-ten chance that users will be redirected to sites that trick users into handing over Ether for fake tokens.
Phishing attacks typically involve the creation of a website or social media account that mirrors legitimate ICOs, fooling investors into handing over credentials. As a result, more than 30,000 people have been scammed by sites in this way, losing an average of $7,500 each.
"It's a huge amount of money to generate in such a short period of time," Jonathan Levin, co-founder of Chainalysis, told Bloomberg. "The cryptocurrency phishers are doing pretty good against all the other types of criminals that are out there."
Scam artists rely on Ethereum's public blockchain to spread false information and appear to be legitimate sites, however that also means Chainalysis has been able to monitor the activity of the digital wallets being used by criminals.
Although it's easy to monitor, the firm warns that over-eager investors seeking a quick return are likely to continue to fuel campaigns of this kind, particularly as ICOs are typically time sensitive and require investors to make hasty decisions with their Ether currency.
