Losses from theft, hacks, and fraud in decentralized finance or DeFi, a thriving segment in the cryptocurrency sector, hit an all-time high in the first seven months of the year is shown by a report from crypto intelligence company CipherTrace. But losses from crime in the overall cryptocurrency market dropped sharply to $681 million at the end of July.
The drop in crypto crime overall reflected the industry’s growing maturity. And that much-improved security infrastructure. The DeFi sector registered criminal losses of a record $474 million from January to July. Their applications, many of which run on the Ethereum blockchain, are financial platforms that enable crypto-denominated lending outside of traditional banks. Dave Jevans, CipherTrace’s chief executive officer, said that it shouldn’t come as a surprise that as the DeFi ecosystem expands, so are DeFi crimes. Just eight months into 2021 and DeFi hacks, thefts, and frauds have already surpassed the total DeFi crimes from 2020. This means regulators around the globe are paying closer attention to DeFi specifically.
The value locked the total number of loans on DeFi platforms was $80.4 billion and then down from $86 billion. There are two types of DeFi crimes such as, the hack of a DeFi protocol by outsiders, or a rug pull by insiders, CipherTrace said. A rug pull occurs when crypto developers abandon a project and run away with investors’ money.
The majority of DeFi crimes in 2021 appear to have been conducted by outsiders as hacks, making up $361 million. The remaining 24% are rug pulls tallying over $113 million at the end of July. The U.S. Securities and Exchange Commission said that it charged lender Blockchain Credit Partners and two of its top executives for raising $30 million. This is through allegedly fraudulent offerings. The case is the SEC’s first involving securities in the DeFi space.