Earlier this week Chainalyis published the key findings of their 2021 Geography of Cryptocurrency report. According to this research, Eastern Europe is severely affected by illicit cryptocurrency-related activity. In relative terms, the region is second after Africa in terms of exposure — but its overall crypto economy is much larger than that of Africa.
The key findings of this research, which covers the period from June 2020 and July 2021, look as follows:
- Addresses based in Eastern Europe have the second-highest rate of exposure to illicit addresses behind only Africa.
- Eastern Europe sent “the second most cryptocurrency of any region to illicit addresses, behind only Western Europe,” in raw value
- Eastern Europe sent “more cryptocurrency to darknet markets than any other region.” Much of this darknet appeal in the region is due to activity involving Hydra Market. This is “the world’s biggest darknet market,” catering only to users in Russian-speaking countries throughout Eastern Europe.
- Eastern Europe also sent, “by a wide margin,” the most web traffic to scam websites during the time period studied.
- Eastern Europe is “the only region with a total transaction volume of $400 million or more for which illicit activity makes up more than 0.5% of total cryptocurrency value sent and received.”
- Scams — usually victims sending money to scammers — account for “the biggest share of funds sent from Eastern Europe to illicit addresses,” as is the case with all regions. Thus, Eastern Europe-based addresses sent $815 million to scams, second only to Western Europe.
- Ukraine accounted for “most of this scam activity, sending more web traffic to scam websites than any other country, more than doubling the total web visits of the second-ranked country.”
Cryptocurrency value sent to illicit addresses by region (June 2020-July 2021)
Illicit share in all crypto-activity by region (June 2020-July 2021)
Crypto-based Ponzi schemes
Explaining why scams are so much targeting users from Eastern Europe, Chainalysis notes that “more than half of the value sent to scam addresses from the region went to one scam: Finiko.”
“Finiko was a Russia-based Ponzi scheme that collapsed in July 2021, soon after users reported they could no longer withdraw funds from their accounts with the company. Finiko invited users to invest with either Bitcoin or Tether, promising monthly returns of up to 30%, and eventually launched its own coin that traded on several exchanges.”
This scam was headed up by Kirill Doronin, a popular Instagram influencer who has been associated with other Ponzi schemes, writes Chainalysis, referring to a Moscow Times article: “Finiko was able to take advantage of difficult economic conditions in Russia exacerbated by the Covid pandemic, attracting users desperate to make extra money.”
Thus, Finiko received over $1.5 billion worth of Bitcoin in over 800,000 separate deposits from December 2019 to August 2021. How many individual victims made these deposits and how much of that $1.5 billion was paid out to investors to keep the Ponzi scheme going remains to be clarified.
Eastern European addresses also receive a great deal of funds from scam addresses, suggesting that many scam operators in addition to victims are located in the region. Chainalysis even believes that “some of the cryptocurrency value labeled as traveling from ransomware addresses to Western Europe is in fact traveling to Eastern Europe.”
Working with law enforcement in Eastern European countries is a necessary step to disrupt local ransomware operators, concludes the research.
Report: Eastern Europe strikingly affected by crypto scamsRead More
