At least $11 million worth of bitcoins have been stolen via scams in the last four years, according to researchers from Southern Methodist University. The actual total value of bitcoins scammed is likely far higher, as it counts only those scams which the researchers were able to track the revenue of.
Cybersecurity researchers Marie Vasek and Tyler Moore authored the study “There’s No Free Lunch, Even Using Bitcoin: Tracking the Popularity and Profits of Virtual Currency Scams,” (PDF) which counted 13,000 victims of 41 different scams from 2011 to 2014. It was partly funded by the Cyber Security Division of the US Department of Homeland Security’s Science and Technology Directorate, the Government of Australia, and SPAWAR Systems Center Pacific.
The researchers ran an SQL database dump of bitcoin transactions, and analyzed bitcoin addresses. They presented their findings at the International Financial Cryptography and Data Security Conference in San Juan, Puerto Rico this week.
The study divides all bitcoin scams into high-yield investment programs, or Ponzi schemes, mining investment scams, scam wallets, and exchange scams. Ponzi schemes took in the most by far, and the scams actually returned $4 million as they capitalized on greed and the difficulty of determining the legitimacy of web services.
The most successful scams take most of their revenue from just a few of their victims, the researchers said.
“Bitcoin scams pose a problem for more than the victims who directly lose money,” Moore said in a Phys.org report. “They threaten to undermine trust in this promising technology, and cast a chilling effect on those interested in trying out new services. By mining the public record for fraudulent transactions, we hope to deter would-be scammers and assist law enforcement in cracking down on the bad actors.”
Bitcoin adoption is growing quickly, but the technology continues to have security issues. European exchange Bitstamp was forced to suspend trading earlier this month due to a security problem, and Blockchain.info lost an estimated 250 bitcoins due to a key generation issue in December.
A hacker stole a similar number of bitcoins in August by hijacking miners’ traffic, a method of theft which is not included in the study.