The cryptocurrency market in 2024 endured a rollercoaster of drama, marked by scandals and breaches that shocked even the most seasoned investors. It was a year where greed, deception, and systemic vulnerabilities collided, pulling back the curtain on the darker side of digital assets.

According to a Reuters report, losses from crypto hacks surged by 21% compared to the previous year, reaching a staggering $2.2 billion. This marked the fourth consecutive year of annual losses exceeding $1 billion, cementing 2024 as a cautionary tale for the unprepared.

In this article, we unravel the most notorious crypto scandals of 2024, exploring how they unfolded, the lessons they left behind, and the measures being taken to prevent future calamities. Prepare for a deep dive into a year that tested the resilience of the crypto world like never before.

The $243 Million Genesis Heist

In August 2024, the crypto world was shaken by a $243 million heist targeting a Genesis creditor. Cybercriminals use highly sophisticated methods, including phishing and social engineering. As support staff from Google and Gemini, the hackers tricked the victim into resetting two-factor authentication (2FA) and transferring funds to a compromised wallet. 

To make matters worse, the attackers accessed private keys using AnyDesk, a remote desktop tool. The stolen funds were cleverly split across various cryptocurrencies and exchanges to obscure the trail. Despite two arrests being made, much of the money remains unrecovered. This incident highlights the vulnerability of even experienced players in the crypto market to well-planned cyberattacks.

Germany’s $1.7 Billion Bitcoin Loss

In July 2024, Germany faced criticism after selling nearly 50,000 seized bitcoins for $53,000 each, earning $2.8 billion. Just months later, Bitcoin’s price surged to $88,000, leaving Germany with $1.7 billion in missed profits. 

This sale, linked to the "Movie2k" criminal case, was required by German law due to a 10% market value change. The missed opportunity became even more significant as Bitcoin rallied following Donald Trump’s U.S. presidential win, which sparked market optimism and speculation about favorable crypto regulations. The question remains: how should governments manage crypto assets in such unpredictable markets?

The $650 Million SEC Fraud Case

In August 2024, the U.S. Securities and Exchange Commission (SEC) uncovered a $650 million crypto fraud scheme where 205,000 investors were defrauded. This operation involved multiple individuals who lured investors with promises of high returns in new crypto projects. However, these were fraudulent ventures with no real value. The scale of the scam revealed the risks in the crypto ecosystem, especially for investors chasing fast profits. The SEC’s actions powerfully conveyed the importance of due diligence when investing in digital assets.

BitClout Founder’s $257 Million Fraud

Nadar Al-Naji, the creator of BitClout, July 2024  was charged with defrauding investors in a $257 million crypto scandal. BitClout was promoted as a decentralized social media and trading platform where users could buy and trade BitClout tokens using Bitcoin. Al-Naji claimed that the platform operated independently and that he had no control over investor funds. However, U.S. authorities revealed that Al-Naji controlled the funds raised. 

Instead of using the money to improve the platform, he reportedly spent over $7 million on personal expenses, including renting a mansion in Beverly Hills and giving cash gifts to his family. The Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) also discovered that Al-Naji controlled the “Treasury Wallet,” which held $260 million worth of Bitcoin. 

He moved about $80 million to various accounts, including foreign exchanges and personal wallets. This case highlights the risks of investing in unregulated cryptocurrencies. Even experienced investors, including major Silicon Valley firms, were misled by Al-Naji’s claims of decentralization. Regulators are now working to hold him accountable and prevent similar scams in the future.

The UK’s $1.2 Billion Illegal Crypto Business

The U.K.’s Financial Conduct Authority (FCA), in June 2024, arrested two suspected of running an unregistered crypto asset exchange worth $1.2 billion. The investigation revealed the illegal exchange had bought and sold over 1 billion British pounds in crypto assets. During office raids, the FCA seized several digital devices, and the suspects were released on bail as inquiries continued. 

Crypto expert Charlotte Tregunna pointed out that the lack of regulatory clarity remains a challenge for service providers, urging swift action from the next government after the upcoming July election to solidify crypto regulations in the U.K.

Surge in Crypto Hacks

Throughout 2024, the cryptocurrency sector experienced a significant increase in hacking incidents. Reports indicate that losses from crypto hacks surged by 21% to reach $2.2 billion. A substantial portion of these losses, approximately $1.3 billion, was attributed to North Korean-linked cybercriminals, marking a record high for such activities.

In July 2024, WazirX, a prominent India-based cryptocurrency exchange, suffered a cyberattack resulting in the loss of approximately $234.9 million in investor funds. The attack was attributed to the North Korean hacking group, Lazarus. The hackers exploited vulnerabilities in WazirX's multisignature wallet system, gaining control and draining both hot and cold wallets. This incident stands as one of the largest crypto heists in India's history. 

Haliey Welch's Meme Coin Controversy

In December 2024, social media influencer Haliey Welch, known as the "Hawk Tuah Girl," launched a meme cryptocurrency called $HAWK on the Solana blockchain. The coin's market capitalization soared to nearly $500 million before crashing by over 90%. Investors filed lawsuits alleging a pump-and-dump scheme and insider trading. Welch denied the accusations and pledged to cooperate with legal investigations

Measures Taken to Stop Crypto Scams and Scandals

In 2024, significant measures were implemented globally to combat cryptocurrency-related scandals, yielding notable results:

Regulatory Enforcement and Legal Actions

• United States: 

The Securities and Exchange Commission (SEC) intensified its oversight of the crypto industry, resulting in substantial penalties. Notably, Terraform Labs, co-founded by Do Kwon, agreed to a $4.5 billion settlement for securities fraud. Kwon personally faced a $204 million penalty. This settlement ranks among the largest for a civil securities fraud case.

• Commodity Futures Trading Commission (CFTC): 

The CFTC reported a record-setting $17.1 billion in monetary relief and sanctions for fiscal year 2024, reflecting its commitment to holding violators accountable and implementing robust remediation measures.

2. International Regulatory Developments

• Hong Kong: 

The Securities and Futures Commission approved four additional cryptocurrency exchanges, bringing the total to seven. This move aims to establish Hong Kong as a global hub for digital asset trading, ensuring that exchanges comply with regulatory standards to protect investors.

• Australia: 

The Australian Transaction Reports and Analysis Centre (AUSTRAC) formed a cryptocurrency task force to regulate crypto ATM providers, ensuring compliance with anti-money laundering laws. This initiative addresses the increasing exploitation of cryptocurrency for illicit activities.

3. Law Enforcement Operations

In Nigeria, Authorities arrested 792 suspects involved in romance and cryptocurrency scams targeting victims primarily from the Americas and Europe. The operation underscores Nigeria's commitment to combating online fraud and protecting potential victims.

4. Industry Collaboration and Technological Advancements

Innovative approaches, such as the Kosmosis project, have been proposed to detect and prevent crypto asset fraud. By constructing a knowledge graph that integrates blockchain and social media data, Kosmosis aims to identify and prevent fraudulent activities like rug pulls.

Outcomes and Impact

These measures have led to increased regulatory clarity, enhanced security protocols, and a more vigilant approach to combating fraud within the cryptocurrency industry. The substantial penalties and legal actions serve as deterrents against misconduct, while international regulatory developments aim to balance innovation with investor protection. Law enforcement operations have disrupted fraudulent networks, safeguarding potential victims. Technological advancements in fraud detection contribute to a more secure crypto ecosystem.

Collectively, these efforts represent a global commitment to addressing the challenges posed by cryptocurrency-related scandals, fostering a more transparent and secure environment for digital assets.

Wrapping up!

In 2024, the cryptocurrency market faced turbulence, as highlighted by the scandals mentioned above. Regulatory crackdowns, law enforcement actions, and innovative measures aimed to address these challenges. From major fines to technological advancements, the year showcased the industry’s resilience and commitment to transparency, paving the way for a more secure and accountable future in the crypto space.