Nigerian prince scams are still more profitable than cryptocurrency fraud

Nigerian prince scams alone are more profitable than all cryptocurrency scams and thefts combined.

Cryptocurrency has a reputation as being a somewhat risky space, filled with scammers, hackers and other kinds of nastiness. It is, but only because the Internet and the world in general are filled with it.

News.bitcoin.com took an in-depth look at the scams, hacks and thefts. They assessed the cryptocurrency scam industry as being worth potentially $3.25 billion in 2018. This includes exit scams, alleged Ponzi schemes like Bitconnect, hack attacks, phishing schemes and all other flavours of fraud and misbehaviour as well as unintentional errors that lost user funds.

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So far in 2018, $1.36 billion has already been lost, with three incidents making up the majority of it.

• Coincheck - Thieves stole $536 million worth of NEM from an exchange, which is the largest crypto heist to date.
• Bitconnect - This was a relatively long running and successful pyramid scheme that wrapped up in 2018.
• BitGrail - A user error resulted in the loss of $170 million.

Take those out of the equation and it's about $542 million lost to date.

That's frankly pitiful, and scammers will definitely need to step up their game if they want cryptocurrency to be taken seriously. Even if you roll all kinds of crypto theft and technical errors together, it's still well outclassed by most traditional fraud. For example, the classic Nigerian prince email scams alone took an estimated $9.3 billion in 2009.

And it's still well short of history's number one Ponzi scheme perpetrated by Bernie Madoff to the tune of $65 billion. Even the niche industry of romance scams is doing better. It's hard to tell exactly how much they manage to pull in, but $1 billion a year is a fairly conservative estimate.

Plus, most of those other scams are pulling in hard fiat money, not the highly volatile cryptocurrencies.

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• BitGrail. A technical error coupled with misbehaviour, possibly without any malicious intent, led to the accidental release of $170 million worth of Nano.
• Bitconnect. A pyramid scheme promised huge returns for those who locked their funds into it, then disappeared with the money. The amount lost depends on how you measure it, but the $250 million used here is a very conservative measure.
• Bangladesh bank heist. Hackers attempted to pull $1 billion out of a bank and ended up getting away with $250 million.
• Coincheck. Thieves stole $536 million worth of NEM from an exchange in the largest single cryptocurrency loss to date.
• Romance scams. This is an Internet scam where someone pretends to fall in love online and then starts siphoning money through sheer persuasion. The FBI believes it's only reported about 15% of the time. The figures used here are a rough $1 billion estimate of this scam's annual takings.
• Crypto total. This is the predicted annual losses based on 2018 trends so far, including anomalous events like Coincheck.
• Nigerian prince scams. Hello. I'm Nigerian royalty. If you send me a lot of money I'll send you even more. It's estimated that this scam raked in $9.3 billion in 2009.
• Enron scandal. This fraud stiffed shareholders out of billions. The amount shown here is $40 billion for the $40 billion lawsuit filed by Enron shareholders.
• Bernie Madoff Ponzi. He took $65 billion in one of history's largest scams.

Despite its reputation, cryptocurrency probably isn't as scummy as one would expect. Although $9 million a day sounds like a lot of money, cryptocurrency is still relatively small and this is reflected in the amount lost to scams and fraud. Fiat currency scams are still much bigger earners, simply because there are a lot more people involved in that area.

Counter-intuitively, crypto's shady reputation might be making it safer by instilling a bit of caution in users. Two-factor authentication is becoming the norm, and exchanges are under constant attack and would disappear almost instantly without world-class security. Plus, transparent ledgers in general aren't ideal for most crooks. In addition, a lot of people who would happily wire money, or even mail gift cards, to an online stranger would be suspicious if someone asked them for bitcoin instead.

A lot of crypto money is lost to scams, but it's not a particularly scammy area. By virtue of popularity, that dubious honour still goes to traditional fiat currency scams.

Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VEN, XLM, SALT, BTC and NANO.

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