Investors Lost $12 Billion In DeFi Exploits This Year: Elliptic Report

Investors lost $12 billion in Defi Exploits in 2021 with cases of fraud and theft increasing seven times compared to 2020 according to the latest report by Elliptic that we read more about in our latest cryptocurrency news today.

According to the data provided by Elliptic, investors lost $12 billion to criminals on decentralized finance platforms since the start of the year and more than $10 billion of the amount accounting for theft and fraud. Over the past few years, the total value locked in DeFi projects surged from $500 million to about $250 billion, and with this significant increase comes a huge risk of exploits and scams.

Since the start of the ongoing year, fraudulent activities accounted for $10.5 billion worth of user funds which were stolen in thefts or fraud on decentralized finance products while in comparison, the number stood at $1.5 billion in 2020. Tom Robinson who is the Chief Scientist at Elliptic explained the statistics with the fact of the DeFi space became an area of financial innovations where people are pouring huge sums of money and as such, it turned out to be a tempting target for the malicious actors:

“The DeFi ecosystem is an incredibly exciting and fast-moving space, with financial services innovation happening at light speed. This is attracting large amounts of capital to projects that are not always robust or well-tested. Criminal actors have seen the opportunity to exploit this.”

DeFi platforms lack a comprehensive regulatory framework as well and trying to address the issues in the sector, the US SEC published a report on risks, regulations, and the rest of the opportunities. Caroline Crenshaw who is a Commissioner of the Agency asserted that her department has a strong jurisdiction over DeFi but no other platforms registered with the regulator. Participants in the ecosystem remain unprotected by the regulators and authorities in case of criminal activities. PolyNetwork for example as an interoperability protocol became a victim of a hack attack that stole over $600 million.

The platform got exploited on the Binance Smart Chain as the bad actors swiped the funds from the past three wallets. However, the hackers were actually white-hat hackers so they started returning the funds from the biggest theft in Defi history. The perpetrators said they did it for fun as they only wanted to expose the vulnerability of these projects. The attacker even returned all funds and PolyNetwork fully restored its system.