Crypto adoption has gone through the roof this year. Unfortunately, so too has the number of scams trying to swindle funds from unsuspecting consumers. Data from Chainalysis
suggests $7.7 billion
has been taken from victims in 2021… an 81%
increase on the year before.
Following on from our look at the 10 best crypto news stories of 2021,
let's reflect on the worst stories that hit the headlines this year — from the death of an eccentric entrepreneur, to a Netflix-inspired token that ended in tears.
Quite recently, a group of crypto enthusiasts embarked on an audacious bid to buy a rare copy of the U.S. Constitution. The imaginatively named collective — ConstitutionDAO
— raised more than $40 million
so they could participate in the Sotheby's auction.
All of this meant they were feeling pretty confident as bidding began, not least because the historic artifact was expected to sell for between $15 million and $20 million.
Unfortunately, the transparency of the blockchain meant it was fairly easy for rivals to calculate what it would take to outbid them. And in a devastating setback, hedge fund billionaire Ken Griffin swooped in at the last minute — paying a grand total of $43.2 million.
The decentralized autonomous organization slowly began to unravel after this. Although donors were able to receive refunds, the final amount returned to their wallets was decimated by high fees on the Ethereum blockchain.
Back in the summer of 2020, the R&B star Akon had a bold vision: to build a modern, Wakanda-inspired metropolis in the West African country of Senegal. Akon City would be powered by cryptocurrencies,
create jobs, and become a vibrant part of the economy. The singer hit the headlines after laying a ceremonial stone to declare that the project was underway.
Fast forward one year, and the $6 billion project was unstarted. Locals were in the dark about what was going on — and hopes were beginning to fade that the promised stadium, casino, schools and luxury apartments would materialize.
At the time, the AFP's West Africa correspondent Emmet Livingstone told the CoinMarketRecap podcast
"You can go to the field where the first stone was laid and it’s still just an empty field. However, if you talk to the building company, they will say they have been in contact with contractors and suppliers and they give the impression of machinations happening behind the scenes — but on the ground, zero."
Livingstone went on to point out that $6 billion is a "huge, huge amount of money" for a country like Senegal — but that it isn't entirely clear who is funding the project.
As Bitcoin continued its dizzying surge right at the start of 2021 — accelerating from $29,000 to $69,000 in the blink of an eye — we started to hear some unfortunate stories about early investors who were unable to get their hands on life-changing sums of money.
The New York Times spoke to Stefan Thomas,
who had just two chances left to guess the password of a hard drive holding 7,002 BTC
. The whole experience had made him think differently about cryptocurrencies. He told the newspaper:
"This whole idea of being your own bank — let me put it this way: Do you make your own shoes? The reason we have banks is that we don't want to deal with all those things that banks do."
Throughout the year, we've heard endless stories about people who have lost everything after falling victim to scams.
The most common involve victims receiving texts or emails that appear to be from their crypto exchange — telling them to log in immediately because someone has been trying to access their funds.
This leads them to a fake login page, and once they enter their email address and password, fraudsters drain their accounts in the blink of an eye.
One couple ended up losing $700,000 in Bitcoin
because of such an incident — and said they received little support from Coinbase in investigating what happened. Erick Richardson, who was offered just $500
in compensation by the exchange, told CNBC
"It felt like they kicked sand in my face. Is there even anybody senior at Coinbase looking at this? Somebody made a calculation and said, 'OK, this is what happened to this guy. He lost 21 Bitcoin. Let's give him $500.'"
A press release came out of the blue in September that declared Walmart, one of the world's biggest retailers, was preparing to accept Litecoin as a payment method
The news was hurriedly broken by a number of established news outlets — and retweeted by the Litecoin Foundation.
There was just one problem: It wasn't true.
Walmart quickly denied that it was entering into such a partnership. And LTC, which had surged sharply on the news, crashed back down to Earth in the blink of an eye.
It was a sophisticated scam that hoodwinked many people… and taught journalists to be super careful of the announcements they see online.
The world's biggest marketplace was engulfed by scandal this year when it emerged that a senior executive was involved in insider trading.
OpenSea's Nate Chastain had been accused of purchasing NFTs
before they were promoted on the website's homepage — and later selling them for a profit. His identity was unmasked by blockchain sleuths on Crypto Twitter.
The company later confirmed that it had "requested and accepted"
his resignation, all while introducing tight new restrictions to prevent employees from engaging in such controversial practices.
Back in June, John McAfee was found dead in his prison cell
— hours after a Spanish court ruled that he can be extradited to the U.S. to face tax evasion charges.
Days earlier, he had told a judge that he feared he would die behind bars if he was taken into American custody.
Best known for creating antivirus software, McAfee became a colorful member of the crypto community with his outlandish predictions about Bitcoin’s future price.
No asset goes up in value constantly — and Bitcoin painfully proved that this year.
It plunged from highs of $64,000
in April to lows of $29,700 in June
… wiping out its entire gains for 2021.
But like a phoenix from the ashes, Bitcoin came back stronger — hitting $67,000 in October and $69,000 in November.
A cocktail of unfortunate news stories — including the Evergrande crisis, the Omicron coronavirus variant and the Fed unveiling plans to end stimulus — led to another corrective phase as 2021 drew to a close. During the first weekend of December, BTC briefly dipped as low as $42,000.
While longer-term Bitcoin investors have been taking all this volatility in their stride — it's nothing new for them, after all — it caused a fair amount of panic for those who are new to the space.
As China pushed ahead with a crackdown on mining, India revisited its plans to heavily restrict the use of cryptocurrencies.
There had been murmurings that anyone caught dealing in digital assets could face time in jail and a hefty fine
. However, conflicting reports have suggested "private cryptocurrencies" will be subject to regulation instead — something that could be workable for the country's 20 million
Plenty of uncertainty about what India will do next is expected in 2022. The crypto industry had only just started to get back on its feet — with Bollywood stars promoting local exchanges in big-budget ads.
Perhaps the most unfortunate story of 2021 relates to the SQUID token.
A project inspired by the popular Netflix show Squid Game had promised to offer a play-to-earn experience like no other.
Players would be able to participate in the same games that feature in the TV program, and potentially earn big crypto prizes for coming out on top.
SQUID's value surged — and plenty of attention was given to the project, with a number of major media outlets writing glowing articles about the token's performance.
Unfortunately, the project had no official ties with Netflix.
Those who had bought into SQUID were trapped because of an anti-selling mechanism — and had little choice but to watch helplessly as the token surged in value, apparently reaching $2,800. Minutes later, it plunged to $0.01.
A number of investors told CoinMarketCap
that they lost everything as a result of the rug pull.