Much to the chagrin of cryptocurrency investors, WazirX, a leading crypto exchange, witnessed a massive security breach on Thursday in one of its multi-sig wallets, leading to the loss of over $230 million in withdrawals.
The exploiter is reportedly selling the stolen tokens, which include $100 million worth of shiba inu and $52 million in ether. Although there is a substantive difference between a security breach and a scam, a loss to the tune of millions of dollars from an exchange is enough to shake the trust of investors.
This is not the first time a loss of this magnitude has taken place in the crypto sector. From FTX in the US to Quadriga in Canada and a digital currencies scam in Uttarakhand, a range of frauds have occurred in the recent past, which have — undoubtedly — shaken the faith of investors in cryptocurrencies as an asset class.
For instance, a massive ₹3,000 crore scam involving digital currencies took place in Uttarakhand last year. To uncover the scam, the Enforcement Directorate (ED) collaborated with US authorities and initiated the investigation in August 2023.
Series of crypto scams which have shaken the foundation of investors’ faith:
1. FTX scam: The crypto exchange FTX was founded in 2019 and collapsed in 2022 after a massive fraud perpetrated by Sam Bankman-Fried, its founder. He was jailed for 25 years and $11 billion was forfeited. During his heyday, Sam Bankman was named the 41st richest American on the Forbes 400 list.
2. Quadriga Exchange: Quadriga was believed to be the largest cryptocurrency exchange in Canada at the time of its collapse in 2019. The exchange ceased operations and the company filed for bankruptcy with C$215.7 million in liabilities and around C$28 million in assets.
3. A lakh people swindled: A large crypto fraud amounting to ₹1,740 crore happened in Himachal Pradesh where one lakh people were swindled through various websites and crypto coins with promises of double returns.
4. The Morris Coin Scam: The Morris Coin Scam surfaced in 2022. Nearly 900-plus investors fell prey to a portal promoting a counterfeit crypto named Morris coin. Investors participated in the initial offering of the fraudulent cryptocurrency, thus leading to a total scam of ₹1,200 crore.
5. The Karnataka Bitcoin Scandal: The Karnataka bitcoin scandal took place in 2021. The Central Crime Branch, the specialised investigative unit of the Karnataka Police, confiscated 31 Bitcoins valued at ₹9 crore from a Bengaluru-based hacker in November 2021.