There has been an increase in scrutiny of crypto asset accounts by law enforcement agencies. According to a report by crypto exchange WazirX, from October 2021 to March 2022, the exchange received 952 requests from Indian law enforcement agencies and 71 requests from foreign law enforcement agencies for transactional and user information. All the requests received were related to criminal inquiries. This total of 1,023 enquiries is much higher than the 377 such enquiries that the company received last year (April 2021 to September 2021), according to the report. In addition to that, of the 377 requests received from law enforcement agencies, 38 were from foreign agencies and 339 from Indian ones.
An analysis of these requests shows that 95 per cent of the fraud cases/scams originate outside the on-chain crypto ecosystem. Only around 4.5-5 per cent cases are related to actual blockchain and virtual digital asset (VDA) frauds.
About 40 per cent of the cases are related to ponzi schemes and social engineering scams. The two categories of impersonation or cheating cases and phishing or airdrop scams come next with 25 per cent each. Identity falsification or identity theft is the lowest at 5 per cent. The report cited one case of identity theft. The identified victim was aged 85 and had no history of tax filed. He claimed agriculture as his source of livelihood. Upon further scrutiny it was found that a distant relative was operating the WazirX account illegally, transacting large amounts. The victim was misguided by his relative to complete KYC checks successfully. Eventually, the user’s account was blocked till further notice.
The above-mentioned data shows that majority of scams originates from outside the on-chain crypto ecosystem.
The number of accounts being locked has also gone up, but not necessarily due to illegal or suspect activities. The report stated that the crypto exchange has so far locked 17,218 accounts during the October 2021 to March 2022 period, an increase of 19 per cent compared to the April-September 2021 period. However, a big majority (73 per cent) of these closures were due to customer requests. The exchange locked 27 per cent of the accounts concerned due to payment disputes or ongoing investigations by legal agencies.
Apart from that, 14,469 accounts were blacklisted (90 per cent on request from customers and 10 per cent due to payment disputes or ongoing investigations by legal authoroties).
Commenting on the bi-annual transparency report, Nischal Shetty, CEO and founder, WazirX, said, “The insights of the report indicate that even now the vast majority of scams are due to misinformation. They occur due to lack of awareness amongst users and indicate a requirement of large-scale education and awareness programs to safeguard user interests.”
