In the first 7 months of 2021, losses from theft, hacks and fraud in “decentralized finance” or DeFi, a thriving segment of the cryptocurrency industry, reached an all-time high. The announcement was made in a report by crypto-intelligence firm CipherTrace published Tuesday, August 10, 2021.

Crime losses across the entire cryptocurrency market fell sharply to $681 million at the end of July, from $1.9 billion for all of 2020 and $4.5 billion in 2019. The decline in cryptocurrency crime overall reflects the growing maturity of the industry and the much improved security infrastructure, investors say. The DeFi sector, on the other hand, recorded criminal losses of a record $474 million from January to July. DeFi applications, many of which run on the Ethereum blockchain, are financial platforms that enable cryptocurrency lending outside of traditional banks.

There are two types of DeFi crimes: hacking of a DeFi protocol by outsiders, or a "rug pull" by insiders, according to CipherTrace. A "rug pull" occurs when crypto developers abandon a project and run away with investors' money. The majority of DeFi-related crimes in 2021 appear to have been conducted by outsiders in the form of hacks, accounting for $361 million, or 76%, of all DeFi-related crimes. The remaining 24% are "rug pulls" totaling more than $113 million at the end of July.