Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/312431 
Year of Publication: 
2025
Series/Report no.: 
SAFE Working Paper No. 444
Publisher: 
Leibniz Institute for Financial Research SAFE, Frankfurt a. M.
Abstract: 
We examine how cybercrime impacts victims' risk-taking and returns. The results from our difference-in-differences analysis of a sample of victim and matched non-victim investors on the Ethereum blockchain are in line with prospect theory and suggests that victims increase their long-term total risk-taking after losing part of their wealth, leading to lower risk-adjusted returns in the post-cybercrime period. Victims' long-term total risk-taking increases because they increase diversifiable risk due to victims' post-cybercrime withdrawal from altcoins. At the same time, the reduction in risk-adjusted returns correlates with increased trading activity and churn, due plausibly to managing cybercrime exposure. In the cross-section of Ethereum addresses, we show that the most affluent victims take a systematic approach to restore their pre-cybercrime wealth level, while the least affluent victims turn into gamblers. Finally, a parsimonious forensic model explains a good part of the addresses' probability of being involved in cybercrime, on both the victim and the cybercriminal side.
Subjects: 
Ethereum blockchain
market manipulation
financial fraud
token investment scam
cybercrime
cryptocurrency
JEL: 
G14
G24
G30
L26
M13
O16
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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