Crypto investment fraud rose by 64% in 2021

[ad_1]

Crypto investment fraud in the UK rose by 64% between 2020 and 2021 according to the multinational law firm Pinsent Masons.

While 5,758 cases of crypto investment fraud cases were reported in 2020, the figure increased to 9,458 cases in 2021.

This surge comes in spite of the volatility of cryptocurrencies, warnings by regulators of scams, and other risks in the sector.

Pinsent Masons senior associate forensic accountant and financial crime investigator Hinesh Shah said: “The boom in cryptocurrency activity has continued to attract in fraudsters.

“For many amateur investors cryptocurrencies are seen as a get rich quick scheme – which is absolutely perfect for fraudsters who prey on investors’ desires to make an abnormally outsized and speedy profit.”

A study in June 2021 by the Financial Conduct Authority estimated that 2.3m adults in the UK already held crypto assets. That is roughly one in thirty adults.

By the end of 2021, the total transaction value of all cryptocurrencies was $15.8trn (£11.97trn). This was up 567% from the previous year.

According to Chainalysis, cryptocurrency scams have become very successful. They have cost victims over $7.7bn (£5.84bn) globally in the past year.

Pinsent Masons said that criminals have adapted techniques from other areas of white-collar crime to target potential crypto currency investors victims.

That includes “rug pulls”, social media posts, and romance crypto scams.

Rug pulls is when a creator of a new digital token attracts new investors and suddenly disappears with investors’ funds.

Fraudsters can also promote bogus apps or websites to encourage users to make crypto investments in social media posts.

Fraudsters can also deceive unsuspecting love interests into parting away with thousands in the promise of a profitable crypto investment.

Pinsent Masons added that the growth in cryptocurrency fraud has raised concerns over the capacity of traditional law enforcement agencies in dealing with cryptocurrency fraud.

This is because very specific skills and experience are needed among enforcement agencies to track fraudsters across jurisdictions and sixteen encrypted wallets.

Despite the challenges, individuals can take steps to recover lost funds through the civil courts.

Courts may grant claimants substantial powers to do this, including:

A Bankers Trust Order (BTO), a disclosure order where victims can acquire confidential documents from a bank or other financial institution in order to trace assets. A freezing injunction, an order that prevents defendants from accessing or dissipating assets that are related to the dispute. A Norwich Pharmacal Order (NPO), another type of disclosure order in which victims can obtain information from third parties (such as Bitcoin exchanges) who are ‘caught up’ in the wrongdoing, helping victims to track fraudsters and recover their losses.

Hinesh Shah added: “As long as there is active trading in unregulated crypto currencies then we can expect fraudsters to target the sector.

“Regulators like the FCA are doing all they can to educate consumers of the risk of fraud but they face a major challenge.

“Where we are hopeful of improvement is in the speed at which crypto-currency fraudsters can be pursued through the civil courts in the UK.

“The UK civil courts have built up a reputation for a being an effective route for going after money that has been defrauded and the early signs are that they are dealing with crypto currency fraud in a similarly robust manner.”

The FCA recently stated having seen an increase in reports about possible cryptocurrency scams.

This applies both to its supervision hub, with a 14% increase compared to the previous six months, and its ScamSmart with a 49% surge.

As a result, the regulator opened 300 cases relating to potential unregistered cypto-asset businesses between April and September 2021.

It said they are “likely to be involved in scams”. Therefore, the FCA has added 172 firms to its unregistered cryptoasset businesses list.

The regulator is also on the hunt for a head of crypto role.

[ad_2]