Crypto fraud up 64 per cent as investment spikes for mainstream
Crypto investment fraud in the UK has continued to rise sharply in the UK with a total of 9,458 cases reported in 2021, up 64 per cent, according to data from Pinsent Masons.
Despite the volatility of cryptocurrencies and warnings by regulators of scams and other risks in the sector, crypto assets have been seen as an increasingly mainstream investment, again helping cryptocurrency related fraudsters.
“The boom in cryptocurrency activity has continued to attract in fraudsters. For many amateur investors crypto currencies 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”, said Hinesh Shah, Senior Associate Forensic Accountant and Financial Crime Investigator at the law firm.
A study in June of last year by the Financial Conduct Authority (FCA) estimated that 2.3 million adults in the UK already held crypto assets, or roughly one in thirty adults.
By the end of 2021, the total transaction value of all cryptocurrencies was $15.8 trillion – this was up 567 per cent from the previous year.
According to Chainalysis, cryptocurrency scams have become very successful and have cost victims over $7.7bn globally in the past year.
Criminals have adapted techniques from other areas of white-collar crime to target potential crypto currency investors victims such as ‘rug pulls’, whereby a creator of a new digital token attracts new investors then suddenly disappears, taking investor funds with them.
Social media has also been a key vehicle for fraudsters to promote bogus apps or websites to encourage users to make crypto investments.
The growth in cryptocurrency fraud has raised concerns over the capacity of traditional law enforcement agencies in dealing with cryptocurrency fraud.
Hinesh Shah, at Pinsent Masons 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.”