By Simon Davison (AnotherDay), Michael Goodwin QC & Tom Davies (Red Lion Chambers)
The increased use of cryptocurrency by the technology sector, businesses, and the general public has led to a significant increase in crypto asset fraud. Crypto scams are now reported daily by the media and have more than doubled in the last year. In fact, the Financial Conduct Authority received 6,372 alerts on suspected crypto scams last year. The victims can be cryptocurrency exchanges, small and large investors, individuals and companies.
The scams take many different forms. For example, the adaptability of blockchain technology means that “initial coin offerings” for the latest tokens or coins provide ample opportunity for bad actors to make ill-gotten gains. Coins may be offered that are essentially worthless, or investors’ funds may be funneled into a completely illegitimate website that looks like a legitimate ICO.
Give away scams are also common in the crypto space. Traditional scams like phishing emails are also commonplace. These remain popular as attempts to either obtain fiat currency (supposedly in exchange for cryptocurrencies) or to obtain security data relating to cryptocurrency accounts, thereby allowing illicit access to funds or crypto. Love scams and blackmail are also common.
The crime related to cryptocurrencies does not end here. The anonymity offered by cryptocurrency makes it an extremely attractive technology for those who wish to keep their activities away from the prying eyes of law enforcement agencies such as terrorists and money launderers. And the sums involved are not small. the The Metropolitan Police recently seized around £114 million worth of cryptocurrency as part of an ongoing money laundering investigation, the largest seizure of crypto assets in the UK and one of the largest in the world.
Part of the problem is that the cryptocurrency sector in the UK has so far been largely unregulated. Although the government is taking action along with regulators and the Bank of England, crypto crime continues to rise rapidly. And so, while the regulatory framework is still being developed and implemented, many are falling victim to crypto fraud.
“Prevention is better than cure”
In many cases, cryptocurrency-related crime is entirely preventable by conducting due diligence prior to the transaction and ensuring robust cyber policies and procedures are in place.
In addition, it is crucial to understand what you are investing in and who you are sending your money or assets to. In many cases, scammers have multiple victims and can receive huge sums of stolen funds – hence they regularly have compelling corporate websites, whitepapers and social media “staff” to give an appearance of legitimacy.
If an investor is considering investing in cryptocurrency, it may be wise to seek advice before making a transaction, both to make sure the investment is legit and to identify “red flags” or potential problem areas.
Investigators often help clients understand whether an investment is a scam or not by completing blockchain analysis of wallet addresses. In the worst case, however, individuals can turn to the law for redress.
There are two main ways in which victims of cryptocurrency crimes can seek redress – through a property claim in a civil proceeding, or through compensation or the seizure of an accused’s property following a criminal conviction.
Most importantly, a crypto fraud victim must act quickly. Crypto assets can be moved, further obfuscated, or “cashed out” in a matter of seconds, so responding quickly to a scam is important.
A key element in investigating and recovering stolen crypto assets is conducting complex blockchain analysis to track and trace the funds. Equally important, however, is conducting “real world” investigations to prove to the courts that fraud has been committed and providing supporting evidence to support it.
Every day, investigators like AnotherDay see numerous requests from victims of cryptocurrency-related crime who are unsure of what to do or how to proceed. For example in the case of Duncan Johns and Ionic Science vs. Unknown Persons, analysis of notices, reverse image searches and open source information showed that the suspect was not who he said he was and that it was in fact a scam; This was crucial in order to prove to the court that fraud was involved and thus justify the claims made and their recovery. Conducted by AnotherDay, the investigation tracked and tracked the assets across multiple blockchains. It was established where the funds were sent. After that, assets linked to the scammers were frozen and confiscated.
Thus, while a regulatory framework is put in place to protect consumers and investors from crypto fraud following private investigations and civil or criminal proceedings, remedies are available for victims of crypto crime to recover losses and seek justice.
https://techround.co.uk/cryptocurrency/what-your-business-needs-to-know-when-it-comes-to-crypto-fraud/?utm_source=rss&utm_medium=rss&utm_campaign=what-your-business-needs-to-know-when-it-comes-to-crypto-fraud What your business needs to know when it comes to crypto scams