What Should I Do If I Am Accused of Cryptocurrency Investment Fraud?

As 2021 draws to an end and we look forward to 2022, we can expect the recent rise in cryptocurrency investment frauds and scams to continue unabated. William E. Quigley,  high-profile investor and co-founder of the WAX blockchain in the US believes that due to the exponential gain in the popularity of crypto and blockchain technology, it is almost certain there will be an “influx” of unprecedented cryptocurrency scams in the coming year. Research by Action Fraud in the UK confirms that incidents of cryptocurrency scams are increasing substantially, due in large part to the use of social media by cyber criminals and gangs. As of mid-October 2021, Action Fraud (the UK’s national reporting centre for fraud and cybercrime), reports that since the start of 2021, an estimated £146m has been lost as a result of cryptocurrency scams, with the average victim losing around £20,500. In the majority of cases, scams are being advertised on social media platforms which purport to promise substantial ROI on cryptocurrency investments. Unfortunately, investors often lack an understanding of the risks involved in the cryptocurrency market, due to the complex technology involved and the lack of regulation of the sector.

Given that more people are looking at adding crypto assets to their investment portfolios and the sophistication of the fraudulent schemes in existence, unwary people can also become entangled in cryptocurrency fraud schemes. In this article, we look at the different types of cryptocurrency fraud and the action you should take if you find yourself caught up in criminal activity.

What are the most common forms of cryptocurrency investment fraud in the UK?

There are a wide range of cryptocurrency investment fraud methods, including:

  • Enticing victims to transfer money in return for cryptocurrency which is not real
  • Using fake mobile phone apps to make people think they are buying cryptocurrency
  • Online gaming (such as the Squid Games fraud explained below)
  • Boiler room fraud – whereby telemarketers commit fraud by selling worthless or non-existent shares
  • Using fake celebrity endorsements to promote fake investment schemes
  • Exit scams – this occurs when those behind a new cryptocurrency disappear with investors’ money during or after an initial coin offering (ICO).
  • Ponzi schemes – whereby individuals are encouraged to part with their money and then earlier investors are repaid with money from later investors
  • Advance fee fraud – whereby upfront payments are made for goods or services which are never delivered

One of the biggest challenges posed by blockchain technology and cryptocurrency is that due to its decentralised nature, it is hard to know who to trust. As Jonathan Padilla, former PayPal head of blockchain says, “With a decentralized platform, there’s really no safeguards in place to say who is a good actor and who is a bad actor…It’s really just buyer beware”.

Unfortunately, even seemingly safe, and large scale schemes with thousands of investors are absolutely no guarantee of safety. Modern scammers are taking advantage of new technology and the latest cultural trends to whip-up interest and drive investment funds into fake schemes. One example of this is the recent Squid Games crypto token which recently collapsed after it was found to be a scam. This involved so called “play-to-earn cryptocurrency” called ‘Squid’, which involved enticing unwitting buyers to buy tokens enabling them to earn more while playing an online game. The developers of this scam stole an estimated £2.48m. In a sign of just how much hype surrounded the Squid currency, it jumped from a value of 1 cent to nearly $3,000 in one week and then promptly fell by 99.99%. All the while, experts in cryptocurrency specialists had been warning it was a scam.

In another recent case of cryptocurrency fraud, a 17-year old who set up a highly sophisticated website which looked like the genuine online gift card shop Love2Shop, was able to steal the personal details of victims and use these to buy vouchers. These were then used to purchase Bitcoins which then soared in value. The police eventually seized £2m in cryptocurrency which resulted from the scam. While this wasn’t strictly an investment scam, the teenager was himself investing the value of the vouchers he stole to make considerable sums.

What should I do if I am accused of cryptocurrency investment fraud?

It is not uncommon for individuals to be accused of cryptocurrency fraud when they were not aware of what was happening or even involved at all. In many cases, enforcement agencies such as the Financial Conduct Authority (FCA), the National Crime Agency (NCA), the Serious Fraud Office (SFO), and HMRC may undertake an investigation into a matter, and even if there is no case to answer, damage to a person’s reputation can still occur. This is why it is important to act quickly if you are accused or you are being investigated for alleged cryptocurrency investment fraud.

Under the Fraud Act 2006, a person may be charged with an offence of fraud either:

  • By false representation
  • By failing to disclose information when there is a legal duty to do so
  • By abuse of position

A Cryptocurrency Investment Fraud Solicitor can intervene and bring the matter under control as quickly as possible. Crucially, they will ensure they are onsite if you are facing a search of your premises, advising you and ensuring that your rights are protected at all times.

In addition, a Cyber Fraud Solicitor will involve expert witnesses including forensic accountants and cryptocurrency experts who will look at the details of what happened and prepare a detailed report that shows you were not directly involved in the alleged activity. This evidence can be crucial in successfully defending cases of alleged cryptocurrency fraud. In many cases it can be extremely hard for agencies to find hard evidence linking the person accused with the alleged fraud.

Final words

Given the often complex and cross-jurisdictional nature of cryptocurrency investment fraud, a sophisticated and forensic approach is required to defend against any allegations of such actions. Cryptocurrency Fraud Solicitors have a wide range of legal tools they can use in order to protect those accused of such actions and minimise the impact of any outcome.

Reeds Solicitors is a leading Cryptocurrency Fraud Defence, family law, prison law, and mental health law firm in England and Wales. You can reach us through our contact page here.