Recent data reports that the growth of cryptocurrencies and blockchain technology has contributed to a 64% increase in crypto fraud in the UK in 2021.
Crypto Fraud On The Upswing In UK
An international law firm with a specialization in the tech industry, Pinsent Masons has reported data that showed 9,458 cases of crypto investment frauds in 2021, which indicates a 64% increase compared to the numbers for 2020. However, the crypto space has ballooned significantly in this time frame, which does explain the spike in fraudulent activities in this bustling industry.
According to Senior Associate Forensic Accountant at the law firm, Hinesh Shah,
“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.”
These digital assets are pulling in a fresh crowd of investors and convincing traditional ones to switch gears and dabble in crypto investments. As it became more mainstream, government regulators and financial watchdogs have tried to draw the attention of the public toward the high risks of fraudulent activities in this largely unregulated sector. In June 2021, the UK’s Financial Conduct Authority (FCA) estimated that one in thirty adults in the union already held crypto assets, which means around 2.3 million investors from the UK alone.
The Global Crypto Problem
Crypto fraud has become a global issue, due to the worldwide spread of cryptocurrencies. Leading crypto analyst firm Chainalysis reported that over $7.7 billion have been lost worldwide due to crypto scams in 2021 alone. Cybercriminals have set their target on the crypto space, primarily because of its unregulated nature and the lack of understanding among the masses. One such group of cybercriminals is the notorious North Korean hacker group Lazarus, which has been hitting investors left and right. The group was recently suspected of attacking DeFiance founder Arthur Cheong’s hot wallet and stealing valuable NFTs and other tokens worth $1.6 million.
Rug Pulls And Other Scams
Cybercriminals have adopted several underhand techniques to scam investors and siphon their funds away, such as ‘rug pulls.’ This happens when the creators of a crypto project get the investor funds under their control and then abscond by abandoning the project. The anonymous nature of blockchain tech allows a lot of criminals to get away with such schemes, which have especially proliferated on social media. The US has also been susceptible to multiple “rug pull” schemes, resulting in losses in the range of millions of dollars, forcing them to take a stricter stance on cybercriminals. Recently the US Department of Justice charged the creators of the Frosties NFT project after they committed a ‘rug pull’ and disappeared with investor funds.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
