ISSUE 53 Expert Witness Journal - Journal - Page 31
Crypto Fraud:
What Have We Learnt in 2023?
by Louise Abbott, Fraud & Financial CrimeCryptocurrency & digital assets
www.keystonelaw.com
2023 followed the unfortunate year-on-year upward trend of crypto fraud and crypto scams. This
has been met with an increasingly innovative approach adopted by both crypto lawyers and the
English courts, and a levelling-out and rise in the crypto investment world following the crypto
winter of 2022/23. The first phase of crypto regulation in England and Wales was a welcome
introduction.
Cryptocurrency scams continue to escalate and are
becoming increasingly sophisticated, with most scams
being connected to large-scale organised criminal
gangs from across the globe, often using artificial intelligence to target victims. Inevitably, social media
continues to be used as the mechanism to approach
victims.
purported investment. Mostly, the funds being paid
are being immediately stolen by the fraudsters and
used to support criminal activities.
Double scams
Victims may be targeted again in what is known as the
‘double scam’. Victims are often approached by companies posing as asset recovery agents with promises
that they can get the victim’s money back for a fee.
Victims caught up in these types of cryptocurrency
scams are often caught out by fake trading platforms,
and unregulated and fake brokers posing as someone
legitimate traders. Those who have either recently inherited funds, or have a wealthy portfolio or retirement pot, are typically amongst those targeted.
In more than 90% of cases, victims are deliberately
targeted by fake recovery agents in an attempted double scam. This type of fake recovery scam is also
known as an advanced fee fraud: the victim pays a fee
for something which will never happen. Double scams
like this are often disguised by the scammer as being
a fee for anti-money laundering (AML) checks, tax
payments, or fee for withdrawals.
Trends and types of crypto scams
The most common types of scams include:
l Long-term investment scams through fake trading
platforms and exchanges.
The fraudsters will usually then sell lists of victims’
details to other organised criminal gangs. Essentially,
despite having been defrauded already, victims’ personal details effectively get put onto a list where the
fraudsters continue to harass the victim, sometimes on
a daily basis, using all manner of methods to try to extract further funds. Someone who has been scammed
once will likely be approached at least one further
time.
l Training or educational scams (where victims sign
up for a training/crypto course).
l Romance scams or pig butchering scams, as they
are often referred to (where victims are approached
through dating apps).
l Giveaway scams (where investors believe they are
investing in a project which abruptly ends and liquidity is immediately drained).
It is very often in crypto cases that victims are
embarrassed to admit that they have been caught up
in such scams – as a result they often feel unable to
speak with family members or admit the truth of what
has happened.
l Rug pulls (where scammers create a seemingly
legitimate project, attract investors, then pull out of
the project, leaving it with nothing).
Whilst all of these scams operate in slightly different
ways, they often involve the victim’s money being paid
through a fake crypto platform. The fake platforms
are typically managed by companies linked to serious
organised criminal gangs. The method for these fake
trading platforms appears to be that the victim is allocated an ‘account manager’ who speaks with them (either by telephone or messaging service) to coerce
them into investing further sums, often over an extended period of time. The victim is often given access to a fake online app to review the investments
made.
Legal recovery procedures
Most crypto frauds are committed by criminals out of
this jurisdiction. In law, cryptocurrencies are treated as
property. A solicitor may act on the victim’s behalf to
recover the assets. In the first instance the transfer of
the cryptoassets would need to be traced, often using
an investigator. Legal representation may be able to
obtain a worldwide freezing order and a proprietary
injunction issued by the court, against persons associated with the victim’s cryptocurrency or its traceable
proceeds. The courts will grant service out of the
jurisdiction where the location of the defendants is
unknown.
In reality, as often uncovered through subsequent investigation, the online apps are fake – used by the
fraudsters to control the victim’s belief about their
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