The total amount lost to cryptocurrency fraud in the UK has surged by 32 per cent in the past year.
Senior associate at Pinsent Masons, Hinesh Shah, said despite the recent fall in cryptocurrency prices, the association of cryptocurrencies with huge windfalls in profit has continued to attract investors who lack the necessary skills and experience to tell a legitimate cryptocurrency investment from a fraudulent one.
There is also a concern that scammers may be proactively targeting these inexperienced investors.
Shah added: “Given the huge sums which some crypto investors made during the boom, scams involving cryptocurrencies can be especially potent for smaller investors who may be desperate to make a ‘quick buck’.”
Crypto fraud can be done under a number of guises, including ‘rug pulls’ where developers of tokens steal funds raised from investors, or ‘pump and dump’ scams where fraudsters create excitement around an asset and sell their own holdings when the price rises, leaving investors exposed to any falls in value.
There are also fraudulent initial coin offerings, where a new token being launched does not exist.
Regulators and government have not yet worked out whether they should regulate crypto, and if so, how.
Some have said the sector should not be regulated, as that would further legitimise an industry that poses no threat to financial stability and is an inherently risk investment.
However, last week, a deputy governor at the Bank of England warned that…
