Digital deception: How the crypto world must evolve to outpace sophisticated fraudsters
by Louise Abbott
FRAUD, unfortunately, is a common challenge with any emerging asset class, and crypto is no exception.
As a practising solicitor specialising in domestic and international civil fraud, cryptocurrency, and asset recovery, I see daily the pain of those that have lost their investments and sometimes livelihoods to increasingly sophisticated fraudsters.
It is something crypto investors are all too familiar with. In recent research, the FCA found that consumers consider scams as “part and parcel” of investing. It adds up - according to research by TRM Labs, the amount of cryptocurrency stolen has more than doubled in the first half of 2024, compared to the same period last year.
Although my professional lens into the industry is one of fraud and scams, I believe that digital assets will play a key role in the future of finance.
They have the power to change society and the economy as we know it. However, with 18% of the UK population, according to FSCS’s latest research, holding crypto, I continue to urge the community to remain vigilant.
The scams
When I first delved into crypto recovery, scams were predominantly linked to phishing, a type of online scam that targets consumers by sending them an e-mail or text message that appears to be from a well-known source.
Nowadays, this is just the tip of the iceberg – with scams being more intricate and elaborate by the day:
- Romance or "pig butchering" scams, where individuals are targeted through dating apps and manipulated into investing.
- Long-term investment scams using fraudulent trading platforms and exchanges.
- Scams involving bogus training or educational programs, where victims are tricked into enrolling in a deceptive cryptocurrency course.
- Giveaway scams, where investors are deceived into contributing to a project that suddenly collapses, with all liquidity rapidly siphoned off.
- Rug pulls, where fraudsters create a seemingly credible project, lure in investors, and then abruptly abandon it, leaving the investors with nothing.
While these scams differ in their specific tactics, they commonly involve victims transferring money via a fraudulent platform. These platforms are usually operated by entities connected to organised criminal networks and gangs.
Typically, the scam includes assigning an "account manager" to the victim, who maintains regular contact through phone calls or messaging to persuade them to continue investing over time. The victim is often given access to a fake online application to monitor their supposed investments.
As later investigations often uncover, these online applications are merely tools for the scammers to manipulate the victim’s perception of their investments. In most cases, the funds are immediately stolen by the scammers to finance criminal operations, which include the horrors of terrorism, child exploitation and human trafficking.
Unfortunately, just as the industry continues to evolve, fraudsters are operating with increasing sophistication. AI and deepfakes are now being used to create scams that appear highly authentic. Just take the recent AI versions of the Prime minister and the Prince of Wales that have appeared in hundreds of adverts promoting a fraudulent cryptocurrency trading platform.
The adverts have reached up to 890,000 people on Meta’s social media sites, which include Facebook and Instagram. Today’s crypto investor faces a new series of challenges.
The recovery
If you are unfortunate enough to fall foul of a scam, retrieving crypto assets is a complicated and costly process. The legal expenses can be significant.
Most cryptocurrency frauds are perpetrated by large-scale organised criminal gangs outside the UK. The first step is tracing the crypto asset, to ensure it is available to be recovered.
This work is usually undertaken with a team of specialist investigators. Following this, it may be possible, through a legal process, to obtain a world-wide freezing order and/or a proprietary injunction over the stolen assets, to ensure they cannot be taken by the scammers, whilst the victim pursues a judgment for the return of their stolen funds.
The English Courts are well rehearsed in these cases, and it is possible to pursue unknown scammers, or those outside of the jurisdiction.
For those who fall victim to these scams, it is crucial to act swiftly and seek professional help.
Recovery is possible but requires navigating complex legal and technical challenges. By remaining alert and adopting protective measures, investors can safeguard their assets and contribute to a more secure and trustworthy crypto ecosystem.
Louise Abbott, Director, M2 Recovery
