by Crypto fraud in the UK has risen by a third in a year, according to police data, with criminals stealing hundreds of millions of pounds from consumers.
The increase in reported losses, obtained via a Freedom of Information request to Britain’s Action Fraud police unit, comes as the sector grapples with the continued fallout from the collapse of major exchange FTX.
Financial losses involving crypto reported to Action Fraud from October 2021 to September 2022 were £226m, a 32% increase on the same period a year earlier. The number of reported incidents increased by 16% to 10,030.
The figures are part of a wider “epidemic” of fraud, which financial services trade body UK Finance says has increased during the pandemic as people’s financial habits have moved online. Fraud in general increased by 8% year on year to reach £1.3 billion in 2021.
In May, the month in which so-called “stablecoin” Terra crashed, affecting a number of other cryptocurrencies and related companies, there were £33m in reported losses. .
According to law firm Pinsent Masons, an increasing number of victims have fallen prey to “rug draw” scams since the value of cryptocurrencies plummeted. These scams involve crypto developers abandoning a project and running away with investors’ funds.
Last November, the creators of a token that promised access to an online game based on the popular Netflix show squid game stole around £2.5million from retail investors before disappearing, the BBC reported.
Hinesh Shah, forensic accountant at Pinsent Masons, said: “Whenever times get tough, scammers always seek to prey on less experienced investors by promising huge returns.
“Given the huge sums that some crypto investors have made during the boom, scams involving cryptocurrencies can be particularly powerful for small investors desperate to make a quick buck.”
Other common scams include fake celebrity endorsements. Scammers posing as Elon Musk stole millions of dollars from US consumers in cryptocurrency frauds last year, according to the Federal Trade Commission, and UK police have warned that similar schemes are being carried out. underway in Britain.
People also fall prey to “pump-and-dump” scams, in which criminals artificially inflate the price of a cryptocurrency before selling it to retail investors shortly before the value plummets.
The Financial Conduct Authority has repeatedly expressed concerns about consumers investing in high-risk asset classes. In August, the regulator issued guidelines for companies that advertise such products as well as banning incentives such as “refer-a-friend” bonuses.
Several UK banks have decided to limit or stop payments to cryptocurrency exchanges, blaming the high rate of fraud in recent months.
Last week, digital bank Starling became the latest to do so, tightening restrictions on inbound and outbound transactions related to cryptocurrencies. He said that despite the potential benefits, speculative assets are currently “high risk and widely used for criminal purposes”.
The scandal surrounding the failure of FTX sent shockwaves through other major players in the space and left the price of cryptocurrencies in a tailspin. Bitcoin is trading at $16,500, according to data site CoinGecko, from $54,500 a year ago.
