Crypto Fraud Increases By 30% In The UK (Here’s Why)

Data from a specialized police unit show an expanding issue that is costing victims hundreds of millions of dollars. Crypto fraud increases three times.

According to police data, cryptocurrency theft in the UK increased by a third in a single year, with thieves taking hundreds of millions of pounds from victims.

The sector is still dealing with the effects of the demise of important exchange FTX, as evidenced by the increase in reported losses, which was discovered through a freedom of information request to UK police unit Action Fraud.

From October 2021 to September 2022, Action Fraud received reports of £226 million in cryptocurrency-related financial losses, a 32% rise over the same time in the previous year. 10,030 recorded incidents, a 16% increase, were reported.

The findings are a part of a larger “epidemic” of fraud, which the trade group for financial services, UK Finance, claimed grew as people’s financial habits shifted online. Fraud in general increased 8% yearly to £1.3 billion in 2021.

A number of other cryptocurrencies and businesses linked to the so-called “stablecoin” Terra’s collapse in May, which had an impact on them all, reported losses totaling £33 million.

Since the value of cryptocurrencies fell, a growing number of victims have fallen prey to “rug pull” scams, according to law firm Pinsent Masons.

These frauds include cryptocurrency developers quitting a project and escaping with investor money. The developers of a token that offered access to an online game inspired on the well-known Netflix series Squid Game stole an estimated £2.5 million from retail investors last November, according to a report by the BBC. “Whenever circumstances are tight, fraudsters always strive to prey on less experienced investors by offering enormous profits,” said Hinesh Shah, a forensic accountant at Pinsent Masons.

Scams utilising cryptocurrencies can be particularly effective for smaller investors who may be desperate to make a “fast buck” given the enormous sums that some crypto investors made during the boom. Fake endorsements from famous people are another frequent scam.

According to the Federal Trade Commission, scammers posing as Elon Musk stole millions of dollars from US consumers in cryptocurrency thefts last year. UK authorities have warned that similar scams are now taking place in their country.

People are also falling for “pump-and-dump” schemes, in which thieves fudge cryptocurrency prices before selling them to retail investors just before the market drops.

Consumer investment in high-risk asset classes has been a source of concern for the Financial Conduct Authority on numerous occasions. The regulatory body issued guidelines for businesses that promote these goods in August and prohibited incentives like “refer a friend” payments.

A number of UK banks have taken action to restrict or prohibit payments to cryptocurrency exchanges, blaming the recent spike in fraud. 

Last week, digital bank Starling became the most recent to do so, strengthening regulations on both incoming and outgoing cryptocurrency transactions.

Despite prospective benefits, it was stated that the speculative assets were currently “high-risk and widely utilised for illicit reasons.”

The scandal surrounding FTX’s failure has shocked other significant players in the market and driven cryptocurrency prices into free fall. According to data collector CoinGecko, the price of one bitcoin has dropped from $54,500 to $16,500.

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