Crypto fraud soars as ‘amateur’ investors flood market
Reports of crypto fraud are surging with the figure reaching almost 10,000 last year amid an explosion of interest in digital assets.
A total of 9,458 cases of crypto fraud were reported in 2021, up by 64 per cent compared to the previous year when 5,758 instances of investment scams were flagged, according to Pinsent Masons.
Despite the risks associated with trading cryptocurrencies, including market volatility, a lack of regulation and fraudsters, retail investors entered the market in their droves last year with an estimated 2.3m British households now holding crypto assets.
“The boom in cryptocurrency activity has continued to attract in fraudsters,” commented Hinesh Shah, Senior Associate Forensic Accountant and Financial Crime Investigator at Pinsent Masons.
“For many amateur investors cryptocurrencies are seen as a get rich quick scheme – which is absolutely perfect for fraudsters who prey on investors’ desires to make an abnormally outsized and speedy profit,” Shah continued.
In 2021, the total transaction value of all crypto assets topped $15.8 trillion – up 567 per cent compared to the previous year according to research firm Chainalysis.
Criminals have developed a number of sophisticated techniques to encourage investors to part with their money. Rug Pulls are a common type of scam which involves a creator of a new digital token raising capital and then disappearing with investor funds.
Social media posts for bogus apps or websites and even romance scams which involve fraudsters targeting unsuspecting love interests on dating apps are also increasingly common.
“As long as there is active trading in unregulated crypto currencies then we can expect fraudsters to target the sector,” said Shah.
Crypto assets are not regulated by the UK’s financial watchdog creating considerable uncertainty for investors who are conned out of their money.
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