UK investors lost £36million in fraud last year relating to the crypto firm Binance before it partnered with Cristiano Ronaldo, fresh police figures have revealed.
The figure, shared exclusively with City A.M. this morning, was revealed following a Freedom of Information (FOI) request by InvestingReviews.co.uk, and comes as Binance faces a growing global crackdown from regulators.
Binance operates the world’s largest online exchange for cryptocurrencies, and is used by an estimated 28m users worldwide.
The platform matches buyers with sellers and offers wallets to users to store their tokens. In 2017, it began issuing its own currency BNB which can be traded both on the Binance exchange as well as other online platforms.
City of London Police say the £36m figure is based on offences reported to Action Fraud, the UK’s national reporting centre for cyber offences, and “captures all reports including coin and wallet”.
While there is no suggestion that Binance acted inappropriately in the thefts, it’s believed the exchange has unwittingly processed transactions stemming from hacks in the past.
In its defence, the company insists it is building “the most sophisticated cyber forensics team on the planet” and enjoys a collaborative approach with law enforcement globally.
Binance recently returned £260,000 to a US-based romance scam victim whose stolen monies were traced to the exchange, but the company says the decentralised nature of the cryptocurrency ecosystem makes it impossible for it to implement foolproof safeguards on other platforms where its coin is traded.
In June, Binance announced a partnership with Manchester United star Cristiano Ronaldo. The footballer has agreed to launch a series of NFTs on the Binance platform beginning later this year.
Law enforcement, however, remains concerned about the apparent absence of protections for investors.
Last year the City watchdog banned Binance from undertaking any regulated activity in the UK, insisting it was “not capable” of supervision by regulators and posed a “significant risk to consumers”.
Despite being blacklisted, the Financial Conduct Authority (FCA) doesn’t have the power to stop investors from using Binance.
According to the documents released in response to the FOI request, Binance-related theft accounted for 17% of the overall £204m of crypto fraud reported to police in 2021, which was almost double the previous year’s figure.
Binance’s Global Head of Intelligence and Investigations Tigran Gambaryan questioned why police had not provided figures for other crypto firms operating an exchange, and said the company would seek a breakdown on how the £36m figure related specifically to Binance’s coin and wallet.
Gambaryan added that Binance supported the Binance coin, but “didn’t control it”.
He added: “This is not typical of law enforcement to identify a specific company in this way.” Cristiano Ronaldo did not respond to a request for a comment on this story.
In total, police said there were 9,288 complaints of cryptocurrency crime across all platforms and coins with the average victim losing £21,620.
According to the figures, Bitcoin scams across all platforms totalled £110m, while frauds involving unspecified cryptocurrencies was £41m, followed by Ether (£11m), Dash (£1.8m) and Etherium (£1.4m).
Crypto fraud victims
Overall, two thirds of cryptocurrency fraud victims were male, while 1 in 5 were under 30 years old.
Crypto frauds were broadly categorised as “financial Investment” cons (62 per cent), boiler room scams (22 per cent), Ponzi schemes (9 per cent), and fraud recovery scams (6.5 per cent), where a victim is contacted by someone masquerading as a government worker or police officer offering to retrieve their money for a fee.
In collating the data, police said a series of keywords were searched against crime reports to identify instances where a cryptocurrency or crypto asset had been referred to.
News of the alleged crimewave comes during a difficult period for cryptocurrency investors. Total market capitalisation of cryptocurrencies has dropped from £3.2trillion to £1trillion so far this year, while Bitcoin is down 70 per cent since last year’s peak.
Meanwhile a string of cryptocurrency firms, including US-based giant Celsius, have filed for bankruptcy leaving investors nursing heavy losses and sparking panic in the markets.