United Kingdom loses record GBP £306m to crypto scams in 2023

Cryptocurrency scams have increasingly become a significant concern as their popularity and usage continue to grow, according to recent findings and expert commentary.

A report from Action Fraud indicated that cryptocurrency scams led to UK victims losing a record GBP £306 million in 2023, a 41% increase compared to the previous year. Additionally, the City of London Police reported that by early 2024, up to 40% of all investment fraud reports were linked to cryptocurrency.

Megan Searle, a former fraud investigator and now a Product Owner at investigative tech firm Altia, has called on individuals to exercise caution when navigating the realm of cryptocurrency. "Fraud involving digital currencies is surging, with scammers employing diverse schemes to deceive victims," she stated.

She further explained that the tactics used by fraudsters are varied, including phishing attacks, false investment schemes, romance scams, and fraudulent crypto projects, commonly referred to as "rug pulls." "These include phishing attacks, fake investment opportunities, romance scams, and fraudulent crypto projects known as rug pulls," added the expert.

Megan noted that scammers often take advantage of people's vulnerabilities and lack of awareness, especially those who are looking to gain rapid financial returns from digital currencies. "People dive in, wanting fast profits, unaware of the risks posed by scammers lurking in every cyber corner," she said.

The global nature of these scams adds complexity to their identification and prevention. "Fraudsters frequently work outside UK jurisdiction," Megan highlighted, pointing out the challenges this poses for investigators. "This creates significant barriers for investigators, who often lack the authority to pursue suspects in other countries."

Common scams include scenarios where victims are deceived into sending cryptocurrency with false promises of receiving a greater return, or through the development of online relationships to gain trust and convince victims to transfer funds. Phishing attacks and schemes known as rug pulls, where developers abandon fraudulent crypto projects after gathering investment, as well as fake apps claiming to mine cryptocurrency without yielding returns, are prevalent scams that Megan warned against.

To help protect against these scams, recognising signs of fraudulent schemes is crucial. "Poorly written white papers are a flag immediately, as legitimate projects are detailed and well researched. Meanwhile, over-the-top promotional campaigns promising guaranteed returns often signal fraud," Megan advised, adding, "Get rich quick claims tend to be too good to be true."

The obstacles faced by investigators in tackling cryptocurrency fraud are heightened by blockchain technology's anonymity, which complicates the process of tracing stolen assets. UK enforcement bodies like the Financial Conduct Authority (FCA) and the National Crime Agency (NCA) are employing advanced blockchain analysis techniques to detect fraud and trace illegal transactions. Yet, international collaboration is challenging due to varying legal frameworks and regulations.

In cases of cryptocurrency scams, victims are encouraged to report occurrences to Action Fraud, the UK's central cybercrime reporting service, which provides resources aimed at mitigating further harm.

In offering guidance on safeguarding against cryptocurrency scams, Megan shared several tips. "Conduct thorough research before committing funds to any crypto project," she stressed. "Look for clear documentation and avoid schemes promising unrealistic returns."

She also highlighted the importance of verifying the credibility of platforms or exchanges and warned against sharing sensitive information like wallet private keys or security codes. According to her, despite the promising investment opportunities that cryptocurrencies present, approaching them with caution remains essential. "Staying informed and vigilant is the best defence against falling victim to fraudulent schemes," Megan concluded.

Altia, based in Nottingham, assists law enforcement, governmental, and private sector entities with intelligence and investigative software, serving clients worldwide.