Cryptocurrency-related fraud in the United Kingdom has remarkably increased over the past year. According to a recent FT report citing data obtained from the UK police unit Action Fraud, bad actors cashed in over £226 million ($272 million) from unsuspecting investors.
The financial losses covering the period between October 2021 to September 2022 represent a 32% increase from the previous year. It also comes when the cryptocurrency market faces a severe crisis. The global crypto market cap has slumped by more than 80% since the start of the year, with the leading cryptocurrency BTC, trading at £13,000 ($16,000) or 76% of its all-time high.
The rapid market decline directly results from unfavourable macroeconomics, the collapse of multi-billion dollar projects like Terra (LUNA), and the more recent fallout of the third-largest crypto exchange, FTX. However, these conditions have not deterred fraudsters from targeting gullible investors.
Per the UK Action Fraud, reported losses in May, the same month as the Terra (LUNA) collapse, totalled £33 million ($39.7 million). The total reported cases during the period under consideration totalled 10,030, a 16% increase over the past year.
The report also uncovered the most popular fraudulent schemes, with rug pull scams being the most popular. Perpetrators typically raise funds from investors for a cryptocurrency project and disappear afterwards, most times without leaving a trail.
Another successful approach used by fraudsters is celebrity endorsements. Scammers post fake social media videos of celebrities like Elon Musk and Bill Gates advertising fraudulent investment opportunities. Criminals also use pump-and-dump schemes, artificially increasing the price of an asset before selling their holdings at the expense of inexperienced investors.
Investors exercise caution by deeply investigating crypto projects because of the prevalence of fraudsters in the industry. Avoiding the tendency to chase quick returns on investment also reduces the chances of an investor falling victim to such schemes.
Meanwhile, UK authorities are on the cusp of introducing new regulations to protect crypto investors. A new Financial Services and Markets Bill introduced in October seeks to control cryptocurrency promotions and related activities.
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