Current trends in fraud: Crypto scams

The increase in the value of cryptoassets has undoubtedly contributed to the continued interest and adoption of this still relatively new asset class across organisations and individuals. The ease of purchasing, selling or transferring a cryptoasset has improved significantly over the last few years (and which has in part stemmed from the development of the regulatory environment). However, there is still a technical barrier to entry. This presents a practical problem; if your assets pass to your loved ones on your death, how do you ensure that they are able to actually access and benefit from any cryptoassets that you hold?

This quarterly civil fraud update provides a summary of reported decisions handed down in the courts of England and Wales in the period of January - March 2023.

The courts are set to address whether software developers of Bitcoin networks owe fiduciary duties to bitcoin owners following the Court of Appeal’s decision in Tulip Trading Limited v Van der Laan & Ors, where it allowed the claim to proceed. The case is poised to be a landmark for future crypto-disputes as it seeks to address several important points in this uncertain and developing area of law.

Amid increased focus on the regulation of cryptoassets in the UK, law enforcement agencies have carried out unprecedented raids targeting illegally-operated cryptocurrency ATMs.

The ‘metaverse’ is one of the most hyped, and simultaneously poorly defined, concepts of the ‘new age’ of the internet’s evolution. To a certain extent a result of the vision promoted by Mark Zuckerberg when announcing Facebook’s pivot and rebranding to become ‘Meta’, the term conjures up images of fantastical worlds populated by other-worldly avatars.

This quarterly civil fraud update provides a summary of reported decisions handed down in the courts of England and Wales in the period July - September 2022.

Connie Atkinson was published in the October 2022 edition of ThoughtLeaders4 HNW Divorce magazine discussing the rise of cryptoassets in financial remedies.

James Alleyne was recently asked to talk to an international audience in London about the UK’s position on regulating the crypto-space.

The FCA’s transformation to becoming an assertive, front footed regulator has been accelerated by three recent developments, all of which prioritise the protection of consumers.

The English High Court, in Mr Dollar Bill Limited v Persons Unknown and Others [2021] EWHC 2718 (Ch), has once again come to the rescue for victims of fraud – this time armed with a Norwich Pharmacal Order to be served outside the jurisdiction.

In March 2021 Twitter founder Jack Dorsey sold his very first Tweet as an NFT for $2.9 million. Around the same time the Land Registry ran a series of pilots to explore the possibility of using blockchain technology, such as NFTs, to provide some much needed modernisation and efficiency to the property buying process. 

On 10 January 2020, the Financial Conduct Authority (FCA) became the anti-money laundering (AML) and counter-terrorist financing (CTF) supervisor for UK cryptoasset firms. Two years in, how effectively is it performing its role as the gatekeeper of the new registration regime?

With the price of crypto assets generally making a good recovery from the Covid-19 related decline of 2019 contrasted with the very recent volatility following issues with the adoption of the cryptocurrency as legal tender in El Salvador, investors in cryptocurrencies might be considering realising some of their gains to try to help minimise any further instability.  

The Financial Conduct Authority (FCA), in its annual business plan published today, sets out its areas of focus for the year ahead.  It is, as ever, essential reading for all those in the regulated sector. 

For the fourth year the FCA has published research on the changing relationship between consumers and cryptoassets. In spite of the pandemic, the strong upward trend in public engagement and media coverage has continued, with the FCA estimating 2.3 million adults now hold cryptoassets.

A Director at the National Crime Agency recently voiced concern about crypto assets being used to fund property purchases in the UK. The NCA’s Nigel Leary was quoted by The Times as saying: “Anything purchased with crypto assets I’d be slightly sceptical about. I’d like to see why they’re being done in that way and what the requirement is for that anonymity, and why it needed to be done in a crypto transaction.”

The price of Bitcoin and other crypto assets is notoriously unstable. Whether caused by a cryptic crypto related tweet from a billionaire inventor, or a crypto crackdown being announced by regulators of the world’s second largest economy, the rise and fall of crypto assets continues to prove that crypto can be risky business.

Despite the Covid-19 pandemic, 2020 was an incredible year for crypto assets.  Largely driven by the increased demand from institutional investors, Bitcoin shattered its previous price records. However, its pseudonymous nature and the ease with which it allows users to instantly send funds anywhere in the world makes crypto assets appealing to criminals.

Hot on the heels of its consultation on bringing cryptoasset inside the scope of the financial promotions regime at the tail end of last year, the FCA has launched a further consultation on the UK’s regulatory approach to cryptoassets and stablecoins. 

As of 10 January 2021, all cryptoasset firms are required to be registered with the Financial Conduct Authority (FCA) under the Money Laundering Regulations.