Law firms analyzing the data from Action Fraud highlighted the scale of cybercrime and the significant impact of the collapse of crypto exchange FTX last year, which resulted in losses for retail investors.
Cryptocurrency scams are part of a broader “epidemic” of fraud, accounting for over 40% of all reported crimes in England and Wales in the previous year, as stated by the Office for National Statistics.
Law firm RPC revealed that losses from crypto fraud increased by 41% year-on-year, reaching £306 million in the 12 months leading to March 2023, compared to £216.5 million in the previous year.
“These numbers demonstrate both the impact of crypto fraud on UK investors and specifically the colossal effect of the FTX collapse on UK retail investors,” explained Dan Wyatt, partner at RPC.
In November 2022 alone, over a third of the crypto fraud losses, amounting to £115.7 million, occurred. This was the same month when FTX filed for bankruptcy. The Bahamian-based exchange had been valued at $32 billion less than a year prior.
The figures indicate the widespread nature of crypto crime, according to Jennifer Craven, a fraud expert at law firm Pinsent Masons. She noted that the data aligns with the significant increase in civil actions initiated by victims of crypto fraud who are determined to recover their losses through legal means.
Cryptocurrencies like Bitcoin remain largely unregulated in the UK. In February, the Treasury presented draft proposals for the regulation of crypto assets, including requirements for exchanges to safeguard customers’ funds in the event of insolvency.
The House of Commons’ Treasury select committee recently suggested that cryptocurrencies should be regulated similarly to the gambling sector, citing their lack of intrinsic value, high price volatility, and absence of discernible social benefits.
RPC also highlighted that the losses may reflect the collapse of crypto-related Ponzi schemes that were unable to sustain themselves as the value of the underlying cryptocurrencies plummeted.
Bitcoin, the oldest cryptocurrency, fell to as low as $15,700 on November 10, 2022, the day before FTX filed for bankruptcy. Currently valued at around $26,200 per bitcoin, it has declined over 60% from its peak of just over $69,000 in November 2021.
As part of the UK government’s national fraud strategy, released earlier this month to combat financial crime, a ban on cold calls regarding financial and investment products will be implemented. However, some companies argue that the strategy falls short and call for stricter regulations on online platforms, where many scams originate.
