UK crypto fraud losses jump 40%

UK losses to crypto fraud increased more than 40 per cent over the past year, surpassing £300mn for the first time, according to Britain’s fraud reporting agency.

Law firms said the data, provided by Action Fraud, reflected the scale of cyber crime and the high-profile collapse of crypto exchange FTX last year that triggered a wave of losses among retail investors.

Cryptocurrency scams are part of a wider “epidemic” of fraud, which accounted for more than 40 per cent of all reported crimes in England and Wales last year, according to the Office for National Statistics.

Losses from crypto fraud increased 41 per cent year on year to £306mn in the 12 months to March 2023 compared with £216.5mn in the previous year, said law firm RPC, which collected the data from Action Fraud.

“These numbers show both the impact of crypto fraud on UK investors and more specifically the colossal impact that the collapse of FTX had on UK retail investors,” said Dan Wyatt, partner at RPC.

More than a third of crypto fraud losses for the year, £115.7mn, occurred in November 2022, the month FTX filed for bankruptcy. The Bahamas-based business had been valued at $32bn less than a year earlier.

Jennifer Craven, fraud expert at law firm Pinsent Masons, said the figures reflected how widespread crypto crime had become.

“[The figures] align with the sharp increase in English High Court actions commenced by victims of crypto fraud who are determined to recover their losses by civil remedial means,” she added.

Cryptocurrencies such as bitcoin are largely unregulated in the UK. In February, the Treasury set out draft proposals for the regulation of crypto assets, including new requirements on exchanges to ringfence customers’ money in the event of insolvency.

MPs on the House of Commons’ Treasury select committee said last week that cryptocurrencies should be regulated in a similar way to the gambling sector, given it had “no intrinsic value, huge price volatility and no discernible social good”.

RPC said the losses could also reflect the collapse of crypto-related Ponzi schemes that were unable to continue as the value of the cryptocurrencies they were based on cratered.

The value of bitcoin, the oldest cryptocurrency, fell as low as $15,700 on November 10, 2022, the day before FTX filed for bankruptcy, according to cryptocurrency site CoinGecko.

The currency is at present valued at $26,200 per bitcoin, down more than 60 per cent since its high of just over $69,000 in November 2021.

In the UK government’s national fraud strategy, a blueprint released earlier this month for how it will clamp down on financial crime, it pledged to ban cold calls on all financial and investment products.

However, many companies said the strategy did not go far enough and called for online platforms, where many scams originate, to face further tougher rules.