Action Fraud, the UK's fraud and cybercrime reporting centre, has revealed that cryptocurrency fraud in the UK has increased by 32% over the past year, with the amount of money lost rising to 226 million pounds (1.935 billion yuan), indicating a sharp increase in such fraudulent activity over the period.

As the recession in the UK worsens, businesses and investors may also look to cryptocurrencies as a way to get a quick return on their investment. In August, crypto Bridge Binance claimed that rising inflation rates are driving people to invest in cryptocurrencies, citing the example of many citizens in countries such as Argentina who have put their life savings into bitcoin.

"Whenever times get tough, fraudsters always try to prey on inexperienced investors by promising juicy returns," said Hinesh Shah, a forensic accountant at Pinsent Masons.

Businesses can fall victim to scams in which crypto investments in web3 technology, including metaverse technology, are encouraged, and then the scammers pull them without delivering the product.

In October, the platform lost $586 million to a hack in which the attackers used a sophisticated method to steal millions of dollars before Binance was able to detect any breaches. Binance has been banned from operating in the UK since 2021, and the Financial Conduct Authority (FCA) has warned against investing in crypto companies that are not authorised by the FCA, as this will not be covered by its financial compensation or Financial Ombudsman service if people are defrauded.

According to Daniel Seely, a financial services regulatory lawyer and crypto expert at Freeths, "the best way to tackle crypto fraud is to increase public/investor awareness of cryptocurrencies in general, and the types of fraud that are common."

"People need to know what the warning signs are and the types of things they should look out for (e.g. any red flags)." "In terms of what the FCA and regulators can do, unfortunately their powers are limited given that they do not formally regulate cryptocurrencies (other than for money laundering purposes), but they do regularly post warnings on their websites about companies they believe are operating illegal and being seen scams." Consumers can view daily 'warning lists', which may help people identify fraudsters."

Source: FX110