Have you been the victim of cryptocurrency fraud?
Crypto fraud is on the rise. Crypto fraud can be difficult to spot before it's too late. For most investors, the technological environment is novel territory. The good news, though, is that it may be easier to trace the stolen crypto assets given the transparent nature of blockchain technology.
What to look out for before investing in crypto assets
There are red flags common to any financial transaction or investment to look out for before committing to a contract and acquiring crypto assets. Be wary, for example, of:-
- Cold calls.
- High-pressure salesmanship, i.e., the “hard sell”.
- Promises or guarantees of profits, especially in a short time.
- Insistence that you pay by wire or cryptocurrency.
- Poor communication skills and/or poorly written correspondence or websites.
- Lack of information about the investment company. For example, is there a record at Companies House (or the equivalent in a different jurisdiction)? Has the company identified its registered office address and/or place of business? Has it provided a website and other contact information, such as a telephone number and email address? Are any of these details odd-looking?
- A lack of history.
- Absence of written terms and conditions.
- Vague terms and conditions, including with respect to clauses about choice of law and jurisdiction in the event of a dispute.
This list is not exhaustive and unfortunately, even if none of these problem signs exist, you may still be at risk of fraud.
What to do if you think you have been the victim of crypto fraud
Instruct solicitors at the earliest opportunity to consider what steps you can take to attempt to recover your assets and/or obtain monetary compensation, including advising you at first instance whether the fraud has sufficient ties to England and Wales to pursue a claim here.
Prior to or upon issuing a claim in the High Court on your behalf, your solicitors are likely to recommend various investigations. This might include hiring a blockchain analyst or other cryptocurrency expert to trace your assets. They may also recommend that you apply to the court for a Norwich Pharmacal Order (NPO) and/or Bankers Trust Order to obtain disclosure of information and/or confidential documents from third parties such as the cryptocurrency exchange(s) and/or bank(s) in question.
Your solicitors may also advise you to apply urgently to court for a proprietary injunction and/or a freezing injunction order against the fraudsters (or even a worldwide freezing order against “persons unknown” if they have not yet been identified) in an effort to protect your assets and/or your ability to enforce a judgment down the line.
It must be noted that these steps are likely to be expensive, especially if the majority or all are required. As such, if the value of the assets in question is not very high, and/or the prospects of recovery are low, it may not be proportionate to pursue any or all of these steps. You will need to discuss this with your solicitors at the outset.
Additional or alternative options for redress include reporting the suspected fraud to the police and/or to Action Fraud, which is the UK’s national reporting centre for fraud and cybercrime. You may also be able to report the matter to a regulator, for example the Financial Conduct Authority - although unfortunately in many fraud cases, the fraudster is likely to be a bogus entity and therefore, not regulated.
Articles are intended as an introduction to the topic and do not constitute legal advice.