Cryptocurrency scam victims lose £10k on average, says Action Fraud

Action Fraud said it received 203 reports of cryptocurrency scams in June and July this year. The total value of losses suffered by victims of these scams exceeded £2.05 million, it said.

Civil fraud and asset recovery expert Jennifer Craven of Pinsent Masons, the law firm behind Out-Law.com, said that the figures highlight the risks of buying or investing in cryptocurrencies for any individual or organisation in an unregulated environment. She said fraudsters are taking advantage of the recent 'bubble' created around the digital currency world, where investors are attracted by the prospect of making a quick profit, and that they are adapting their methods to induce investors to handing over money and personal data.

However, according to Craven, there are steps that those defrauded in cryptocurrency scams may be able to take to recover their money. A speedy response is essential to maximise the chance of that happening, she said.

"In circumstances where the investor has no idea that he has been scammed, and much time passes between the investment being made and the fraud being identified, it becomes very difficult for the stolen money to be traced into the hands of the fraudster, who invariably has shut up shop and fled with the cash," Craven said. "In circumstances where the investor acts quickly to trace the funds which in appropriate circumstances can involve using the UK civil courts and recovery methods, there may be a better chance of recouping the cash and identifying the fraudster."

"Where an investor has purchased cryptocurrency, but the cryptocurrency itself is subsequently stolen, it is difficult to trace it, but not necessarily impossible. Cryptocurrencies are often decentralised, meaning that they are not issued by a central authority that controls access. They are also pseudonymous, meaning that the identity of the owner and identifying details such as payment account information are not tied to the cryptocurrency. However, if the cryptocurrency can be traced to the particular internet public key address, it may be possible to link it to a particular individual, depending on the circumstances," Craven said.

The Commercial Court in England and Wales has also shown itself to be "an adaptable and effective forum" in the fight against cyber fraud of this type, she said.

"The Commercial Court has shown that it is willing, for instance, to extend the application of traditional civil remedies which might assist in the tracing exercise such as injunctive relief in the form of freezing orders," Craven said. "Such relief might even be granted in circumstances where the victim cannot identify the fraudster, which is so common in this type of cyber fraud, so as to prevent further dealing in the cryptocurrency. This may enable the victim to obtain further remedies, in the form of disclosure orders which could require a third party to hand over information about the private key."