The crypto industry is still reeling under the aftermath of the collapse of crypto exchange FTX.
But outside of FTX, cryptocurrency theft is rampant, especially in the UK, where it increased by a third in one year. Thieves stole hundreds of millions of pounds from victims, according to police data cited by the Financial Times.
From October 2021 to September 2022, UK police unit Action Fraud received reports of £226 million ($273 million) in cryptocurrency-related financial losses. That’s a 32% rise over the same time in the previous year. With 10,030 reported incidents, a 16% surge has been reported.
The findings are a part of a larger “epidemic” of fraud, which the trade group for financial services, UK Finance, claimed grew as people’s financial habits shifted online.
Fraud in general increased 8% yearly to £1.3 billion ($1.56 billion) in 2021.
There were £33 million ($39.6 million) in reported losses in May, the month in which algorithmic stablecoin Terra LUNA/USD collapsed, having an impact on several other cryptocurrencies and businesses linked to it.
Rug Pull Scams
Since the value of cryptocurrencies fell, a growing number of victims have fallen prey to “rug pull” scams, according to law firm Pinsent Masons.
These frauds include cryptocurrency developers quitting a project and escaping with investor money.
The developers of a token that offered access to an online game inspired by the Netflix series Squid Game stole an estimated £2.5 million ($3 million) from retail investors last November, according to a report by the BBC.
Hinesh Shah, a forensic accountant at Pinsent Masons, said: “Whenever times are tough, fraudsters always seek to prey on less experienced investors by promising huge returns.”
“Given the huge sums which some crypto investors made during the boom, scams involving cryptocurrencies can be especially potent for smaller investors who may be desperate to make a ‘quick buck’,” Shah added.
Fake endorsements from famous people are another frequent scam.
According to the Federal Trade Commission, scammers posing as Tesla TSLA CEO Elon Musk stole millions of dollars from US consumers in cryptocurrency thefts last year.
UK authorities have warned that similar scams are now taking place in their country.
People are also falling for “pump-and-dump” schemes, in which thieves fudge cryptocurrency prices before selling them to retail investors just before the market drops.
Consumer investment in high-risk asset classes has been a source of concern for the Financial Conduct Authority on numerous occasions.
The regulatory body issued guidelines for businesses that promote these goods in August and prohibited incentives like “refer a friend” bonuses.