In one year, the value of financial losses due to cryptocurrency fraud increased by 32%, according to data from the UK Police Action Fraud unit seen by the Financial Times.
From October 2021 to September 2022, losses from cryptocurrency fraudsters' actions amounted to £226 million, which is significantly more than in the same period a year earlier. The number of reported offences alone exceeded 10,000, increasing by 16%. It means that an average investor could lose more than £22,000.
According to data from UK Finance, a local financial services trade body, cryptocurrency fraudster activity increased significantly during the Covid-19 pandemic when a sizable portion of daily activity shifted to the Internet. Online fraud increased by 8% to £1.3 billion last year, and cryptocurrencies are responsible for their growing share.
The deepening recession and economic downturn are causing people in financial distress to seek alternative methods of raising money. Unfortunately, their economic desperation is often exploited by fraudsters.
"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'," Hinesh Shah, Pinsent Masons' forensic account, told Financial Times.
FCA Also Sees the Rising Problem
Independent data collected by the Financial Conduct Authority (FCA ), the United Kingdom's financial market watchdog, confirms the abovementioned statistics. The institution opened more than 400 regulatory cases of potential cryptocurrency crimes between April 1, 2021 and March 31, 2022.
The FCA saw a significant increase in information about potential cryptocurrency crimes, which is up 59% from the previous period. Unfortunately, 79% of consumers contacting the FCA did so after their initial investment.
According to the regulator's fourth Consumer Investments Data Review published last month, cryptos were among the most frequently reported products to ScamSmart.
