Tackling Cryptoasset Fraud in the UK

Fraud is the most common form of crime in the UK, according to National Crime Agency figures for 2022-2023. Analysis by TRM shows it is also the leading type of crypto crime, accounting for nearly a third of all illicit cryptoasset volume globally. TRM has found that at least USD 10 billion was lost to frauds and scams in 2023. 

This week, the UK is hosting G7 countries, South Korea and Singapore for the Global Fraud Summit to assess how, as a global community, we can better tackle all forms of fraud. As the summit gets under way, TRM looks at the UK’s cryptoasset fraud landscape. 

Snapshot of Cryptoasset Fraud in the UK 

The average loss to a UK victim involving a cryptoasset fraud was just under GBP 15,000 according to data collected since October 2022 on TRM’s Chainabuse platform, the world’s largest cryptoasset fraud and scams victim reporting site. The highest loss reported by a UK victim in this period was over GBP 550,000.

Victims reported a variety of fraud types on Chainabuse. The largest proportion, at around 40%, was sextortion. These crimes involve a scammer sending communication to a victim claiming to have installed malware on the recipient’s device that recorded them viewing pornography. Scammers threaten to broadcast the incriminating video unless a ransom is paid. From TRM’s analysis it appears that sextortion frauds reported to Chainabuse almost exclusively make use of Bitcoin as the requested ransom currency. 

Return frauds, also known as investment frauds, accounted for 16%, followed by phishing (9%). Unlike sextortion scams, phishing frauds overwhelmingly occur on the Ethereum blockchain (over 90%) according to Chainabuse reports. To learn more about these fraud types, TRM catalogs the broad range of frauds involving cryptoassets in our Illicit Crypto Ecosystem report, which can be found here. 

The attack vector for these frauds can vary dramatically, with victims being approached over social media, via email or and text message. Fraudsters will often use narratives to do with the metaverse, charities or trading gains to tempt victims into their schemes. They will also use “social proofs” such as fake reviews or influencer endorsements to give victims a sense of security in their investments. 

Links to Transnational Organized Crime

Another significant category of frauds that leverage cryptoassets are romance frauds, commonly referred to as “Pig Butchering'' scams. These frauds rely on psychological manipulation to entice victims with promises of large returns on their investments. Because scams in general are significantly under-reported by victims, it is difficult to quantify the scale of pig butchering globally. However, many schemes that appear to be run by individuals are in fact linked to others. What’s more, over half of pig butchering schemes sampled by TRM Labs exhibited apparent links to large transnational organized crime groups. The graph below shows multiple interconnected scams operated by the illicit actors either in succession or simultaneously: 

Whilst fraudsters around the globe use a multitude of techniques, once funds are on the move they are twice as likely to go through unlicensed service providers as licensed ones, according to TRM research. In 2023, funds linked to investment fraud made up 0.04% of the incoming volume to licensed VASPs; for unlicensed VASPs, the figure jumps to 0.11% of incoming volume.

This highlights the importance of licensing frameworks for fighting crypto frauds. 

Efforts to combat cryptoasset frauds  

Regulatory frameworks are one way of tackling crypto crime. In October 2023, the UK introduced its Financial Promotions regime for cryptoassets, which bans any business, fraudulent or otherwise from advertising to UK consumers without proper authorisation. Firms must either be registered with the FCA or work with an authorized third party to have adverts approved. In the initial reporting on the regime’s effectiveness, the FCA reported that it published 2,285 alerts to help prevent consumers from losing their money to scams, up from 1,800 in 2022. The UK has also introduced new legislation in the Economic Crime and Corporate Transparency Act which makes it easier to seize criminal cryptoassets but also introduces a failure to prevent fraud offenses for corporations.

On top of legislation and the powers available to law enforcement, increasing public awareness of frauds and how to report fraud is crucial. In 2024, the UK government launched the “Stop, think fraud” campaign which aims to create a break in the sense of urgency fraudsters try to generate to unnerve victims. London’s Metropolitan Police have also recently published a “Little Book on Cryptocrime” which aims to increase awareness of the tell-tale signs of crypto frauds. 

Taken together, regulatory and public awareness campaigns appear to be having an impact. TRM research found a 16% reduction in cryptoasset frauds around the world from 2022 to 2023, while the FCA, the UK’s financial regulator, recently revealed that the rate of growth of investment fraud in fiat and crypto slowed “significantly” in 2023. The FCA’s data showed that in 2023, the number of victims grew by 4.3%, down from 28% in 2022. 

What’s next? 

To continue the positive progress made to date on fraud it is essential that public and private sector actors continue to: 

• Raise awareness of what crypto fraud looks like and how to prevent falling victim to it. TRM has made a number of resources available for consumers in the Chainabuse Safety Support Center 
• Streamline fraud reporting and support. The more quickly a victim reports a fraud, the more likely law enforcement is to freeze at least some of the funds. some text
  • Private sector resources focused on crypto fraud, like Chainabuse, are one part of the puzzle but public sector fraud reporting tools that can integrate reports from across the wider fraud ecosystem are also key
• Cross-border crime is fought by cross-border law enforcement activity some text
  • With all frauds, including ones that make use of cryptoassets, victims and perpetrators are rarely in the same country. Law enforcement agencies must continue to develop ways of successfully working cross border to freeze funds and hopefully increase the volume of assets returned to victims. This recent seizure made by a U.S. community police force is an example of the successes we are seeing from law enforcement agencies around the world.
  • Agencies such as Europol have also shown that significant success can be achieved with international collaboration, in this recent 195 million euro VAT fraud disruptions occurred across 17 countries, leading to the successful seizure of criminal cryptoassets. 

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