Responding to the Crypto Fraud Epidemic

‍

Foreword

Cryptocurrency and blockchain technologies have been in the spotlight of investor consciousness over the past few years, and their usage and applications continue to grow at a rapid rate. While they remain primarily a means of conducting financial transactions, blockchain technologies now allow for a wide and diverse range of applications, including smart contracts, the purchase of non-fungible tokens (NFTs) and supporting healthcare and logistics

Cryptocurrency usage at its height in 2021 resulted in a total transactional value of $15.8tn, a growth of 567% from the year before. Daily transaction volumes in November 2022 have now almost halved from their 2021 highs.

However, given the growth and value of cryptocurrencies, this has inevitably led to increasingly sophisticated and targeted attacks against individuals, companies and organisations. The anonymised nature of the blockchain, the lack of a bank or centralised authority, and the irreversible nature of the transactions often combine with a lack of awareness and understanding among retail investors and potential users to create a strong link between cryptocurrency and fraud.

Due to the anonymised nature of the blockchain, it is commonly felt that fraudsters can act with impunity and stolen funds are lost, to be written off and forgotten. However, as the blockchain is visible to all, experienced investigators using specialist analytical tools can work alongside experienced lawyers and attorneys in locating and recovering stolen funds, or pursuing other tangible assets held by the fraudsters.

In this white paper, we look at some of the patterns and trends around cryptocurrency-related fraud, and ways that stolen funds can be recovered – which can also reduce further offending, and present an opportunity to prevent or realise wider asset losses in the specie, crime & cyber insurance market.