Investment Firm Boss Loses £300k to Convincing Cryptocurrency Scam

Matthew was introduced to a crypto trading app by a friend. He was told that the app’s strategy was to “make money from buying and selling cryptocurrencies across different exchanges by spotting price differences” and that it used AI ‘bots’ to identify these discrepancies.

To use the app, Matthew had to set up a crypto wallet, an app or device that allows the owner to store, receive, send, and spend digital currencies, and he was told to link this to the crypto trading app. According to the trading app’s customer services, once the wallet was connected, this allowed the ‘bots’ to use Matthew’s balance to trade and make a profit.

Initially, he saw a return, and he could send the funds from the trading app back to his crypto wallet and then convert the digital currency back into pounds. Over time, Matthew was told that he needed a minimum balance in his account to keep trading, at first around $10,000, and then more and more until he needed to have a balance of $400,000 to withdraw any funds.

He was told the International Monetary Fund (IMF) had frozen his funds and that he needed to deposit a further 20% to release his money. At this point, he smelled a rat and contacted the IMF, who confirmed that it would not be involved in such activities.

Matthew stopped engaging with the app for several months before he was contacted by the trading app’s ‘customer service’ team, who said they could help him access his funds… for a 10% charge. He raised the necessary $40,000 before being told the unfreezing process was unsuccessful.

Matthew has since stopped engaging with the app again and has reported the scam to the FBI in the US and the National Crime Agency in the UK. He has also complained to the Financial Ombudsman Service (FOS), the government-backed service responsible for investigating and adjudicating disputes between financial services firms and their consumers.

Unfortunately for Matthew and other would-be investors, the rising popularity of cryptocurrency has led to a surge in cryptocurrency-related scams and illegal trading.

Fraudsters often use seemingly legitimate investment companies to lure in their victims, using a variety of techniques, including:

• Claiming to be associated with well-known celebrities or public figures (often this is not the case).
• Promising high returns with little or no risk.
• Running social media adverts with impressive claims about ‘quick wins’.

As the wider cryptocurrency industry remains largely unregulated for now, it is doubtful that your money would be protected by the Financial Conduct Authority (FCA) if you fell victim to a scam. However, if your money was transferred from a UK bank, you may be able to take action with the Financial Ombudsman Service (FOS), an independent body responsible for investigating disputes between financial institutions and consumers, and the TLW Solicitors cryptocurrency team are on hand to help.

In October 2023, the Financial Conduct Authority (FCA), the conduct regulator for UK financial firms and markets, announced that following a change in legislation, the promotion of crypto-assets in the UK was now within its remit (rather than the Advertising Standards Agency, ASA).

From 8th October, the FCA introduced strict new rules to ensure that crypto-asset products are marketed clearly and accurately and that any marketing should:

• Be clear, fair, and not misleading
• Be labelled with prominent risk warnings
• Not inappropriately incentivise people to invest, such as through ‘refer a friend’ schemes

According to the FCA website:

“Anyone who continues promoting crypto-assets to UK customers past the October deadline without complying with the rules may be committing a criminal offence punishable by an unlimited fine and/or up to 2 years imprisonment.”

Sarah Spruce, Head of the crypto scams team at TLW Solicitors, commented:

“We welcome these regulations by the FCA, and we hope that some rules around the promotion of crypto-assets will reduce the number of unsuspecting victims that get pulled in by the promise of impressive returns.

Matthew’s case is not unusual, and anyone who has been duped by a crypto scam should not feel embarrassed or ashamed. He was scammed even though he is an experienced investment professional, sharing his story will hopefully avoid others falling prey to the crypto-scammers.

If something like this happens to you or a loved one, you are not alone – get in touch with my team, we’ll discuss your case and explore your no-win, no-fee compensation options.”