Out-Law / Your Daily Need-To-Know

Cryptocurrency frauds on the rise as 'typosquatting' case reported

Out-Law News | 03 Jul 2019 | 2:49 pm | 2 min. read

More than 4,000 people worldwide may have had bitcoin stolen after the website of a well-known cryptocurrency company was 'spoofed' by fraudsters, police have said.

Six people were arrested last week as part of a cross-border investigation, led by the South West Regional Cyber Crime Unit (SW RCCU) in England and police in the Netherlands, into the £22 million theft. Police are now urging potential victims to get in touch.

"The investigation has grown from a single report of £17,000 worth of bitcoin stolen from a Wiltshire-based victim to a current estimate of more than 4,000 victims in at least 12 countries," said Detective Inspector Louise Boyce of the SW RCCU. "We expect that number to grow."

"This is the second story involving a large cryptocurrency fraud within the space of little more than a week, following the recent news of a Ponzi scheme that saw investors defrauded of $147 million in bitcoin," said civil fraud expert Jennifer Craven of Pinsent Masons, the law firm behind Out-Law.com. "This illustrates that frauds like these are on the rise."

"The significance of this incident is demonstrated by the police's robust response, coordinating efforts internationally and seizing devices and equipment to assist in further unravelling the 'typosquatting' network," she said.

Craven Jennifer

Jennifer Craven

Senior Associate

This is the second story involving a large cryptocurrency fraud within the space of little more than a week, following the recent news of a Ponzi scheme that saw investors defrauded of $147 million in bitcoin. This illustrates that frauds like these are on the rise.

The fraudsters in this case recreated the website of crypocurrency company Blockchain at a mis-typed version of the genuine company's web address. Individuals who arrived at the spoofed webpage entered their usernames and passwords as usual, which were then collected by the fraudsters allowing them to access the individuals' cryptocurrency 'wallets'.

Six individuals were arrested under simultaneous warrants at 7am on 25 June 2019. Three men based in the south west of England were arrested on suspicion of committing computer misuse and money laundering offences, while two men and one woman based in the Netherlands were arrested on suspicion of money laundering.

Police also seized "a large number of devices, equipment and valuable assets", which will now be examined by the SW RCCU.

Civil fraud expert Jennifer Craven said that cryptocurrency fraud was "by its very nature extremely complicated", and that the police did not always have the resources to pursue particularly complex cases.

"Given the anonymous nature of blockchain transactions, it is often only when money exits the system - for example, through exchanges - that victims can attempt to interrupt the fraudster's dissipation," she said.

"It is extremely important that victims consider their options: civil remedies, for example, may provide an alternative and more effective line of attack when tracing and recovering stolen monies. Some of the weapons available in civil proceedings include interim search and seize orders - similar to that used to seize laptops and other equipment in this case – freezing and disclosure orders," she said.

"It is essential, however, that any victim of fraud should act quickly, whatever they do, in order to maximise their chances of recovery. This is particularly important when responding to fast-paced cryptocurrency fraud," she said.