Crypto fraudsters abuse ‘soft’ UK company laws to scam victims: report

According to an independent analysis, the UK is host to at least 168 companies accused of running fake crypto or foreign exchange (forex) scams.

A joint investigation by media companies the Bureau of Investigative Journalism and the Observer published on January 29 found that organized crime groups are using the UK as their base because of its “soft regulation”.

The actual number of UK-based crypto or forex companies involved in scams is likely far higher than the 168 as the number was calculated by reviewing a list of suspected fake companies and comparing them to reports of fraudulent activity on various websites.

About half of the companies found were linked to so-called “pig slaughter scams”.

Pig slaughter scams are an insidious scheme where the scammer builds trust with the victim — often involving romance — before convincing them to deposit money or crypto into a trading platform or virtual wallet that the scammer controls.

The scammer then proceeds to “fat” the victim and build further trust before convincing them to transfer a much larger amount, only to then abscond with the funds.

According to the report, victims were often approached on social media or through dating websites such as Tinder.

In addition, many victims interviewed in the report said the companies seemed more legitimate because they were based in the UK, saying they would not have fallen for the scam if the companies were based elsewhere.

Registering a business in the UK costs just £12 ($14.85) and requires no form of identification, making it easy for fake businesses to register there and gain “fake credibility”.

However, companies are required to provide a UK office address for registration, which has led to some residential addresses being bombarded with letters aimed at companies claiming to have an office there.

The letters he claimed to have been received by a UK resident were intended for fictitious companies registered at their address. Source: Observer

“What is happening in the UK is unconscionable,” said financial crime investigator Graham Barrow. “We have known for at least 20 years that UK companies are being used in these scams and we are probably the world’s biggest provider of scam companies.”

Related: The stablecoin from the UK is being integrated into 18,000 ATMs across the country

The UK government is trying to crack down on crypto companies in the region, with the UK Financial Conduct Authority requiring all companies carrying out crypto asset activities to register with it from 10 January 2020.

However, the regulator has been very strict with its approvals, with many crypto-related companies continuing to operate as unregistered companies as it tries to strike a balance between providing a safe environment for investors and supporting innovation in the industry.