Cryptocurrency fraud reports have more than doubled in the year to June 30, in what was the fourth year of 100 per cent plus increases, according to new data.
The UK saw 8,614 reports of cryptocurrency fraud to Action Fraud, the reporting centre for fraud, in the past year, up from 3,983 in the year before, according to Pinsent Masons.
This marked the fourth consecutive year that cryptocurrency fraud reports have increased by more than 100 per cent year on year.
Pinsent Masons said the surge in popularity of cryptocurrencies amongst retail investors was attracting increasing numbers of fraudsters looking to take advantage of inexperienced investors.
What's more, within the world of cryptocurrencies, promises of ‘get rich quick’ schemes are met with less scepticism, it warned.
There is a concern that vulnerable customers make up a disproportionately large percentage of the victims of cryptocurrency fraud.
Hinesh Shah, financial crime investigator at Pinsent Masons, said the rise of cryptocurrency fraud has shown no sign of peaking yet and he warned it could spark a host of legal action from unhappy investors.
"The police are now swamped with reports and cannot place adequate resources on these investigations.
“However, the UK civil courts can be used to track down crypto fraudsters and get stolen funds reclaimed.”
He added: “There is a misconception that cryptocurrencies cannot be traced but the point of blockchain technology is transparency: transactions on the blockchain are traceable.
“Legitimate crypto institutions that want to stay on the right side of regulators and enforcement agencies will cooperate with a UK court order and freeze the stolen assets.”
Jennifer Craven, civil fraud and asset recovery specialist at Pinsent Masons, said group legal action may be the way to go for investors who lost small amounts.
She said: “The perception that there is nothing a victim can do to pursue crypto fraudsters is far from accurate.
"However, pursuing a civil claim is not cheap and if you have been defrauded of one or two thousand pounds the economics wouldn’t stack up.
"That’s why we are hopeful that more class actions will get off the ground allowing a group of victims with limited resources to club together to pursue these cases.”
Craven added: “With the FCA increasingly focused on the protection of vulnerable customers we anticipate more robust regulatory action to help stem the rise in this type of fraud."
The FCA has been urging the government repeatedly to include online paid for advertising in its Online Safety Bill but so far the government has refused, saying there would be a separate consultation on online advertising regulation later in the year.
Earlier this month the FCA’s executive director of enforcement and market oversight, Mark Steward, said social media firms should be forced to stop financial adverts by implementing “systems and controls”.