Cryptocurrency Editor's Choice Fintech

Celeb Twitter Bitcoin Scam Highlights the Need for Civil Investigations to Trace Crypto Fraud

Recently, the Twitter accounts of high-profile figures such as former President Barack Obama and Amazon CEO Jeff Bezos were used in carrying out a significant Bitcoin scam, highlighting that even the most powerful aren’t protected from sophisticated cryptocurrency fraud. While $280,000 was lost, prosecutors have warned that these types of crimes are hard to prosecute due to their quick and hidden nature. As cryptocurrency and foreign exchange scams have more than tripled in the last year alone, some criminal investigators are struggling to keep pace. 

Jason Woodland

Jason Woodland is Partner at Peters & Peters Solicitors LLP, together with Amalia Neenan, Legal Researcher, he believes that we must move away from criminal prosecutions when tackling crypto fraud, harnessing the speed of civil investigations to trace lost crypto assets.

Throughout the confusion of the pandemic, one thing has become abundantly clear: our society’s reliance on technology. When we decamped into our kitchens and home offices, we moved ever more online. Whether it be hosting business meetings or enjoying a virtual Sunday lunch, technology made it possible. 

But, with all of the opportunities for development that emerging technologies provide, there has always been a shady underbelly that nefarious users have sought to exploit. More disheartening still is the fact that the COVID-19 crisis has become the latest playground for fraudsters. Since the UK entered lockdown, fraud has increased by 33%. Online frauds reported to Action Fraud alone amount to £16.6 million, with much more going un-recorded. Mass panic and technological innovation have provided perfect conditions for a host of COVID-related scams – the latest being a spate of fraudulent attacks centred on cryptocurrencies. But, as crypto-fraudsters become increasingly sophisticated, how can civil law tools provide a vital lifeline to victims seeking to reclaim their assets?

Amalia Neenan

Old tools, new situations

In July, readers will likely have read about the latest crypto-attack, where Twitter accounts of several high-profile individuals were infiltrated by hackers in a spear-phishing attack on Twitter employees. Once in, hackers unleashed a ‘double-your-bitcoin’ scam, claiming that these individuals were ‘giving back to the community’ in aid of the COVID-19 crisis and that all bitcoins sent in would be doubled and returned by the individual. 

In light of scandals like this, cryptocurrencies have been marred by their perceived use as the currency of criminals. Fraudsters prey on victims’ lack of understanding of the product and scams tend to be shrouded in a level of technological mysticism, where bad actors try to dupe individuals through the use of jargon or specialised technological knowledge. Compound this with the lack of a unified regulatory or legislative framework, the unique characteristics inherent to their design – chiefly anonymity and decentralisation, and the conservative approach of the law – and you have the perfect conditions for fraudsters. 

A civil arsenal 

With the world of crypto offering fertile ground for fraud, what can victims do? Ultimately, when crypto-assets are stolen, the victim will be presented with a choice: whether to make a complaint to the authorities (pursing a criminal route) and/or seeking a civil claim. The best option will depend on a myriad of factors; but, as fraudsters’ sophistication continues to overtake authorities, it is likely that civil remedies will increasingly become a focus. 

A civil route offers the victim complete control of the investigation, utilising as much or as little resources as desired and eradicating the budgetary restrictions that a police investigation may entail. Additionally, should the victim be more interested in the recovery of assets than the perpetrator’s jail time, a civil claim is preferable. Pursuing a criminal prosecution is often a slow process, offering speedy crypto-criminals and stolen funds time to get away. It is a very different timeline to that of civil proceedings, where courts have extensive powers to grant interim relief, including orders to locate and freeze assets, as well as obtain disclosure from either the fraudster or third parties. Indeed, it has become customary to freeze assets of perpetrators prior to issuing a civil claim for fraud, with the English courts readily available to hear applications at a moment’s notice. 

Getting to the finish line also tends to be easier in civil claims, as the standard of proof is the “balance of probabilities”, whilst for most criminal offences it is “beyond reasonable doubt”. This difference can be particularly important in crypto-fraud, where pieces of the puzzle are invariably hard to acquire. 

Steps forward

Unfortunately, the recovery of stolen assets is exponentially more complicated in the crypto-sphere, as all transactions are anonymised through cryptographic code and there is no centralised third-party intermediary used to control or legitimise transactions, making them virtually untraceable. 

But there are signs that English law is starting to catch-up with technology. The Law Tech Delivery Panel’s ‘Legal Statement on Cryptoassets and Smart Contracts’ has defined cryptocurrencies as “property” under English law, with this definition backed by a number of English and foreign Court decisions. What’s more, crypto-exchanges are in fact classed as Obliged Entities, requiring them to carry out Know Your Customer checks under the 5th Anti-Money Laundering Directive. This means that there should be relevant information held by third parties who will comply with Court orders to reveal information essential to tracing assets. 

These are important developments, as they enable the English courts to deploy their full range of powers in relation to stolen cryptocurrency. For example, freezing orders can be sought against either the wallet or the public key linked to any suspicious transaction prohibiting the movement of the funds. Potentially, orders requiring the disclosure or changing of private keys or passwords could be obtained, thus preventing the movement of crypto-currencies pending the resolution of any dispute about ownership. It may then be possible to obtain relevant details (such as names, addresses and fiat-bank account information) from crypto-exchanges, which act as quasi-intermediaries. 

Can we keep up? 

The technological complexity of these crimes demands an equally technologically sophisticated legal response. Until now, the march of technology has vastly outpaced the law. However, these developments, alongside the arsenal of civil tools available to victims, prove that the English law can be expertly employed to meet this new challenge head-on. 


  • Gina is a fintech journalist (BA, MA) who works across broadcast and print. She has written for most national newspapers and started her career in BBC local radio.

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