UK watchdog and regulator The Advertising Standard Authority (ASA) has issued an enforcement notice to more than 50 UK companies this week that advertise cryptocurrencies, highlighting the growing problem of misleading advertisements that are enticing the general public to invest. The notice also applies to ads issued by social media influencers and affiliate marketing ads.

Crypto-related fraud has been prevalent in the news during the past twelve months and the largely unregulated space has been leveraged by fraudsters. Last week The Times reported that the Financial Conduct Authority (‘FCA’) had received 6,372 alerts about suspected crypto frauds in the last year. The FCA have already issued advice on how consumers should protect themselves from becoming victim to fraud and have strengthened rules regarding advertisements which offer investments in crypto-assets.

Often these frauds involve millions of pounds and scammers are increasingly using innovative advertising and new technologies to capture an audience and entice investors. It can therefore be hard to recognise a scam given the sophisticated nature of the websites and tactics used. Potential warning signs could be cold calls, promises of guaranteed returns on investment, or lack of clear terms and conditions.

If you have been a victim of fraud, or you are concerned about an advertisement relating to crypto-assets and whether it may be legitimate, there are certain steps you can take to try and protect yourself and your funds. The courts in England & Wales are particularly suited and well placed to assist in the recovery of funds if they appear to have been dissipated due to a crypto-related scam.

What are the options available and the potential remedies?

The FCA are constantly issuing warnings in relation to scammers and crypto advertisements. Individuals are therefore encouraged to check online when investing or looking to advertise crypto-related products on social media, to ascertain whether there have been any scam warnings issued in relation to the investment product, website or individuals associated with the same. However, if you have already made the choice to invest and are worried that funds have been dissipated, it may be that you need to obtain legal advice and try to trace the funds in order to recover them.

Fetch.ai and another v Persons Unknown Category A and others [2021] is one of the leading cases in this area, where an entity had fallen victim to fraud and sought to obtain a proprietary injunction, worldwide freezing order and disclosures orders against fraudsters and the cryptocurrency exchange where the funds were held.

Freezing orders and disclosure orders are usually obtained prior to the issuing of proceedings to limit the risk of further funds being dissipated. They must be obtained quickly which means that a prospective Claimant should instruct solicitors and investigate as soon as they think they have become a victim of fraudulent activity. The freezing order and disclosure orders act as an interim remedy and are granted by the High Court if a Judge is satisfied that the relevant conditions are met. The Claimant in Fetch.ai was successful in obtaining those orders so that proceedings could be issued and investigations into where the assets were held, and who by, could continue.

There is no guarantee that funds will be recovered, but blockchain infrastructure enables the tracking and tracing of cryptocurrencies. Recovery of the asset is therefore possible in certain circumstances.

Our expert team have experience in tracking and tracing digital assets. We work collaboratively with individuals who specialise in undertaking investigations and with leading Counsel who have successfully frozen assets when there has been a fraud. We also provide advice on advertising standards and the relevant legal framework. Please get in touch with our expert team quoting ‘Digital Disputes’.