US-based crypto exchange Kraken has announced plans to expand its products with intention to expand globally too.
According to a recent study, the United Kingdom is home to almost 170 firms that are linked to or suspected of running fraudulent crypto or foreign exchange scams.
According to an investigation by the Bureau of Investigative Journalism and the Observer, organised crime groups are taking advantage of the country’s lack of regulation to set up base there. According to the research, the number of companies that are involved in scams is likely sitting much higher than 168. Many are alleged to have their founders or developers based abroad, such as in China, but are using the United Kingdom to operate from owing to regulation.
Pig-butchering crypto scam
The main scheme type is known as a “pig-butchering scam”. This involves building trust with a user to slowly convincing them to deposit money or invest in a trading platform which is controlled by the victim. The scammer will start by requesting a small amount of Bitcoin ($BTC) and other crypto and then will “fatten” the victim by persuading them to deposit larger and larger amounts. These are often linked to romance, with personal trust as a main factor in the con. Victims of the scams have been frequently targeted through social media or dating websites, such as Tinder. Many of them stated that the companies involved in the scam appeared to be genuine because they were based in the UK.
It’s a simple process to register a company in the UK, and can be done with no formal ID required and £12 to incorporate the company. This has made it easy for fraudulent firms to establish a company and build a reputation as a result of the lack of regulation.
Financial crime investigator Graham Barrow has called the situation in the UK “unconscionable,” noting that the UK has been the world’s largest provider of scam companies for at least 20 years. The UK government has been trying to tighten regulations on crypto companies in the region, with the Financial Conduct Authority requiring all businesses involved in crypto activities to register with it since January 10, 2020. However, the regulator has been strict with its approvals, balancing the need to protect investors and support industry innovation.