My NFT has been stolen – what can I do if I have been victim of a crypto fraud?

On 16 April 2023, the Sunday Times ran a story entitled “I paid £2,000 for an NFT but scammers stole it”.

Thefts of digital assets such as Non-Fungible Tokens (“NFT”s) are becoming more common. If you have been the victim of NFT theft, what can you do?

A 24 August 2022 article by the Guardian reported how more than $100million worth of NFTs were stolen in the year to July. The article reports that criminals made off with an average of $300,000 per scam.

The key to a NFT theft is to trick the NFT holder to hand over any secret phrase of crypto wallet keys. Popular techniques involved in doing so include phishing attacks and deploying other viruses to try and obtain the pertinent information. These can vary in sophistication with the most advanced frauds using smart contracts to extract the pertinent information. Once the criminal has successfully obtained the information, the criminal can then steal the NFT.

What can I do?

The first thing to do if you feel that you have been the victim of an NFT theft is to contact the exchange from which you bought the NFT.

More generally speaking, depending on the circumstances, there are various avenues to explore when it comes to pursuing a potential crypto fraud. These avenues include the matter being investigated and pursued through law enforcement, pursuing the matter by way of a private prosecution, or pursuing the matter by way of civil proceedings. Any of these avenues can be complemented by implementing compliant cryptoasset tracing measures.

It is important to act quickly. Consider reporting the alleged fraud to ActionFraud, who provide a comprehensive reporting process and further detailed information on reporting.

There are additional steps you can take, which will potentially assist the investigation of any allegation of fraud. Reporting to law enforcement might not necessarily result in them investigating the alleged fraud, as agencies will apply various considerations before deciding whether to take the matter further. It is therefore important to consider steps you can also take yourself to assist with any subsequent investigation.

In this regard one of the options is to consider additional assistance through instructing a specialist private firm to investigate. These firms should conduct a compliance investigation, which can be used to assist further action through law enforcement, or alternatively in civil proceedings or a criminal private prosecution, if appropriate.

In addition, specialist firms bring the benefits of being able to utilise specialist tools to track fund flows and gather evidence in a format that should also be admissible in any subsequent proceedings. In theory the blockchain (where all crypto transactions are recorded) is a transparent record; therefore, it should technically be possible to try and trace all transactions and thus evidence the trails of any purported fraudulent activity.

Finally, it is worth ensuring that any investigation is assisted by expert legal advice. Gherson Solicitors bring combined expertise from a criminal, civil and regulatory perspective, underpinned by a firm understanding of cryptoassets and blockchain technology.

Increased reports of crypto fraud and scams – More from Gherson

The team have previously written a blog entitled what to do if you think that you have been victim to a crypto fraud or scam. This followed an earlier blog entitled what can you do to try and help avoid a crypto fraud of scam.

Reports of crypto frauds and scams remain on the increase. A recent article by Cyber reports how around £1 million-worth of cryptocurrency scams are being reported by Santander UK customers each month. This article quoted Thomas Cattee, Solicitor in Gherson’s criminal litigation, investigations and regulatory department.

Criminal investigations and litigation

Gherson’s solicitors criminal litigation, regulatory and investigatory team combine an expert knowledge of criminal and regulatory law underpinned with a firm understanding of digital assets and blockchain technology. As such, the team is able to provide expert strategic advice to anyone wanting to investigate and pursue a potential theft of crypto assets.

The team is also able to provide advice to anyone facing investigation in relation to any allegation of criminality involving cryptoassets.

Regulation and compliance

In these constantly changing times, firms that deal with cryptoassets will need to carefully consider all their systems and controls to ensure that they are able to comply with all relevant AML and sanctions regulations. Gherson’s white-collar crime and regulatory team are able to provide advice and assistance with AML and sanctions compliance, including in situations involving cryptoassets. 

Additionally, the team has recently started a series on the regulation of crypto with the aim of advising those who work in the compliance of this sector. Furthermore, for those who would like advice on relevant issues, including those who have had issues with the FCA registration process, our specialist regulatory and compliance team can guide individuals and companies through the process.

How Gherson can assist

If you have any questions arising from this blog, please do not hesitate to contact us for advice, send us an e-mail, or, alternatively, follow us on Twitter, Facebook, or LinkedIn to stay-up-to-date.

The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice. Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position. Gherson accepts no responsibility for loss which may arise from accessing or reliance on information contained in this blog. For formal advice on the current law please do not hesitate to contact Gherson. Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Gherson.

©Gherson 2022

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