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The Asia-Pacific
Investigations
Review
2024
Emerging Trends in Crypto Fraud
The Asia-PaciIc
vnRestigations weRieG
2024
As well as daily news, GIR curates a range of comprehensive regional reviews. This volume
contains insight and thought leadership from 18 pre-eminent practitioners in the Asia-PaciCc
region. Inside you will Cnd articles on Australia, Shina, India and ;ingapore‘ on the main types
of cryptocurrency fraud and on how to ’doj a multi-qurisdictional internal investigation with all
of the challenges and contradictory reLuests from various agencies that those can entail.
:eneratedN boRem4er ,2 050S
The information contained in this report is indicative only. Baw business Research is not responsi(le
for any actions kor lac) thereof6 ta)en as a result of relying on or in any way using information contained
in this report and in no event shall (e lia(le for any damages resulting from reliance on or use of this
information. Sopyright 2005 - 202E Baw business Research
x–plore on :vw
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Emerging Trends in
Crypto Fraud
:Gynn koplins, Alanlsha Uagar and bataDiya UholuroRa
Perun Consultants Limited
Uummary
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Sryptocurrency O itjs the hottest thing in investing. Wr it was. ?ith the values of
cryptocurrencies plummeting, regulations tightening and high incidences of fraud, what can
investors do to protect themselves and what are the emerging trends to (e aware of•
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H ?hat are crypto assets•
H Uow (ig is the fraud pro(lem•
H Uow are investors defrauded•
H San investors protect themselves from fraud•
H ?hat were the maqor factors impacting crypto in 2022•
H Uow are countries dealing with crypto regulation•
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H Shinajs tough stance on crypto
H Glo(al regulatory developments
H Asia regulation
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?ith a steady stream of calamities resulting in a signiCcant downturn in asset prices, (urnt
investors are Deeing the cryptocurrency mar)et and it is clear that the industry is witnessing
a maqor slump. The term ’crypto winterj was Crst used in 2018 when the cryptocurrency
mar)et e–perienced a considera(le downturn, and it made an appearance again in 2022. The
past year has seen the price of popular digital assets such as bitcoin and xthereum slide
from record highs. The decline started with the meltdown of Terra$;z k$;T6, when its price
plunged to 10 cents and, along with its sister coin, Buna, lost almost $;F40 (illion of value in
a wee). before the crash, Buna was one of the top 10 largest cryptocurrencies on the mar)et.
This event was the catalyst for a severe decline in cryptocurrency prices, with most to)ens
losing E0 per cent of their mar)et valuation.
As the prices of various currencies witnessed a free fall, many front runners of the crypto
industry faced collapse. Srypto lender Selsius fro3e all account withdrawals, while ba(el
Vinance suspended withdrawals, citing unusual liLuidity pressures. The crypto hedge fund
Three Arrows Sapital kJAS6, which had invested heavily in $;T, defaulted on its loan
payments to the crypto lender Noyager and su(seLuently Cled for (an)ruptcy in Xuly 2022.
Noyager, along with other lending platforms such as Genesis Trading, incurred su(stantial
losses and signiCcant withdrawals leading it to eventually Cle for (an)ruptcy. An article (y
Soinzes)in Kovem(er 2022 stated that cryptocurrency e–change VT: Trading BtdkVT:6 had
signiCcantly overvalued its to)en, which accounted for a large portion of assets at Alameda
Research, its sister trading platform. After a failed attempt (y binance to rescue VT:, the
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e–change collapsed due to a surge in customer withdrawals, and VT: Cled for (an)ruptcy
within days.
Amid all this turmoil, in Xanuary 202J crypto mar)et capitalisation faced one of its worst
declines, falling 5E per cent from all-time highs in 2021. The result was an urgency among
regulators to tighten legislation and crac) down on corrupt and delinLuent digital currency
Crms. In Ve(ruary 202J, the ;ecurities and x–change Sommission k;xS6 launched a series of
enforcement actions against several operators, including Genesis and Gemini, over violating
investor protection laws. The ;xS also charged the founder of $;T and Buna of misleading
investors, and ;am ban)man-Vried, the founder of VT:, with additional criminal counts.
Srypto-related crime grew signiCcantly, with the volume of transactions related to criminal
activity sharply increasing. Illicit use of cryptocurrencies hit a record $;F20.1 (illionin 2022
as transactions involving companies targeted (y $; sanctions s)yroc)eted, ma)ing up 44
per cent of the yearjs illicit activity. To com(at this, the x$ has drawn up an e–tensive set of
new regulations for governing crypto, while other nations, such as the $; and the $M, are still
considering their options. In Asia, ;ingapore has esta(lished a stronger regulatory regime,
while Uong Mong attempts to tread a Cne line (etween protecting investors and offering
crypto groups a (usiness (ase.
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It seems not, as bitcoin re(ounded to over $;FJ0,000 in April 202J, currently settling around
$;F25,000.The surging price comes at a time of deep uncertainty. There are theories that the
price rise is a function of manipulation and propping up. Vears still continue to surround the
security of customer funds, and new crypto investors are pivoting to crypto e–change-traded
funds kxTVs6 as a safer entry point to digital assets.
xTVs retain the allure for those investors interested in cryptocurrencies (ut are new to
the asset class, aiming to give retail investors e–posure to changes in digital asset values
without the need to (uy or hold them directly. Another trend gra((ing the crypto industry
is the use of artiCcial intelligence kAI6 crypto to)ens. AI cryptocurrencies are to)ens that
power AI (loc)chain platforms such as The Graph and ;ingularityKxT.$sers pay with to)ens
to use the platforms and access the (eneCts of the integrated AI systems. IdentiCcation
technologies are also (eing e–plored, as is evident from the news that the SxW of Wpen
AI,;am Altman kwho is wor)ing to o(tain funding to create a secure glo(al cryptocurrency
called ?orldcoin6 is using eye(all-scanning technology to create a glo(al identiCcation
system. These developments suggest that crypto prospects still hold promise.
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Sryptographic assets are transfera(le digital representations, designed in a way that
prohi(its their copying or duplication. The technology that facilitates the transfer of
cryptographic assets is referred to as a ’(loc)chainj. bloc)chain is a digital, decentralised
ledger that )eeps a record of all transactions that ta)e place across a peer-to-peer
networ), ena(ling the encryption of information. Sryptographic assets and the underlying
technology provide opportunities to digitise a variety of ’real worldj o(qects. Sryptocurrencies
are the most commonly )nown su(set of crypto assets, with bitcoin (eing the most
prominent.Today we have different )inds of crypto asset, such as non-fungi(le to)ens
kKVTs6, synthetic assets, sta(lecoins and utility to)ens.
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The pace of development in the crypto industry has far outstripped regulatorsj a(ility to
respond. ?ith social media, online forums, trading applications and many crypto e–changes,
the potential is high for ine–perienced investors to get (urnt.
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These are some of the largest crypto scams in history, with more than 45,000 people
reportedly losing over $;F1 (illion in crypto to scams (etween the (eginning of 2021 and the
Crst Luarter of 2022, according to the Vederal Trade Sommission.1]3 Srypto scams are cons
in which scammers use some tried and some new tactics to steal cryptocurrency. Wne of
the most common scams is the investment scam, where(y fraudsters tric) their victims into
(uying cryptocurrency and sending it to them. Among other tactics, scammers impersonate
(usinesses, government agencies and love interests.103
Sriminals not only steal cryptocurrency, (ut they also use it to fund illicit activity. According
to the 202J Srypto Srime Report (y Shainalysis, issued in Ve(ruary 202J, illicit transaction
value rose for a second consecutive year in 2022, hitting a record $;F20.5 (illion.163 The
Report classiCed a wide range of activities as illicit, including transactions lin)ed to child
se–ual a(use materials, human tra7c)ing, ransomware, stolen funds, terrorism Cnancing,
scams, cy(ercriminal administrators, dar)net mar)ets and sanctions.1,3
Figure 1: Total Illicit Transaction Value 2017–2022
Source: The 2023 Crypto Crime Report by Chainalysis
Vraudsters are attracted to cryptocurrency transactions as they are pseudonymous and
generally perceived to (e di7cult to recover.
Typical cryptocurrency transaction methods includeY
H purchasing cryptocurrency through a cryptocurrency e–change‘
H receiving cryptocurrency as payment for legal or illegal transactions‘
H purchasing cryptocurrency for cash at a cryptocurrency AT/‘ and
H e–changing Cat currency for cryptocurrency through informal peer-to-peer
transactions.
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Sryptocurrency transfers cannot (e reversed, ma)ing them di7cult to trace, and with most of
the general pu(lic still unfamiliar with how crypto wor)s, cryptocurrencies present a num(er
of opportunities for fraudulent activity. ;ome of the most common types of crypto scams
are as follows.
Bitcoin Investment Schemes
;cammers contact investors claiming to (e seasoned investment managers. They are
(asically Pon3i schemes where(y managers claim to have made millions investing in
cryptocurrency and reLuest an upfront fee from potential investors.
Ransomware Or Blackmail And Extortion Scams
Ransomware starts with cy(ercriminals entering a system and encrypting data, then offering
a decryption )ey if the victim agrees to pay a ransom through cryptocurrency. x–tortions (y
ransomware attac)ers were down 40.J per cent to $;F4E5.8 million in 2022 from $;F95E.5
million in 2021.Uowever, the decline is not attri(uted to a drop in attac)s (ut rather on
account of victims refusing to pay ransomware attac)ers.
Figure 2: Total Ransomware Value 2017–2022
Source: The 2023 Crypto Crime Report by Chainalysis
Rug Pull Scams
Rug pull scams occur when investment scammers pump up a new proqect, KVT or coin to
get funding and promise massive returns to draw in hefty investments. Uowever, the game
changes as the funds from the proqect are drained a(ruptly. This type of scam is du((ed a
’rug pullj. A total of $;F25 (illion was lost in over 500 cases to cryptocurrency and KVT rug
pulls (etween the (eginning of 2011 and Xune 202J.1S3
Romance Scams
There has (een a recent increase in romance scams, in which the fraudster contacts the
victim online, (uilds their trust, then solicits personal information.
Fake Job Listings
;cammers will impersonate recruiters or qo( see)ers to get access to cryptocurrency
accounts. The ’qo(sj they are hiring for are often in the crypto Celd, including crypto mining
and recruiting other crypto investors. The qo( see)er will have to ma)e a payment in crypto
to get started.
Fake Cryptocurrency Exchanges
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Va)e and unregulated cryptocurrency e–changes act as a legitimate e–change to commit a
scam. ?hen a victim attempts to withdraw funds, o(stacles appear, such as unannounced
fees and ta–es to (e paid.
Flash Loan Attacks
Vlash loans are loans for short periods of time with the money-ma)ing trades carried
out in one transaction and then the Dash loan is repaid. These loans are popular in the
cryptocurrency mar)et as traders use funds to (uy to)ens on one platform with a lower price,
and then sell that asset immediately on a different platform to ma)e money. In Ve(ruary
202J, Platypus Vinance was victim to a Dash loan attac), resulting in a $;F8.E million loss.
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There are some ways to protect current or future investments.
H Trustworthy digital payment to)en service providersY investors should research their
cryptocurrency e–changes (efore they (uy crypto on them. Mey parameters for
choosing an e–change include that itY should provide relevant ris) disclosures to
retail consumers and follow proper segregation of customer assets‘ has processes
for complaints handling‘ has not (een hac)ed‘ and maintains high availa(ility and
recovera(ility of its critical systems.
H ;ecure crypto walletsYstoring crypto in a secure wallet should offer protection.
Wther security strategies include maintaining strong passwords, spreading
cryptocurrencies across different wallets, )eeping the seed phrase173 safe in an oZine
location, using two-factor authentication and, if technical s)ills allow, holding (oth hot
and cold wallets.183
H bloc)chainsY there is constant ris) of a E1 per cent attack, which means if a miner or a
group of them get more than E0 per cent of the networ)s, they can control the mining
hash rate.
H Mnow-your-customer kM#S6 reLuirementsY many countries now reLuire currency
e–changes to comply with M#S reLuirements or at least maintain records of
customersj identities. This allows fraud e–aminers and legal advisers to trac) the
money through court orders or su(poenas.
H Regional regulationY the a(sence of a uniCed glo(al regulatory framewor)is also
appearing to (e a threat. ?hile the x$ has enacted strict regulations to limit the
use of cryptocurrencies, some countries ksuch as xl ;alvador6 have fully em(raced
cryptocurrencies.
H Somprehensive white papersYinvestors should review every cryptocurrencyjs white
paper (efore investment. The white paper details the standard for every currency, the
cryptojs use cases and scala(ility and the creatorjs plans for the future.
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Terraform Ba(s endeavoured to utilise (loc)chain technology to construct a decentralised
Cnance networ). zo Mwon, a ;tanford $niversity graduate and a former engineer at Apple
and Google, launched $;T as an algorithmic sta(lecoin in 2018.
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$;T was supported (y Buna, which functioned as a parallel Doating rate cryptocurrency and
was responsi(le for maintaining a peg of $;F1. In /arch 2022, the value of Buna reached
a pea) of appro–imately $;F120 per to)en, propelled (y the potential of the $;TBuna
ecosystem amid a surge in the cryptocurrency mar)et.
In early /ay 2022, investors simultaneously withdrew their funds due to a loss of conCdence
in the to)ens. ?ithin a fortnight, the Terra sta(lecoin and Buna to)en continued their steep
decline, leading some media sources to classify it as a potential Pon3i scheme or rug pull
scam.
?hether a massive $;T sell-off was a reaction to rising interest rates or there was a
malicious attac) on the Terra (loc)chain, is a matter of contention. A research report (y
Kansen, a company that analyses (loc)chain data, investigated the $;T death spiraland
it dispels the notion that a solitary attac)er was responsi(le for the depeg. zo Mwon
ac)nowledged the potential of (loc)chain and decentralisation, motivating him to reorganise
the coin and launch a new version.
In ;eptem(er 2022, ;outh Morea issued an arrest warrant for Mwon, while Interpol reportedly
issued a ’red noticej for him. The ;xS (egan an investigation of Terraform Ba(s in Xune 2022
to determine whether the mar)eting of the $;T sta(lecoin violated federal regulations.
In ;eptem(er 2022, a $;FE5. million class action was Cled in ;ingapore against Mwon,
Terraform Ba(s, Ki)olaos Ale–andros Platias and the Buna Voundation Guard. In Ve(ruary
202J, $; Cnancial regulators charged zo Mwon and TerraVorm Ba(s with ’orchestrating a
multi-(illion-dollar crypto asset securities fraudj.
Ethereum Fusion
Vollowing $;Tjs demise, xthereum, the dominant (loc)chain for smart contracts, underwent
a signiCcant transformation (y switching from a proof-of-wor) to a proof-of-sta)e consensus
system. This change reduced energy consumption (y a remar)a(le .E per cent, addressing
concerns a(out (loc)chainjs environmental impact and improving networ) e7cacy..
Uowever, the shift to proof-of-sta)e also e–posed xthereum to potential regulatory
challenges, as proposed (ills in the $; Songress sought to impose strict regulations on
this type of (loc)chain. This severely impacted xthereumjs innovation potential as a leading
(loc)chain hu(.
3AC Collapse
JAS was launched in 2012 (y classmates ;u hu and Myle zavies, focusing on emerging
mar)et currency trading.At one stage, the fund had an estimated $;F10 (illion under its
management.
As of the end of 2020, JAS (ecame the largest holder of Grayscale bitcoin Trust kGbTS6
shares, with a position then worth $;F1 (illion,as the hedge fund could (uy shares at a
discount in e–change for bitcoin.;hares were sold to ordinary traders at a premium price.
Uowever, with the advent of xTVs on bitcoin in Sanada, GbTS lost signiCcant value.
JAS had invested in a wide range of instruments and proqects, so its success was directly
dependent on the growth of the crypto mar)et. In addition to investor funds, other loans were
also applied, which were invested in Buna and other less liLuid coins.
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As a result of these e–tremely unsuccessful transactions and the collapse of $;T and Buna,
a liLuidity crisis arose. Myle zavies tried to ta)e out a new loan from Genesis in mid-Xune
2022 to cover his o(ligations. ;am Sallahan of the bTS ;avings Plan suggests that, at some
point, the crypto fund turned into a Pon3i scheme, as the founders resorted to Cnding new
investors and lenders as losses mounted.
JAS was ordered to liLuidate in Xune 2022 (y a court in the british Nirgin Islands,and on 1
Xuly 2022 it Cled for (an)ruptcy in a Kew #or) court, owing over $;FJ (illion to creditors.
FTX Collapse
In early Kovem(er 2022, Soinzes) pu(lished an article that cast serious dou(ts on the
sta(ility of the VT: crypto e–change.The article referred to a conCdential document o(tained
(y the news site, revealing that appro–imately 40 per cent of the assets held (y ;am
ban)man-Vriedjs personal hedge fund, Alameda Research, consisted of VTT to)ensissued
(y the VT: e–change. Alamedajs total assets sat at $;F14.5 (illion, with the VTT to)ens
representing nearly 0 per cent of the companyjs net assets.
Given the limited mar)eta(ility of such a large amount of VTT to)ens kin e–cess of $;FE.8
(illion6, any liLuidity reLuirements for repayments could lead to a run on Alamedajs (alance
sheet and pro(a(le (an)ruptcy.
What Did FTX Have To Do With Alameda?
both VT: and Alameda Research were maqority-owned (y ;am ban)man-Vried. ?ith the
collapse, previously undisclosed details regarding the relationship (etween these two
companies came to light.
Bucas Ku33i, head of research at Soin /etrics, conducted an analysis using open (loc)chain
data and determined that the VT: e–change provided Alameda with $;F4 (illion in
emergency funding using VTT to)ens kconveniently issued (y VT: itself6.If Alameda were
to face (an)ruptcy, the repayment of loans issued (y the VT: e–change would (e highly
uncertain.
Panic ensued among VT: clients, with withdrawal volumes from the crypto e–change
reaching $;F5 (illion (y 8 Kovem(er 2022.The VTT to)en had already e–perienced an 80
per cent decline since the (eginning of the month. The e–change imposed restrictions on
withdrawal amounts.
VT:js largest competitor, binance, announced its decision to liLuidate the remaining VTTon
its (oo)s, although within a few days it also said it wanted to fully acLuire VT:.com.Uowever,
after a review of VT:js Cnances,binance withdrew its offer.
Alarming revelations included rec)less lending practices, with VT:js founder channelling over
$;F10 (illion of customer funds into high-ris) (ets, while the SxW of Alameda Research
displayed a lac) of understanding regarding due diligence and ris) management.
Vurther misconduct occurred (ehind the scenes, as nearly $;FE00 million was discreetly
transferred out of the VT: e–change, indicating premeditated actions (y those involved.The
failure of VT: triggered investigations (y the Xustice zepartment and the ;xS into whether
VT: inappropriately utilised customer cash to prop up Alameda. ;am ban)man-Vried was
detained in the bahamas on 12 zecem(er 2022 for defrauding investors and lying to them.
Ue faces eight criminal charges and up to 11E years in prison if convicted.
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Impact On Bitcoin Price
between 9 Kovem(er and 8 Kovem(er 2022, bitcoin plunged (y 22 per cent in less than
a day as investors struggled to gauge the impact of a potential VT: collapse. It fell (elow
$;F15,000 multiple times in the su(seLuent wee)s.1f3
Figure 3: Bitcoin Price History April 2022–April 2023
Source: https://www.coingecko.com/en/coins/bitcoin.
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As cryptocurrency has evolved from a speculative investment to a new asset class, it has
prompted governments to e–plore ways to regulate it. zifferent countries have different
approaches, adding to the lac) of clarity surrounding crypto regulation.
In the $;, the crypto regulations are full of complications, as there are several regulators in
charge of overseeing crypto companies. The biden administration signed an e–ecutive order
in /arch 2022 calling on federal regulators to assess the (road ris)s and (eneCts offered (y
cryptocurrencies. In Xanuary 202J, the administration released a roadmap to mitigate crypto
ris)s.
The ;xS has already moved towards regulating the sector with its widely pu(licised lawsuit
against Ripple, alleging that it raised more than $;F1.J (illion (y selling its native to)en, :RP,
in unregistered securities transactions. /ore recently, the ;xS has (een targeting e–changes
such as Soin(ase and binance over their crypto products.
The x$ has (een more forward loo)ing. It recently ratiCed the Crst cross-qurisdictional
regulatory and supervisory framewor) for crypto assets.The law aims to ensure that crypto
transfers can always (e traced, and suspicious transactions (loc)ed, as is the case with any
other Cnancial operation.
The $M is planning to introduce a sweeping new regulatory regime that aims to (ring rules
governing crypto to)ens in line with those already in place for traditional Cnancial assets
such as stoc)s and (onds. Uowever, the Vinancial Sonduct Authorityjs current regulatory
remit over crypto is limited to ma)ing sure that crypto Crms that operate in the $M comply
with anti-money laundering and counter-terrorism legislation.
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In contrast to the rest of the world, countries in the Asia-PaciCc region have demonstrated
widely differing attitudes to the regulation of crypto assets.
China’s Crypto Shutdown
Shinajs crypto (an in ;eptem(er 2021 targeted three areas of digital asset dealingY
H bitcoin miningY after Shina (anned bitcoin mining, it (ecame illegal for Shinese
residents and (usinesses to mine cryptocurrencies‘
H crypto trading and transactionsY Shinese investors are not permitted to (uy, sell or
transact in digital currencies such as bitcoin or xthereum‘ and
H employment in the crypto sectorY if any tech companies or entrepreneurs deal with
cryptocurrencies, they could face signiCcant penalties.
Although it is illegal to use and (uy crypto in Shina, there are no speciCc policies against
holding digital assets such as bitcoin, zogecoin or xthereum. Uowever, it seems that bitcoin
is still (eing mined in Shina. The Sam(ridge bitcoin xlectricity Sonsumption Inde– noted
that mining activity in Shina appeared on bitcoinjs networ) in ;eptem(er 2021. In early 2022,
Shina accounted for more than 20 per cent of bitcoinjs hash rate, which is second only to
the $;. /ainland Shina was also the worldjs fourth-largest crypto mar)et in the year up to
Xuly 2022.
Shina has also (een wor)ing on its ’digital yuanj currency, a state-sponsored virtual currency
to trac) all currency movements. The digital yuan will (e distri(uted (y the Peoplejs ban) of
Shina to commercial (an)s, and commercial (an)s will (e responsi(le for ta)ing the digital
currency into the hands of consumers. Sonsumers will have a service where(y they can
e–change coins for digital yuan.
Is Hong Kong The New Frontier For Crypto?
According to the ?orldwide Srypto Readiness Report, Uong Mong was the most
’crypto-readyj in 2022, topping all categories including the num(er of (loc)chain start-ups
per 100,000 people and the num(er of crypto AT/s proportional to the population. Kota(ly,
this ran)ed it ahead of the $nited ;tates and ;wit3erland.
The Uong Mong government has (een relatively supportive of the sector and is more ’crypto
friendlyj than mainland Shina. The Uong Mong government ’is very serious a(out (uilding
an international virtual asset centrej, said :iao Veng, chair of Uong Mong crypto e–change
UashMey, which saw 1J,000 people attend the Crst day of its Uong Mong ?e(J festival.
UashMey received a licence to operate in Uong Mong in Kovem(er 2022, ma)ing it one of
two licensed crypto e–changes in the city kalongside rival e–change W;B6. Wther companies
that plan to esta(lish or e–pand their presence in Uong Mong include e–changes MuSoin,
Gate.io and Uuo(i, which announced plans in Ve(ruary 202J to move its headLuarters from
;ingapore.
The Uong Mong government also announced its funding support to the industry (y
earmar)ing $;F5.4 million for developing its ?e(J ecosystem. Uong Mongjs Cnancial
secretary, Paul Shan, also announced the formation of a tas) force dedicated to the
development of virtual assets, composed of mem(ers from the policy (ureau, regulatory
(odies and the industry.
Acceptance Of Crypto As A Currency In Gatecoin
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In a ruling in /arch 202J,the Uong Mong Uigh Sourt conCrmed that cryptocurrencies
constitute ’propertyj under Uong Mong law and are capa(le of (eing held on trust. The ruling
was made in a legal dispute involving the crypto e–change Gatecoin, which collapsed in 201.
The court said that crypto assets have property attri(utes and are ’capa(le of (eing held on
trustj.
In light of the recent high-proCle collapses of some maqor cryptocurrency e–changes, this
decision provides helpful clarity on the legal treatment of cryptocurrencies in Uong Mong,
particularly in a winding-up scenario. Baw Crms have noted that the new ruling could provide
insolvency professionals with more clarity on crypto assets and means that crypto has
property characteristics similar to other assets such as stoc)s.
As Uong Mong pushes to position itself as a glo(al virtual asset hu(, disputes surrounding
crypto assets and associated technologies will only (ecome increasingly common.
What Did Singapore Do?
The /onetary Authority of ;ingapore k/A;6 is focused on (uilding a responsi(le and
innovative digital asset ecosystem.Its goal is to reduce potential consumer harm from
cryptocurrencies and associated services (y attracting (usinesses with e–cellent ris)
management capa(ilities and value propositions.
/A; encourages the growth of the digital asset ecosystem (y supporting initiatives such as
to)enisation and distri(uted ledgers, (ut also warns against the ris)y practice of speculation
on cryptocurrencies.However, MAS is also taking measures to manage the risks of digital
assets and restrict retail access to cryptocurrencies.
Cryptocurrency Is Not Money
A recent qudgment in ;ingapore involving JAS set a precedent for the legal status of
cryptocurrencies. Algorand Voundation Cled an application to wind up JAS in the ;ingapore
Uigh Sourt, see)ing to recover $;FEJ.E million in cryptocurrency. The central issue was
whether cryptocurrency could (e considered a sum of money, which would determine
Algorandjs status as a creditor and the validity of the application. Uowever, the court reqected
Algorandjs argument, stating that cryptocurrency is not considered ’moneyj for the purposes
of a winding-up application, as determining its status would reLuire e–tensive e–amination
and was not appropriate in the conte–t of insolvency.
CLbC–MUvLb
As a result of the recent crises and collapse of some of the largest independent crypto
e–changes, investors have lost (illions of dollars. This has had a drastic impact on consumer
(usiness acceptance of new ideas and on the choice of (usinesses and investments, and
has implications for policy and regulations. The maqority of the (ad actors have (een ta)en
out, and the price and mar)et structure of bitcoin had re(ounded to a solid place as at the
time of writing.
The failures of VT:, Selsius and Terraform Ba(s helped differentiate unregulated, centralised
players that ran faulty and fraudulent (usinesses. It also signiCed the industryjs maturation,
which will continue to advance as more regulations are implemented.
/any of the eruptions of 2022 would not have occurred if the digital assets sector had
appropriate corporate governance structures in place. The a(sence of transparency and
Emerging Trends in Crypto Fraud x–plore on :vw
RETURN TO UMYYAwH
wea) governance, together with a (elief that crypto is fundamentally uniLue and therefore
cannot (e addressed with time-tested approaches, are maqor contri(utors to the industryjs
downfall.
?ith the domino effect of the crypto crises resulting in crypto-service companies Cling for
(an)ruptcy, there is a need for the crypto ecosystem to align its activities closer with that of
the traditional Cnance industry, (eneCting from the lessons learned over centuries.
The maqor disruption caused in the past year has spar)ed an interest from mar)et regulators
to ensure monetary and Cnancial sta(ility as these assets (ecome more widely adopted.
The choices for regulators include an opt-in or pilot regime, a ris)-(ased regime, a catch-all
regime or a (lan)et (an. ?hile a ris)-(ased regime is li)ely the preferred approach, the
common o(qective across all qurisdictions is the protection of users, mar)et sta(ility, the
minimising of regulatory ar(itrage, and a nim(le and agile regulatory framewor) that
e7ciently accommodates the rapid mar)et development and Cnancial innovation that is
prevalent in the class of crypto assets. zespite a trou(led 2022, digital assets continue to
evolve and remain a potent source of innovation, and mar)et participants anticipate greater
integrity in the crypto asset mar)et in 202J.
Endnotes
] httpsYwww.ftc.govnews-eventsdata-visuali3ationsdata-spotlight202
205reports-show-scammers-cashing-crypto-cra3ecrypto1. bac) to section
0 httpsYconsumer.ftc.govarticleswhat-)now-a(out-cryptocurrency-and-s
cams. bac) to section
6 httpsYgo.chainalysis.com202J-crypto-crime-report.html. bac) to section
, i(id. bac) to section
S httpsYwww.comparitech.comcryptocryptocurrency-scams. bac) to section
7 A seed phrase is a collection of 12 to 24 random words generated (y a wallet service,
which needs to (e entered in the e–act same seLuence as received when signing up.
bac) to section
8 Uot wallets can (e logged into from anywhere at any time (ut come at a greater ris) of
data theft and (reaches. Sold wallets are oZine wallets, not connected to the internet,
such as a $;b device. Uowever, if you lose your oZine wallet, there is no ’forgot your
passwordj option to recover it. bac) to section
f httpsYwww.cn(c.com202J0119(itcoin-has-now-recovered-all-its-loss
es-since-ft–-collapsed.html. bac) to section
Emerging Trends in Crypto Fraud x–plore on :vw
RETURN TO UMYYAwH
:Gynn koplins ghopkins@perunconsultants.com
Alanlsha Uagar asagar@perunconsultants.com
bataDiya UholuroRa nshokurova@perunconsultants.com
7/F, Hollywood Commercial House, 3-5 Old Bailey Street, Central, Hong Kong
TeDN
(+852) 2887 8020
https://www.perunconsultants.com
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