Understanding Cryptocurrency, the scams and why criminals are cashing in

• In this special ITV News Meridian Vodcast, Sangeeta Bhabra speaks to reporter Joe Coshan who's spent six months investigating these scams and Professor of Finance Carol Alexander from the University of Sussex to break down how crypto works and the scams that could cost you everything

Cryptocurrency is now part of our financial ecosystem.

In the UK, more than six million adults own, on average, nearly £2,000-worth of crypto assets, even though they can’t ever physically see or touch them.

Digital currencies, like Bitcoin or Ethereum, only exist online.

The Financial Conduct Authority (FCA) thinks more people now see crypto as an alternative to mainstream investments.

But its increase in popularity has also made it a fraudster’s favourite - and the most common asset now stolen.

What is Cryptocurrency?

Cryptocurrency is a digital currency designed to work through a computer network, known as the blockchain.

It's not reliant on any central authority, such as a government or bank, to uphold or maintain it.

It allows anyone anywhere, to send and receive payments. Instead of being physical money carried around and exchanged in the real world, cryptocurrency payments exist purely online.

When you transfer cryptocurrency funds, the transactions are recorded in a public ledger.

Cryptocurrency received its name because it uses encryption to verify transactions. The aim of encryption is to provide security and safety.

The first cryptocurrency was Bitcoin, which was founded in 2009 and remains the best known and most valuable today, with one Bitcoin (1 BTC) being worth over £84,000 at the time of writing.

There are more than 10,000 cryptocurrencies - most of which are no longer traded and are useless.

"They Took Everything" - Mark's story

Mark Peacock, from Alton in Hampshire, was conned by an organised crime gang, who drained his and his wife's cryptocurrency wallet of more than £250,000.

“I received a call from a withheld number who said he was an officer from Thames Valley Police's Cyber Crime Team," Mark told ITV Meridian.

"He gave me a crime reference number and said they’d arrested someone who had loads of our personal information on his phone, and we could visit any police station in 24 hours of my choice to view the evidence."

The scam was elaborate - after the initial call from the fake police officer, a second call came from someone posing as a representative from Ledger, the company that makes digital cryptocurrency wallets, where Mark stored his cryptocurrencies. By quoting the same crime reference number the 'police' gave him, Mark was convinced and coerced into entering his 24-word passphrase.

Mark recalled: "They kept saying 'Don't tell us your passwords or keys' but whatever we typed in, they could see it.

"The phone went dead, we looked at our screen and everything was gone, they took everything. We don't know how we're going to pay the bills.

"We started investing in cryptocurrencies eight years ago, as we wanted a better return on our pension. We weren't after a lavish lifestyle, just a normal everyday lifestyle for myself, my wife, my grandchildren, my son.

"Everything's gone and I don't know living day-to-day what's going to happen."

How criminals are cashing in on crypto and getting away with it

A bit like we've seen with M&S and the Co-Op (LINK) - the personal details of 272,000 customers of Ledger was lost to hackers in 2020. Ledger informed affected customers at the time of the data breach that their names, addresses, email addresses and phone numbers were compromised.

Even though it was only basic information lost, scammers who would've purchased the data on the dark web knew, because they were customers of Ledger, there was a good chance they owned cryptocurrency.

Mark was one of nine victims that's had a combined loss of over £1 million by what's believed to be the same organised crime gang operating in our region.

Detective Sergeant Darryll Paulson, of Kent Police's Cyber Crime Unit, told ITV Meridian: "I urge anyone contacted by someone claiming to be from a crypto host, or from the police, not to give out any personal details.

"Scammers are becoming increasingly more calculating in their methods to defraud their victims into losing a substantial amount of money and will often create urgency in the situation, such as telling them they need to act now to stop their funds from being stolen.

"Don't be embarrassed about reporting a scam, it only takes a second to be distracted and fall victim."

DS Paulson showed ITV Meridian how they're investigating complex cryptocurrency crime using the Blockchain.

Every cryptocurrency transaction creates its own ID on the blockchain, which means detectives can see where the stolen assets are being transferred through different exchanges around the world.

But that doesn't mean they can retrieve them.

"We can see our victims wallet, and two transfers, one of nearly £400,000 and the other of £75,000 and then it's transferred to what we know is an organised crime group's wallet.

"Criminals are using cryptocurrency exchanges that don't carry out 'Know Your Customer' (KYC) checks, so it's very hard to know who they are.

"Then they're using encrypted mobile phones to cash out in places like Dubai and the Seychelles, countries that we don't necessarily have a great relationship with law enforcement sometimes, so we can't subpoena the exchange's records or get local police officers to knock on the door.

"We joined the police to help people and catch criminals. We can see where the money is, but all we can say to the victims is your money's in China, and that's about as much as we can tell them, it's very frustrating."

The stats behind the scams

Data from Action Fraud, the UK's national reporting centre for fraud and cyber crime, found there were almost 26,000 reports of investment fraud in 2024, where victims lost nearly £650m. Cryptocurrency scams accounted for two-thirds of them.

While it was those aged 35-44 that were most likely to be targeted, it was those aged 55-64 that suffered the greatest financial losses.

Amanda Wolf, the Head of the National Fraud Intelligence Bureau, told ITV Meridian: "We do all - myself included as a member of the public - need to stop and think when we’re engaging with people.

"It may seem obvious, but we would really emphasise the age-old ‘if it is too good to be true it almost certainly is’ mantra.

“Whether it’s £200 or £200,0000, our advice is always the same - do your research independently, check if the company is FCA registered and never take financial advice via social media or from people who have approached you out of the blue. If it were that easy to make profit on an investment, we would all know about it.”

Top tips for staying safe

• Never share the 24 words of your recovery phrase with anyone under any circumstances.

• Cryptocurrency companies say they will never contact their users or customers via a phone call or a text message. If someone claims to, it's a scam, hang up and report it.

• Don't click on unexpected links in emails or messages

• Double-check wallet addresses before sending funds

Ledger say if you have any doubts about the authenticity of a communication from them, check their dedicated webpage, which highlights common methods scammers use to target their customers so they can spot red flags.

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