The High Court has ordered a number of crypto exchanges to reveal the personal data of some of their users after a fraud was uncovered.
The move is seen as a sign the UK judiciary is willing to assist victims of cryptocurrency fraud.
The case, which was heard this week (November 29), was brought by a cryptocurrency exchange based in the UK that alleged it was hacked in 2020.
These hackers transferred out millions of pounds in cryptocurrencies such as Bitcoin, Ripple, and Ethereum.
The exchange, which was not named to prevent the fraudsters from being tipped off, worked with the Metropolitan Police’s cyber crime unit, and then a crypto-tracing expert, to try and locate the assets.
However, in order to continue the investigation, the exchange needed more information, the request for which was granted by the High Court.
Six exchanges were therefore ordered to hand over the names, bank accounts and card details of some individuals suspected of the fraud.
Vanessa Whitman, partner at law firm CMS, said the case is important as it outlines the English courts’ attitude towards crypto fraud.
“Although the practical difficulties associated with recovering stolen crypto assets remain, the decision in the case demonstrates the English courts’ continued readiness to use the tools at their disposal, and where necessary, offer solutions to assist victims of fraud," she said.
The case comes after figures from Action Fraud, the UK government’s national reporting system for fraud and cyber-crime, showed that the amount lost to crypto fraud rose 32 per cent in the past year.
Senior associate at Pinsent Masons, Hinesh Shah, said despite the recent fall in cryptocurrency prices, the association of cryptocurrencies with huge windfalls in profit has continued to attract investors who lack the necessary skills and experience to tell a legitimate cryptocurrency investment from a fraudulent one.
There is also a concern that scammers may be proactively targeting these inexperienced investors.
Shah added: "Given the huge sums which some crypto investors made during the boom, scams involving cryptocurrencies can be especially potent for smaller investors who may be desperate to make a ‘quick buck’.”
Regulators and government have not yet worked out whether they should regulate crypto, and if so, how.
Some have said the sector should not be regulated, as that would further legitimise an industry that poses no threat to financial stability and is an inherently risk investment.
However, last month, a deputy governor at the Bank of England warned that crypto needs to be regulated in order to protect financial stability.
Jon Cunliffe, deputy governor for financial stability at the Bank of England, said the experience of the past year has demonstrated that crypto is not a stable ecosystem.
Part of this is because its foundation is “completely unbacked instruments of extreme volatility” that can swing wildly in value, he said.
