CRYPTOCURRENCY FRAUD INVESTIGATION

As the trading and holding of digital assets becomes more and more widespread, so too does the risk of it being used in connection with scams and other criminal activities. Our team of forensic accountants are perfectly placed to help limit your exposure through a cryptocurrency fraud investigation.

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How Forensic Accounting can Assist with Cryptocurrency Fraud Cases

The surge in the trading of digital assets goes hand in hand with the rise in cryptocurrency fraud cases in the UK and around the world. One of the most common reasons for this boom in cryptocurrency fraud can be attributed to the relative anonymity, and the lack of any one centralised supervision unit. This is where forensic accounting can be invaluable. Cryptocurrency forensics experts are hugely experienced and skilled accounting professionals who have chosen to go above and beyond with their training.

Be it during a divorce/ matrimonial dispute, during a litigation, or when acting as an expert witness, getting across the intricacies and important details of a cryptocurrency investigation is vital. Due in part to its relatively new position in our society and its complicated nature for the unaware, blockchain and cryptocurrency are not, by any means, universally understood.

One of the most important aspects of a forensic accountant’s job is their ability to unearth vital hidden data and information. As mentioned above, the relative anonymity of digital assets represent an opportunity for potential scammers. However, digital currency is neither totally untraceable or completely anonymous. There are in fact a few ways an expert can link a digital wallet to the owning party. This includes examining transactions, speaking to other parties involved, analysing internet traffic history, and more.

Additionally, since all cryptocurrency transactions are recorded on the blockchain, and the most recognised names in the field (Bitcoin, Etherium, etc.) are public ledger traded (anybody within the network can see and analyse any transactions made), cryptocurrency can actually be highly useful for getting to the bottom of a forensic investigation.

What Makes Cryptocurrency Investigations Challenging?

Cryptocurrency investigations have often been incredibly difficult for law enforcement and accountants alike. This has been due to how new the practice is, it being unregulated, the speed with which crypto can be moved and traded from account to account, and how often innovations in the field are cropping up.

One of the most challenging aspects of cryptocurrency investigations can be the use of methods such as P2P networks, privacy coins, nested exchanges etc. to conceal the identity of those taking part in a transaction.

Additionally, as covered above, despite not being impossible, tracing cryptocurrency to the rightful owner can be difficult. New techniques created to further enhance anonymity only make the investigation process more difficult.

Types of Cryptocurrency Fraud

Cryptocurrency fraud is a growing field, with all manner of different types of cryptocurrency scams cropping up all the time, including:

Financial Crime: Money-laundering, tax avoidance, etc.
Fraudulent Initial Coin Offerings (ICOs): The first ever sale of a crypto, an ICO, is a common method of fraud.
Market Manipulation: Attempting to manipulate the market for ones gain
Ponzi Schemes: The uninformed can often be caught up in ponzi schemes.
Theft: Hacking of crypto wallets, setting up fake exchanges, etc.
Fake Crowdfunds: When new crypto comes out they may opt to crowdfund to raise money. It’s possible for this money to go missing.

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If you are looking for an expert to conduct a thorough cryptocurrency fraud investigation, contact our specialist forensic accountants today.

The Forensic Accounting
Process for Cryptocurrency Fraud Prevention

A cryptocurrency fraud investigation has a variety of different important, complicated steps to go through. From initial consultations in order to collate information on your exact situation, right through to potentially representing you in court, cryptocurrency forensics are designed to ensure that every part of the process is undertaken efficiently and effectively to achieve the ideal result for our clients.

The forensic accounting process for cryptocurrency fraud prevention will often include:

Consultation

As with every forensic accounting case we take on, upon initial contact a forensic accountant will consult with the client. This is done so we can formulate a complete picture of your situation in order to offer as accurate an opinion as possible, and in turn formulate an all-encompassing service to suit your needs.

During the consultation stage we will also request a selection of circumstantial evidence/information. What we need from our clients will depend who it is we’re acting for. If it’s a member of the public who has been defrauded, this may include:

Initial whitepaper
Details of amounts invested
Initial advertising and offering
Details of sale process
Bank statements

Alternatively, if we are defending, necessary evidence/information could include:

Bank statement detailing where investment was from, and where it went
Whitepaper
Witness evidence

Analysis

Once information, evidence, and data is provided by the client, our team will get to work performing a detailed and thorough analysis of everything — ensuring that no stone is left unturned.

Due to the sheer amount of documents and data that can be handed over at this stage, it’s impossible to give an estimate of how long it may take. However, forensic accountants possess a unique skill with regards to combing through substantial amounts of data. The skill and attention to detail of forensic accountants ensure that not only will this stage take significantly less time, there is a good chance that a crucial, missable piece of information could be spotted that, ultimately, can prove pivotal to the success of your case.

Should any further requests be made to the client with regards to sending additional documents, these will also be analysed as quickly as possible.

Investigation

When conducting cryptocurrency fraud investigations, forensic accountants have been forced to devise a way to combine their traditional methods with more complicated techniques catered to the blockchain. An important aspect in the role of a forensic accountant is the ability to keep up with the latest trends, to stay one step ahead of any potential fraudsters. The ability to locate hidden digital fingerprints can be vital in the process of uncovering fraud involving cryptocurrency.

Useful methods of uncovering potential methods of cryptocurrency fraud includes:

Extracting evidence from a device: Analysing an electronic device or email addresses can uncover key evidence in a variety of cases. A device could uncover a vertical currency address utilised to receive payments, or a ‘key’ necessary to approve any transactions.
Following a Paper Trail: Traditional forensic accounting investigations will often start with a paper trail — a cryptocurrency fraud investigation is no different. Things like bank and credit card statements can glean vital information.
Linking Transactions: Uncovering evidence is only half the battle. It’s also important that you can link any transactions found to the particular person under investigation.

Reporting

Once all information has been collated and analysed, the forensic accountant on your case will present their findings in a detailed report. An important part in the role of a forensic accountant is rooted in their ability to present findings in as accessible a manner as possible, while ensuring that it can withstand significant cross examination in court.

Court Proceedings

While the intention of all cryptocurrency fraud investigations will be to avoid court wherever possible, it may be necessary for a forensic accountant to assist a legal team and act as an expert witness. Having the assistance of an experienced and highly skilled forensic accountant behind you can often be pivotal in securing a positive outcome in your case.

Free eBook: The Complete Guide to Forensic Accounting

Whether you’re in the middle of a divorce, are having a disagreement with a fellow shareholder, you’re accused of/have been victim to financial crime, or are the subject of a POCA order, there is a huge variety of ways a forensic accountant can assist and support you through any situation, no matter how complicated.

Whatever your situation, our free guide to forensic accounting is designed to help you to better understand the work done by our team of experts. We cover how the process works, when a forensic accountant’s skill set can help you, their specific areas of expertise, and much more.

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How Inquesta Can Help with Cryptocurrency Fraud Cases

Due to the constant innovations in the field, conducting an effective cryptocurrency fraud investigation requires a thorough, meticulous approach that leaves no stone left unturned.

Inquesta’s team of expert forensic accountants are on hand to assist you, no matter your needs.

With decades of experience in dealing with traditional cases of financial fraud, paired with a deep understanding and insight into the still relatively new world of cryptocurrency, our cryptocurrency forensics team possess the expertise to assist you with a variety of situations. This includes:

The tracing of cryptocurrency assets
Digital assets during divorce<
Bankruptcy
Fraud
Corruption
Litigation support
Act as expert witness

From initial enquiries, assessment of information and data, through to the intricacies of a cryptocurrency fraud investigation, and acting as an expert witness — we remain by your side, offering vital support throughout the process.

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Our Specialist Team

Inquesta has assembled a team of forensic accounting specialists that are perfectly placed to assist — whatever your requirements may be.

Rob Miller

Director of Forensic Accounting

A co-founder of Inquesta, Rob Miller is a chartered accountant, a member of the Institute of Chartered Accountants in England and Wales (ICAEW), and a Practising Member of The Academy of Experts.

With decades of experience in providing specialist forensic accounting services, Rob has been instructed to assist with numerous cases — such as financial investigations, criminal defence and confiscation proceedings, commercial and contractual disputes, valuation matters, and much more besides. He has acted on behalf of claimants, defendants, and as a single joint expert.

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“Rob Miller is my first choice for forensic accountancy on criminal cases. He has an impressive eye for detail and adopts a ‘user-friendly’ approach to interaction with our clients and other professionals which ensures the smooth running of any task we instruct him to undertake.”

Jennifer Richardson, Solicitor-Advocate

Free Guide: The Complete Guide to Forensic Accounting

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FAQs

What is Cryptocurrency Fraud?

When big money is involved it’s inevitable that fraud will follow, and cryptocurrency is no different. Cryptocurrency fraud involves when one party seeks to use digital currency such as Bitcoin, Ethereum, etc. to, in some way, defraud another. This can be done via investment schemes, phishing, ponzi schemes, and much more.

For more information on what is cryptocurrency fraud, and for expert advice on how to remain protected when dealing with digital currencies, get in touch today.

How to Report Cryptocurrency Fraud

If you live in England, Wales, and Northern Ireland and believe that you may have been a victim of cryptocurrency fraud or other forms of cyber crimes, we recommend that you get in touch with a forensic accountant to assess your case, before reporting it to Action Fraud.

CRYPTOCURRENCY FRAUD INVESTIGATION

How Forensic Accounting can Assist with Cryptocurrency Fraud Cases