Scams involving cryptocurrencies have ballooned in recent years. Hong Kong witnessed 2,336 crypto-related scams in 2022, up 67 per cent from the year before, according to police figures. The frauds involved funds worth HK$1.7bn ($217mn) — a 106 per cent increase on 2021.
While the full scale of the problem is hard to quantify accurately, says Crompton, the number “just keeps going up”.
For lawyers in Hong Kong, addressing fears over the potential for digital assets to enable scams and fraud is a key concern. They are also helping the territory’s Securities and Futures Commission tread the fine line between protecting investors and allowing crypto groups enough freedom to make the city attractive as a base.
In September, just before Hong Kong launched a high-profile crypto push, RPC’s Crompton became a founding committee member of the territory’s Crypto Fraud and Asset Recovery Network. This group brings together lawyers, accountants and industry players to raise awareness of crypto fraud in Asia. The lawyers also seek to help victims to reclaim their stolen assets.
That second task is more difficult, says Crompton. In traditional finance, “you tend to know who the bad guys are”, he notes. But crypto fraudsters employ aliases to hide their identities and digital wallets used to store defrauded cryptocurrency are usually anonymous.
Additionally, crypto exchanges often fail to react to legal letters notifying them of suspicious activity whereas traditional banks generally would, points out Crompton.