Key Theme: Virtual Assets in the FinCrime Mainstream

Nick Furneaux, MD at CSITech and CTO at Asset Reality:

From their inception in 2009, cryptocurrencies entered first into the realm of the IT Geek and computer savvy libertarian, this arguably was followed by criminal funds and lastly into the general publics consciousness. 

As we enter a post-pandemic world we now see the entry of cryptocurrencies into the domain of traditional banking with DeFI or Decentralized Finance.  There seems to be a token for everything now, each one promising grand things, overturning centuries of financial process, methodology and legislation. 

Right now DeFI is a drop in the ocean compared to the vast sums transacted and held by the large finance houses, however just one of the largest DeFi facilitators has $12 Billion in assets in its liquidity pool. 

Sure, compared to global pension fund assets of $32 Trillion its small beans, but just like the rise of Bitcoin it should not be discounted.  As has been the case since the dawn of time, where the money goes, criminality follows (and sometimes leads). 

DeFi is just the next battle ground for legislators and investigators to locate, investigate, disrupt and seize criminal funds.   

My own company, CSITech, has seen a steady uptick this year in reports from individuals being defrauded out of significant sums by a new breed of an old scam, fake investment companies. 

Instead of promising large returns by ’beating the stock market’ or investments in non-existent African gold mines, this time it is the draw of large returns on deposited cryptocurrencies. 

The issue is that there are legitimate DeFI companies offering bank beating interest rates on certain crypto-deposits and this means that the golden rule of ‘if it looks to be too good to be true, it probably is’ has become blurred. 

This, associated with a lack of fundamental understanding as to how the cryptocurrencies and tokens work, means that holders of crypto looking to maximise growth are easy pickings for scammers. 

We spoke to a victim just a few weeks ago who described the scammers actually using a blockchain explorer showing their crypto-assets being stolen to ‘demonstrate’ how they were making their crypto ‘work’ by moving between tokens as values fluctuated. 

It reminded me of the old 3-Card Monte street scams where the victim never actually takes their eye off the cards but will never find the money card.  Nothing new under the sun.

Finance is changing and changing fast and legislators and investigators need to work hard to keep up.  However, lets not forget the education that individual investors need to be able to engage with the new frontier of finance safely.