A new frontier for law

Neil Holloway, founder and CEO of M2 Recovery, on the rise (and rise) of crypto recovery

We are now a year on from the largest cryptocurrency heist in history, when Bybit CEO Ben Zhou authorised what seemed like a routine transaction, only to lose $1.5bn in a single stroke. Hackers intercepted the request, altered the code, and redirected the funds into their own wallets. The anniversary of this event serves as a chilling reminder that while cryptocurrencies may have matured into a credible alternative to traditional finance, they still lack many of the safeguards that underpin global institutions.

Blockchain data platform Chainalysis now estimates that in 2025, cryptocurrency scams received at least $14bn on-chain, a significant increase from the $9.9bn first reported in 2024. This figure is expected to exceed $17bn as the team at Chainalysis identifies more illicit wallet addresses in the coming months for 2025.

For legal professionals, regulators, and financial institutions alike, this trajectory underscores the urgency of building a framework not only for prevention but for meaningful recovery.

Increasing sophistication

Gone are the days of crude ‘send me your Bitcoin’ emails. Today’s fraudsters operate with a chilling sophistication.

‘Pig butchering’ scams, where criminals use large language models to conduct long, convincing conversations with victims, represent a new frontier in social engineering. Meanwhile, technical exploits such as unaudited smart contracts, address poisoning, or fake token approvals allow scammers to siphon funds with remarkable speed and precision.

The rise of artificial intelligence deepfakes has compounded the problem, with convincing audio and video impersonations of trusted figures luring even seasoned professionals into parting with their assets. For victims, the experience can be devastating. For the broader crypto ecosystem, such scams threaten confidence and adoption at scale.

The fightback

Too often, in my experience, victims of crypto crime simply don’t have the means to fight back, regardless of how strong their case is. Fortunately, the industry response to these challenges is maturing rapidly.

Specialist firms—such as M2 Recovery—deploy a mixture of crypto recovery and legal expenses insurance services to help victims recover losses once thought irretrievable. Legal costs of recovering your stolen cryptoassets can reach upwards of £250,000. However, the heartbreak of being deceived out of cryptocurrency can now have a happier ending, as victims no longer have to write off their losses as unrecoverable.

Crypto recovery is also no longer purely reactive. New services are emerging to flag suspicious counterparties before a transaction is completed. Such preventive measures reduce the likelihood of scams succeeding in the first place.

For the legal profession, the surge in crypto fraud is not just a challenge but an opportunity. Asset tracing, interim injunctions, and cross-border enforcement—once niche specialisms—are fast becoming core tools in recovery. As fraudsters exploit the speed and borderlessness of blockchain, lawyers are being called on to test the limits of traditional remedies in novel contexts.

The UK Law Commission’s recent work on recognising digital assets as property has given courts a stronger footing to treat stolen tokens as recoverable in law, and its reports on decentralised structures signal an ambition for the UK to lead globally in this field. For lawyers, the message is clear: crypto recovery will not just be an ancillary niche, but a defining feature of commercial litigation in the years ahead.

The crypto safety net

The rise of cryptocurrency has always been intertwined with the rhetoric of decentralisation and autonomy. Yet, as recent heists have shown, decentralisation without accountability leaves victims exposed. The rise of crypto recovery is not merely a response to fraud. It is a prerequisite for the sustainable future of digital assets. As institutional money flows in and traditional finance adapts, the work we do now will determine whether crypto achieves its potential as a legitimate, trusted pillar of the global economy, or remains a frontier defined by risk.

M2 Recovery Hosts Parliamentary Panel in the House of Lords

M2 Recovery recently visited the House of Lords to host our parliamentary panel, “Fighting Back: Crypto Fraud on the Rise – How Tech is Shaping the Next Wave of Financial Crime.”
A big thank you to Viscount Camrose for sponsoring the event and supporting such an important discussion.

Chaired by Nick Shah, former senior officer within the UK’s National Crime Agency, the panel brought together Matt Green (Head of Disputes and Strategy, M2 Recovery and Head of Blockchain, Digital Assets and Technology Disputes, Lawrence Stephens), Jordan Wain (UK Public Policy Lead, Chainalysis), Adrian Morris (Associate Director, Digital Asset Recovery, Grant Thornton) and Michael Skidmore (Head of Serious Crime Research, The Police Foundation) to reflect on the pace at which crypto-related fraud is evolving and what must happen next.

Key themes from the panel and Q&A included:

The growing industrialisation and professionalisation of crypto scams, with AI supercharging this.
The policing challenge: fraud now accounts for ~40% of UK crime, yet resources and expertise remain highly localised.
The need to shift from a reactive to intelligence-led response, with stronger coordination and international collaboration.
The victim journey, including reporting barriers and how difficult/costly recovery can be even where viable.
The role of insolvency frameworks and public-private partnerships in tracing and recovering stolen assets.
The continued importance of consumer education as scams continue to grow and become more sophisticated.

The key takeaway?

Crypto crime is evolving fast and tackling it will require deep collaboration across enforcement, policymakers, technology specialists and the private sector. Therefore, conversations like this have never been so important.
Thank you to everyone who joined us and contributed thoughtful questions to the discussion.

How The DeFi Industry Can Strengthen Its Cyber Defenses

Originally posted on: https://www.forbes.com/councils/forbestechcouncil/2025/11/10/how-the-defi-industry-can-strengthen-its-cyber-defenses/

Decentralized finance (DeFi) and digital assets have revolutionized finance. However, as these trends gain mainstream acceptance, cyber threats are evolving just as rapidly.

With over 20 years in cybersecurity governance, risk and compliance, I’ve recently led projects concerning the regulatory requirements and risk assessments of digital assets. Through conducting risk assessments and designing compliance frameworks, I’ve seen both the increased scale of the risk and the efforts to address these concerns.

With cyberattacks becoming increasingly frequent, the question remains whether the DeFi industry is adequately prepared to combat these rising threats.

The Increasing Frequency Of Hacks

Digital assets have long been an attractive target for cybercriminals due to their pseudonymous transactions and relatively unregulated nature, but the attacks seem to be rising in both scope and frequency.

In fact, there have already been large-scale digital asset breaches just this year. The Lazarus Group is suspected of one of the largest digital assets heists in history, stealing $1.5 billionfrom Bybit’s Ethereum cold wallet. Likewise, Coinbase suffered a major insider-driven data breach affecting nearly 70,000 users, with attackers bribing overseas support agents to access sensitive personal information. The company now faces up to $400 million in remediation and security costs.

According to Chainalysis, at least $40.9 billion was received by illicit addresses in 2024, but they estimate the total may be closer to $51 billion. These developments indicate that digital asset hacks are no longer isolated incidents. Instead, they represent a systemic challenge that the industry must urgently address.

Likewise, M2 Recovery, an insurance company focused on recovering stolen digital assets, found that increasingly sophisticated methods like phishing and man-in-the-middle attacks are being used to steal digital assets. In 2023, their research showed that it cost upwards of £250,000 to investigate and recover lost assets.

Why DeFi Is Vulnerable

The DeFi ecosystem remains vulnerable to exploitation due to several structural weaknesses, including:

• Unaudited Smart Contracts: These self-governing computer programs that control digital agreements might have weak spots if they haven’t been carefully checked.

• Insecure Cross-Chain Bridges: These tools help move digital assets or data between different blockchains. However, these bridges must be built securely.

Furthermore, the industry’s focus on transaction speed and efficiency can lead to trade-offs that compromise security, leaving platforms vulnerable to exploitation.

Compounding these technical risks are regulatory gaps that hinder enforcement. Unlike the banking sector, many digital asset activities don’t have clear regulations yet, with different rules in different countries, creating ongoing uncertainty about how to manage compliance requirements.

Perhaps partly because of this uncertainty, the digital assets industry remains largely reactive, addressing security flaws only after breaches have occurred.

However, some security advancements in security are a cause for optimism.

For instance, many DeFi platforms now require multifactor authentication to prevent unauthorized access. Cold storage solutions have also become more prevalent, with leading platforms storing the majority of assets in offline cold wallets (registration required) to reduce exposure to online threats. Additionally, AI-powered fraud detection tools are being integrated into DeFi platforms to monitor transactions and suspicious activities.

Strengthening Cybersecurity

To mitigate the increasing cyber threats, industry leaders must shift from reactive security measures to proactive strategies. Several key areas require improvement to ensure stronger defenses:

1. AI-Driven Security Solutions: AI-powered fraud detection systems can analyze transactions to spot unusual behavior and stop fraud. In fact, Deloitte has suggested that advanced technologies, like AI anomaly detection, are no longer optional but a necessity in fraud detection.

2. Enhanced Regulation And Compliance: Governments and firms are working together to create clearer rules around digital assets. Regulations like the EU’s MiCAR framework and the U.S. SEC guidelines enforce transparency, anti-money laundering (AML) and know-your-customer (KYC) policies on DeFi platforms, helping prevent bad actors from abusing the system. The regulatory environment remains complex but is evolving toward stronger oversight.

3. Digital Asset Insurance And Asset Recovery: Digital asset insurance is growing, with firms offering policies to protect against hacks and losses. For example, firms review the effectiveness of insurance products and rapid asset-freezing techniques to recover stolen funds quickly and reduce losses.

While DeFi hacks are increasing at an alarming rate, these strategies can significantly reduce cybercrime risks and provide a safer environment.

It’s also important to note that the major breaches serve as a stark reminder that cybersecurity is not just about protecting assets but also safeguarding user data. Insider threats, social engineering and weak security protocols can lead to devastating consequences. DeFi’s future depends on how effectively it addresses these cyber threats.

Firms in and around Mayfair are helping investors navigate the market and combat fraudulent scammers targeting areas of high wealth

Originally posted in: Mayfair Times

“What the industry is experiencing right now is euphoria. Everyone is talking about it,” Quynh Ho tells me. Head of venture investment and corporate development at the GSR Group, a global leader in crypto trading and investment with an office on Curzon Street, Ho oversees GSR’s venture investment portfolio. The firm is an active, multi-stage investor in more than 200 crypto companies and protocols within the spheres of finance and technology.

We met just before Christmas. Bitcoin, the world’s first and most popular cryptocurrency, had just surged to a record high, rising in price by more than 50 percent since Donald Trump’s electoral win. This was in no small part due to Trump’s newfound warmth towards virtual currencies—having previously called Bitcoin a scam, he spent his election campaign vowing to make the US the “crypto capital of the planet.”

Bitcoin’s dramatic resurgence has piqued the interests of British investors who come in all shapes and sizes: from crypto-curious teenagers to high-net-worth individuals working in the finance sector. According to research by the polling firm YouGov and the Financial Conduct Authority (FCA), the City watchdog, one in eight adults in the UK now own cryptocurrency, with an average holding of £1,842.

Despite its rise in value, Bitcoin and other cryptocurrencies are polarising. Stories of virtual currencies delivering lucrative returns abound. So do cautious warnings from the FCA and other organisations about the risks of investing in these volatile assets.

New regulations around cryptocurrencies are still being finalised under Prime Minister Keir Starmer, who plans to deliver the comprehensive framework proposed by the previous government.
“In the UK, the marketing of crypto products is heavily regulated by the financial promotions regime. That limits how crypto could be promoted and by whom,” explains Raphael Landesmann, a regulatory counsel at GSR. “We’ve also got an anti-money laundering financial crime regime, which applies to crypto, but we don’t yet have a full licensing regime. That’s the bit the government is going to consult on through [2025], and the industry is really clamouring to get [that] finalised.”

Based in Marylebone, crypto insurance firm M2 Recovery specialises in crypto recovery services, from investigating and tracing the proceeds of fraud to complex legal recovery processes and enforcement. The firm’s director, Louise Abbott, tells me that “since Trump was elected, crypto [investment] has gone through the roof.”

Abbott warns that the surge of interest in cryptocurrencies leaves people vulnerable to fraudsters and scams. The latter are becoming more elaborate, with criminal gangs using sophisticated marketing techniques via social media to entice investors.
“These fraudsters operate on an absolutely massive scale,” Abbott says. “You’re talking about huge warehouses, billions of crypto passing through wallets every day.”

TRM Labs, a blockchain intelligence company that detects and investigates crypto-related financial crime and fraud, found that the value of stolen crypto assets worldwide more than doubled in the first half of 2024.

Abbott has been busy fielding calls from those unlucky enough to fall for these scams. While some of her clients are “little old ladies,” others are lawyers or investment bankers. Just before we talked, she received a call from someone who had been happily investing in Bitcoin for over a year. “They said: ‘I just tried to withdraw my money, and I can’t.’”

Scammers pinpoint areas of high wealth, with Mayfair being an obvious target. “I have a client who lives in the area and a couple who work there,” Abbott tells me. “One is an entrepreneur who was [involved in] an investment scam. He’s in his 50s and had been showing interest online, looking at crypto. Another lady, who’s well known, has been targeted because she is wealthy.”

M2 offers a unique insurance policy for crypto investors who have been scammed, covering £250,000 in legal fees and disbursements. To reclaim stolen crypto assets, Abbott and her legal team obtain a freezing injunction through a court process to prevent further funds from being withdrawn illicitly. Once this is granted, Abbott works with crypto platforms to retrieve these stolen funds, which can be tracked through a blockchain ledger.

In her work recovering stolen crypto assets, Abbott has worked with the US Secret Service, the British police, and other enforcement agencies, peering into the shadowy underbelly of a new breed of globalised crypto crime networks. Strong evidence suggests these gangs or cartels have links to authoritarian regimes, acting on their behalf to help fund state activities.

“Some of them are definitely state-backed or funding warfare,” Abbott says. “Some of them you can attribute to terrorism. They’re really quite horrendous.”

Digital deception: How the crypto world must evolve to outpace sophisticated fraudsters

Originally posed on: https://www.thedigitalcommonwealth.com/posts/digital-deception-how-the-crypto-world-must-evolve-to-outpace-sophisticated-fraudsters

Fraud, unfortunately, is a common challenge with any emerging asset class, and crypto is no exception.

As a practising solicitor specialising in domestic and international civil fraud, cryptocurrency, and asset recovery, I see daily the pain of those that have lost their investments and sometimes livelihoods to increasingly sophisticated fraudsters.

It is something crypto investors are all too familiar with. In recent research, the FCA found that consumers consider scams as “part and parcel” of investing. It adds up – according to research by TRM Labs, the amount of cryptocurrency stolen has more than doubled in the first half of 2024, compared to the same period last year.

Although my professional lens into the industry is one of fraud and scams, I believe that digital assets will play a key role in the future of finance.

They have the power to change society and the economy as we know it. However, with 18% of the UK population, according to FSCS’s latest research, holding crypto, I continue to urge the community to remain vigilant.

The scams

When I first delved into crypto recovery, scams were predominantly linked to phishing, a type of online scam that targets consumers by sending them an e-mail or text message that appears to be from a well-known source.

Nowadays, this is just the tip of the iceberg – with scams being more intricate and elaborate by the day:

Romance or “pig butchering” scams, where individuals are targeted through dating apps and manipulated into investing.
Long-term investment scams using fraudulent trading platforms and exchanges.
Scams involving bogus training or educational programs, where victims are tricked into enrolling in a deceptive cryptocurrency course.
Giveaway scams, where investors are deceived into contributing to a project that suddenly collapses, with all liquidity rapidly siphoned off.
Rug pulls, where fraudsters create a seemingly credible project, lure in investors, and then abruptly abandon it, leaving the investors with nothing.

While these scams differ in their specific tactics, they commonly involve victims transferring money via a fraudulent platform. These platforms are usually operated by entities connected to organised criminal networks and gangs.

Typically, the scam includes assigning an “account manager” to the victim, who maintains regular contact through phone calls or messaging to persuade them to continue investing over time. The victim is often given access to a fake online application to monitor their supposed investments.

As later investigations often uncover, these online applications are merely tools for the scammers to manipulate the victim’s perception of their investments. In most cases, the funds are immediately stolen by the scammers to finance criminal operations, which include the horrors of terrorism, child exploitation and human trafficking.

Unfortunately, just as the industry continues to evolve, fraudsters are operating with increasing sophistication. AI and deepfakes are now being used to create scams that appear highly authentic. Just take the recent AI versions of the Prime minister and the Prince of Wales that have appeared in hundreds of adverts promoting a fraudulent cryptocurrency trading platform.

The adverts have reached up to 890,000 people on Meta’s social media sites, which include Facebook and Instagram. Today’s crypto investor faces a new series of challenges.

The recovery

If you are unfortunate enough to fall foul of a scam, retrieving crypto assets is a complicated and costly process. The legal expenses can be significant.

Most cryptocurrency frauds are perpetrated by large-scale organised criminal gangs outside the UK. The first step is tracing the crypto asset, to ensure it is available to be recovered.

This work is usually undertaken with a team of specialist investigators. Following this, it may be possible, through a legal process, to obtain a world-wide freezing order and/or a proprietary injunction over the stolen assets, to ensure they cannot be taken by the scammers, whilst the victim pursues a judgment for the return of their stolen funds.

The English Courts are well rehearsed in these cases, and it is possible to pursue unknown scammers, or those outside of the jurisdiction.

For those who fall victim to these scams, it is crucial to act swiftly and seek professional help.

Recovery is possible but requires navigating complex legal and technical challenges. By remaining alert and adopting protective measures, investors can safeguard their assets and contribute to a more secure and trustworthy crypto ecosystem.

‍

Lord Bellingham: ‘Cryptocurrency has become a new frontier for scammers’

Originally posted on: https://www.politics.co.uk/comment/2025/01/28/lord-bellingham-cryptocurrency-has-become-a-new-frontier-for-scammers/

Fraud is as old as commerce itself, but the rise of cryptocurrency has opened a new and rapidly evolving front in the battle against scams.

For those of you unfamiliar with cryptocurrency, I am looking at many of my parliamentary colleagues here, its potential is as exciting as it is revolutionary. In short, it introduces a new way of transferring value. It is also crucially decentralised, meaning it operates without a central authority like a bank, allowing for peer-to-peer transfers with increased transparency and security.

It’s not a case of if but a case of when we see this disrupting the traditional financial system, particularly with the return of a certain president Trump to the White House, reversing a previously hostile environment for the crypto community in the US. You need only to take a look at the price of Bitcoin to get a sense of how the community is feeling – bullish.

But we don’t need to look across the Atlantic to find evidence of the shifting sands. Closer to home, recent figures from the FCA show that 12% or 7 million citizens hold cryptocurrency and consumers are increasingly viewing it as part of ‘a wider investment portfolio’.

In short, the horse has bolted and crypto is here to stay.

Unfortunately, so is fraud. Where there’s money there’s scammers and cryptocurrency is now firmly in the crosshairs of bad actors who want your crypto cash. Unsurprisingly, as the market grows so does fraud – the market almost tripled in 2024 and stolen funds increased by approximately 21% to $2.2 billion, according to Chainalysis.

This trend is matched by an increasing sophistication of cyber criminals. Cryptocurrency scams have evolved far beyond the days of simple phishing emails. Today’s scammers are using advanced techniques that make these scams harder to detect, including increasing use of AI to carry out highly personalised sextortion attacks. New methods are bearing fruit for scammers, as 2024 saw a 56% increase in the number of large loss cases, with thirty high value thefts over $1 million.

These criminals operate from all corners of the globe, masking their VPNs to make it challenging to track them down and bring them to justice. Take North Korean hackers who are stealing more from crypto platforms than ever before, $1.34 billion in 2024, or 61% of the total amount stolen for the year.

Concerningly, 1 in 5 Brits using cryptocurrency are also under the impression they will receive financial compensation if scammed by these bad actors. They will not. And let’s not forget that behind each scam is a victim, usually an ordinary person, lured in by sophisticated tactics, who is left scarred by the experience and facing financial ruin, stress and mistrust.

But there is no need to throw the baby out with the bath water here. The bottom line is that new technologies, especially those born from the internet, often face security challenges in their earliest days. As adoption grows, industry participants learn from each incident and security improves.

Fortunately, the market is responding with innovation of its own. Companies like M2 Recovery for example offers a lifeline with insurance that covers the costs of the burdensome track, trace and legal fees for victims to get their cryptocurrency back.

Ultimately, there is no better replacement than not being scammed at all and knowledge will always be the best deterrence. The more informed you are, the harder it is for scammers to take advantage.

Crypto’s ‘Trust’ Problem

Originally posted on: https://www.cybersecurityintelligence.com/blog/cryptos-trust-problem-8563.html

There’s a lot of talk about the future of crypto – how it’ll reshape finance, decentralise control, and unlock new economic models. And that vision still holds. But right now, too many people are losing money. I am not referring to market volatility or bad trades, but rather the prevalence of fraud and scams.

In 2024 alone, Chainalysis estimates that a whopping $12.4bn was lost as a result.

We must fight back – not solely from code bugs or protocol failures, but also from fraud: pig butchering schemes, fake platforms, phishing links, wallet drainers, SIM swaps. These are crimes built on trust – manipulated, then monetised.

And they’re happening every day.

We often hear the word ‘hack’ thrown around when funds go missing. But most of what I see isn’t a traditional hack. It’s psychological manipulation. It’s social engineering.

Take pig butchering (a type of online scam where the victim is encouraged to make increasing financial contributions over a long period), which has grown by 40% in 2024. It’s a slow-burn scam where someone builds a fake online relationship, often over weeks – before introducing a “can’t-miss” crypto investment platform, for example. Everything looks real.

The site works, the charts move, withdrawals appear to process. But it’s a trap. And once the victim is deep enough in, the exit vanishes.

Losses can be life-changing. Some of our customers have lost 8-figure sums. And because crypto lacks the safety nets of traditional finance – no chargebacks, no fraud department – most people are told there’s nothing they can do.

We don’t think that’s good enough.

In crypto circles, people often talk about security in technical terms: audits, zero-days, bridges and smart contract bugs. That stuff matters. But the biggest threat I see every day, as the founder of a crypto insurance, investigation and recovery firm, is people being deceived, with human nature and vulnerabilities being exploited.

Yet, too many platforms still treat fraud as a user-side problem. There’s often no formal response process. No fund tracing plan. No recovery team. And when victims ask for help, the response is usually a shrug after a long wait for a response.

And timing matters. The first 24 – 48 hours after a scam are often make-or-break for any kind of recovery. That’s why we’re set up to move fast.

Crypto is no longer just an experiment. It’s becoming infrastructure – for payments, for identity, for asset ownership. But if we don’t fix the trust issue, adoption will stall. People won’t come near something they feel they don’t understand – or worse, don’t feel safe using.

The crypto industry can no longer treat trust as a user problem. Platforms, devs, and investors all have a stake in building systems that are resilient not just to bugs, but to bad actors. That means designing for prevention, detection, and response. It means funding recovery infrastructure, publishing clear protocols for fraud cases, and refusing to ignore victims. We need the same kind of seriousness applied to scams as is applied to smart contract audits. Until that happens, fraud will remain the single biggest threat to mass adoption.

The truth is, we need a shift in culture. Security can’t be an afterthought. It can’t be seen as a blocker to growth or a checkbox before launch. It has to be baked into the DNA of every team, every product, every roadmap.

Let me be clear: this is not a call for deceleration – far from it. But if we’re serious about achieving the mass adoption the industry aspires to, we must focus on strengthening the entire ecosystem. Because the promise of Web3 is not just exciting – it’s worth protecting.

And it starts with trust.

Former NI Secretary of State ‘thrilled’ with new job away from politics

Read full article on: https://www.belfasttelegraph.co.uk/news/northern-ireland/former-ni-secretary-of-state-thrilled-with-new-job-away-from-politics/a955810373.html

Former Northern Ireland Secretary of State Chris Heaton-Harris has taken up a new role as a senior advisor to a UK-based “crypto asset recovery and insurance firm”.

Mr Heaton-Harris first entered politics when he became a member of the European Parliament in 1999.

A self-described “fierce Eurosceptic”, he served in Brussels before standing down in 2009.

The following year he entered the House of Commons in what was his third attempt to win a seat.

He served for a time as the Government’s chief whip, Minister of State for Transport and Minister of State for Europe.

Mr Heaton-Harris also chaired the European Research Group, a Eurosceptic group of Conservative MPs.

Former Secretary of State for Northern Ireland joins M2 Recovery

Original posted on: https://www.insurancebusinessmag.com/uk/news/breaking-news/former-secretary-of-state-for-northern-ireland-joins-m2-recovery-537451.aspx

Chris Heaton-Harris (pictured), former Secretary of State for Northern Ireland, has joined M2 Recovery, a firm specialising in crypto asset recovery and legal expenses insurance, as a senior advisor.

Heaton-Harris was Member of Parliament for Daventry from 2010 to 2024 and held several government positions, including Secretary of State for Northern Ireland under Prime Ministers Liz Truss and Rishi Sunak, Minister of State for Transport, and Chief Whip of the House of Commons under Boris Johnson. During his time as Northern Ireland Secretary, he was involved in implementing The Windsor Framework and managing negotiations with the European Union amid political challenges.

Prior to his parliamentary career, Heaton-Harris was director of a family-run wholesale business for nearly ten years. He also served as a Member of the European Parliament (MEP) for the East Midlands from 1999 to 2009, acting as Conservative Chief Whip from 2001 to 2004. During this period, he worked on addressing fraud and mismanagement within European institutions, including involvement in the case of Marta Andreasen, the European Commission’s former Chief Accountant.

At M2 Recovery, Heaton-Harris will apply his political and leadership experience to support the firm’s work on crypto asset recovery and fraud prevention in a complex financial landscape.

M2 Recovery Wins at Prestigious Digital Commonwealth Awards

M2 Recovery has been named the winner of Best Insurance Provision at the inaugural Digital Commonwealth Annual Industry Awards, held at the iconic Mansion House in the City of London.

The awards, which followed the sixth Mansion House Summit earlier in the day, brought together over 160 industry leaders for an evening of celebration in the historic Egyptian Hall. Guests enjoyed a gala dinner and live announcements across 24 award categories.

M2 Recovery triumphed in a competitive field that included major names such as Marsh, CoinCover, Nayms, Nexus Mutual, and Relm. The award, supported by Wincent, recognises outstanding innovation and reliability in the digital insurance space.

M2 Recovery nominated for Best Insurance Provision at The Digital Commonwealth Awards

Originally posted on: https://www.linkedin.com/feed/update/urn:li:activity:7309875581888675841/?actorCompanyId=18311924

We are thrilled to announce that M2 Recovery has been nominated for Best Insurance Provision at The Digital Commonwealth Awards!

It is great to be recognised alongside some of the best in the industry as a provider of a cutting-edge insurance product.

Congratulations to all the other nominations!

We look forward to connecting with industry leaders at the ceremony in April.

M2 Recovery Crypto Fraud & Recovery Webinar: Key Insights

Originally posted on: https://www.linkedin.com/feed/update/urn:li:activity:7305618908508520450

This morning, M2 Recovery hosted an insightful webinar on the evolving landscape of crypto fraud, featuring expert speakers. The engagement from attendees was fantastic, sparking thought-provoking discussions on the challenges victims face and the critical role of legal expenses insurance in crypto asset recovery.

Key takeaways from the session included:

The rapid rise and changing nature of crypto-related fraud in the UK
The financial and emotional toll on victims navigating asset recovery
How M2 Recovery’s pioneering legal expenses insurance supports consumers before and after fraud occurs
A deep dive into the M2 Recovery customer journey
The urgent need to educated consumers on how to invest in cryptoassets safely and better understand the risks of this evolving asset class

A huge thank you to our speakers, Louise Abbott and Lord Henry Bellingham and everyone who joined us for such a dynamic session!

If you missed this one, stay tuned for updates and future events as we continue our mission to fight crypto fraud and promote consumer awareness.

Democracy Talks: Crypto as a force for democracy and the requirement for an impartial judiciary.

Originally posted on: https://cfdaad.co.uk/crypto-as-a-force-fo-democracy/

Louise Abbott and Claire Cummings talk about crypto as a force for democracy and the requirement for an impartial judiciary

PART I: What is the value of crypto as a force for democracy?

Cryptocurrency has been discussed widely as both a tool for and a challenge to democracy, with varying perspectives on its role. Its value as a force for democracy can be understood from several angles:

Censorship Resistance

Freedom from Authoritarian Control: Cryptocurrencies, especially those built on decentralized blockchain technology, are harder to censor or control. In countries with authoritarian regimes that suppress financial activity or restrict freedom of speech, crypto can provide a means to bypass these restrictions, enabling free exchange of value and ideas.
Protection of Privacy: Crypto can offer users greater privacy compared to traditional financial systems, where transactions can be traced and monitored by authorities. This privacy can protect political dissidents and activists in oppressive environments.

Transparency and Accountability

Blockchain Transparency: The underlying blockchain technology of most cryptocurrencies provides an immutable, transparent record of transactions. This feature could enhance democratic governance by making financial and governmental transactions more visible and less prone to corruption.
Smart Contracts and Decentralized Governance: Smart contracts allow for self-executing agreements without intermediaries, which could reduce the risk of corruption and inefficiency in democratic systems. Moreover, decentralized autonomous organizations (DAOs) offer alternative governance models that can align with democratic principles.

Potential for Political Mobilization

Funding Political Movements: Cryptocurrencies have been used to fund political movements, protests, and advocacy, especially in regions where traditional funding channels are restricted. For example, during protests or conflicts, crypto donations have supported activists, allowing them to bypass governmental control over fundraising.
Global Connectivity: By enabling peer-to-peer transfers without needing a central authority, cryptocurrencies allow for global solidarity, facilitating cooperation between activists, organizations, and movements that support democratic causes.

PART II: Why is it important to have freedom to invest?

Financial Inclusion and Access

Decentralized Financial Systems: Cryptocurrencies are not controlled by any central authority like banks or governments. This means people in underbanked or politically unstable regions can access financial services without relying on traditional institutions, potentially empowering individuals and communities.
Banking the Unbanked: Cryptocurrencies can offer a lifeline to individuals who lack access to banking systems due to geographical, political, or economic barriers. This can enhance economic participation and reduce inequality.

Empowerment through Technology

Disruption of Traditional Systems: Cryptocurrencies disrupt centralized institutions like banks, corporations, and even governments, potentially redistributing power. This decentralization aligns with democratic ideals by reducing monopolies and increasing competition, thus giving individuals more control over their economic lives.
Democratising Investment: Cryptocurrencies and blockchain technology have lowered the barriers to entry for investment and entrepreneurship. Through tokenization and decentralized finance (DeFi), individuals can participate in global markets, invest in startups, or access financial products without relying on traditional financial intermediaries.

CONCLUSION:

Cryptocurrency holds significant potential as a force for democracy by promoting financial inclusion, reducing censorship, enhancing transparency, and offering new avenues for political and economic participation. However, its effectiveness as a democratic tool is contingent on addressing issues like volatility, inequality, and misuse for illicit purposes. Ultimately, cryptocurrencies could empower individuals and communities in ways that align with democratic values, but their integration into society requires careful regulation and thoughtful consideration of their broader social impact.

PART III: Challenges to Democracy

Volatility and Speculation: The speculative nature of cryptocurrencies can lead to instability, which might undermine public trust in financial systems and potentially disrupt political and economic stability. This volatility could also deepen inequality, as those with early access or greater resources could disproportionately benefit.
Criminal and Illicit Activities: While cryptocurrencies can promote financial freedom, they can also be used for illicit activities (e.g., money laundering, evading sanctions). This raises concerns about the potential for cryptos to undermine rule of law and governance, which are core principles of democracy.
Concentration of Wealth: Despite the idea of decentralization, the crypto space has seen significant concentration of wealth, with early adopters and large institutions holding a significant share of assets. This could perpetuate wealth inequality, potentially undermining democratic values of fairness and equality.

PART IV: Why is it important for victims to be free to seek funding and insurance?

Financial Recovery: Victims of financial scams/ fraud face significant financial hardship often due to the high value they have placed into the crypto investment. Often their life savings or pension funds. Access to funding and insurance enables them to recover financially, helping to cover these expenses without resorting to further long-term debt or financial distress.
Restoration of Normal Life: Funding and insurance help victims return to their normal life by enabling the successful recovery of their lost funds. This support is vital for restoring a sense of normalcy and stability in their lives, allowing them to focus on healing and rebuilding.
Access to Justice: In many cases, insurance can also play a role in ensuring victims receive justice. For example, recovering the clients assets can help the victim feel that the wrongdoers or enablers (exchanges) are accountable. This hopefully, may also encourage the exchanges to take responsibility for their actions. (NB court’s approach for fortification of cross undertaking example)
Equality of Opportunity: Without access to insurance and funding, victims may be left without the resources they need to recover, especially in situations where their losses are severe or ongoing. Ensuring victims can seek these resources helps level the playing field, providing all individuals with the opportunity to recover from trauma or loss, regardless of their financial standing.
Emotional Relief: Financial support offers emotional relief, reducing the stress and anxiety that often accompany the aftermath of a traumatic event. Knowing that they have resources to cover expenses can help victims focus on emotional and physical healing.
Encouraging Timely Action: The ability to seek funding or insurance coverage ensures that victims can act quickly to address immediate needs, without worrying about the long-term financial implications.

CONCLUSION

The freedom to seek funding and insurance is critical for victims to regain their lives, restore their financial stability, and receive the necessary support to recover from their experiences.

Understanding M2 Recovery’s Unique Approach to Crypto Fraud Insurance

In this episode of The Gage, we had the pleasure of welcoming Lord Bellingham, a distinguished figure with a rich background in politics and business. With over three decades of experience as a Member of Parliament and now a member of the House of Lords, Lord Bellingham shared insights into his career journey and his current role as chairman of M2 Recovery, a pioneering company in the insurance sector focused on cryptocurrency fraud.

We began by exploring Lord Bellingham’s extensive political career, which started in 1983 and spanned until 2019. He recounted his experiences as both a minister and a backbencher, emphasising the importance of serving constituents and the unique challenges of representing a constituency like Northwest Norfolk. After stepping down from Parliament, he transitioned into the business world, where he has taken on a portfolio of roles, including his leadership at M2.

Throughout the episode, Lord Bellingham expressed his concerns about the risks faced by individual investors, particularly those who may not fully understand the volatile nature of cryptocurrencies. He urged listeners to approach crypto investments with caution and to consider the importance of insurance as a safeguard against fraud.

As we wrapped up, Lord Bellingham reflected on how his views on the crypto world have evolved since entering the business sector. He reiterated that while cryptocurrencies can be a valuable addition to investment portfolios, they are not suitable for everyone, especially unsophisticated investors.

This episode provided a fascinating look into the intersection of politics, business, and the emerging world of cryptocurrency insurance. Lord Bellingham’s insights and passion for the subject matter made for an engaging and informative discussion that hopefully will resonate with our listeners, especially those interested in the future of finance and investment security.

M2 Adds Legal Expenses to Its Crypto Insurance Product

Original posted on: https://insurance-edge.net/2024/12/09/m2-adds-legal-expenses-to-its-crypto-insurance/

M2 Recovery has enhanced its groundbreaking crypto insurance policy by launching its after-the-event legal expenses insurance. The innovative policy is designed and placed with Lloyd’s of London insurers in collaboration with boutique specialist insurance and reinsurance broker McGill and Partners.

The new expansion allows M2 Recovery to support individuals who have already experienced crypto theft, providing expert assistance in recovering stolen assets.

The need to include reactive solutions comes at a crucial time for the industry, as it battles an escalating wave of crypto scams and fraud. This new offering reinforces M2 Recovery’s commitment to safeguarding crypto investors and addressing the growing need for comprehensive support in an increasingly vulnerable landscape.

Recent research from the Financial Services Compensation Scheme (FSCS) reveals a surge in first-time crypto investors, drawn to the market by the prospect of quick returns. However, data from TRM Labs2 highlights a troubling trend: the value of stolen crypto worldwide more than doubled in the first half of 2024. With so many newcomers entering the crypto space, we can unfortunately expect more people to fall victim to scams in the future.

This troubling trend highlights both the increasing sophistication of cybercriminals and the pressing need for comprehensive protective and responsive measures within the digital asset space. M2 Recovery’s newly expanded insurance policy offering is specifically designed to address this critical need, delivering a vital solution for the market. While investigating and recovering lost crypto assets can cost upwards of £250,000.

Neil Holloway, Founder and Managing Director of M2 Recovery commented on the launch and product expansion:

“Here at M2 Recovery, the safety and security of your crypto remains our top priority. I have worked in the insurance industry for over 45 years, and I have never seen an insurance product as unique and as innovative as our services.

We were the first company in the world to offer legal expenses insurance for crypto, and we are now the first to offer this protection to investors who have sadly lost their assets. This is a game-changer for the industry, and we are proud to be leading the way in crypto legal insurance.”

Louise Abbott, Director of Legal Services at M2 Recovery, added:

“As a specialist crypto lawyer with over 10 years of experience in the sector, I have witnessed first-hand the increasing number and sophistication of scams and frauds within the crypto space. I work on these cases every day and witness the emotional damage they can do. It’s clear from the increasing number of crypto-fraud and related cases that come across my desk, that the demand for secure, after -the-event legal expenses insurance has never been greater.

The surge in crypto fraud highlights the critical need for trusted recovery solutions, and I am delighted that we are now able to offer this vital service.

As the industry grows, so does our commitment to protecting our clients in every stage.”

M2 Recovery tackles crypto scams with new insurance policy

Originally posted on: https://www.insurancebusinessmag.com/uk/news/breaking-news/m2-recovery-tackles-crypto-scams-with-new-insurance-policy-517330.aspx

M2 Recovery has announced an expansion of its crypto insurance policy with the introduction of after-the-event (ATE) legal expenses insurance. This new offering, developed in partnership with Lloyd’s of London insurers and broker McGill and Partners, is designed to help individuals recover stolen digital assets after they have already been targeted by crypto fraud.

According to a news release, the addition of ATE insurance comes at a time when crypto scams are on the rise. Recent data from TRM Labs revealed that the value of stolen crypto assets worldwide more than doubled in the first half of 2024. This surge in theft coincides with an increase in first-time crypto investors, many of whom are drawn to the market by the promise of high returns. However, this influx of new investors has also led to a growing number of victims of fraud.

M2 Recovery’s new policy is aimed at providing financial support and legal expertise for those who have already been affected by crypto theft. The company highlighted that investigating and recovering stolen assets can be a costly process, with expenses often exceeding £250,000.

Neil Holloway, founder and managing director of M2 Recovery, noted the significance of the new offering. “The safety and security of your crypto remains our top priority,” Holloway said. “We were the first company in the world to offer legal expenses insurance for crypto, and we are now the first to offer this protection to investors who have sadly lost their assets.”

Louise Abbott, director of legal services at M2 Recovery and a crypto law specialist, shared her perspective on the growing problem of crypto fraud. “I have witnessed first-hand the increasing number and sophistication of scams and frauds within the crypto space. I work on these cases every day and witness the emotional damage they can do,” she said.

“It’s clear from the increasing number of crypto-fraud and related cases that come across my desk, that the demand for secure, after-the-event legal expenses insurance has never been greater. The surge in crypto fraud highlights the critical need for trusted recovery solutions, and I am delighted that we are now able to offer this vital service.”

M2 Recovery Expands Groundbreaking Crypto Insurance to Include an After-the-Event legal expenses policy Amid Rising Crypto Scams

M2 Recovery has enhanced its groundbreaking crypto insurance policy by launching its after-the-event legal expenses insurance. This expansion allows M2 Recovery to support individuals who have already experienced crypto theft, providing expert assistance in recovering stolen assets.

Recent research^[1] from the Financial Services Compensation Scheme (FSCS) reveals a surge in first-time crypto investors, drawn to the market by the prospect of quick returns. However, data from TRM Labs^[2] highlights a troubling trend: the value of stolen crypto worldwide more than doubled in the first half of 2024. With so many newcomers entering the crypto space, we can unfortunately expect more people to fall victim to scams in the future.

This troubling trend highlights both the increasing sophistication of cybercriminals and the pressing need for comprehensive protective and responsive measures within the digital asset space. M2 Recovery’s newly expanded insurance policy offering is specifically designed to address this critical need, delivering a vital solution for the market.

Neil Holloway, Founder and Managing Director of M2 Recovery commented on the launch and product expansion:

Louise Abbott, Director of Legal Services at M2 Recovery, added:

“As a specialist crypto lawyer with over 10 years of experience in the sector, I have witnessed first-hand the increasing number and sophistication of scams and frauds within the crypto space. I work on these cases every day, and witness the emotional damage they can do. It’s clear from the increasing number of crypto-fraud and related cases that come across my desk that the demand for secure, after-the-event legal expenses insurance has never been greater.

The surge in crypto fraud highlights the critical need for trusted recovery solutions, and I am delighted that we are now able to offer this vital service.”

As the industry grows, so does our commitment to protecting our clients at every stage.”

Notes For further information on M2 Recovery please contact tommy@m2recovery.com

^[1] https://www.fscs.org.uk/globalassets/industry-resources/research/fscs-consumer-research-attitudes-towards-investing-in-cryptocurrencies-april-2023.pdf

^[2] https://www.trmlabs.com/post/thefts-from-hacks-and-exploits-surge-in-first-half-of-2024

The future of Crypto regulation

In this article, our director Louise Abbott considers the future of crypto regulation in England and Wales and discusses how other jurisdictions are regulating this sector with leading experts from across the globe.

Crypto assets have been the subject of increased scrutiny during the last couple of years, with both the government and the FCA having expressed concerned over ‘the wild west’ of finance.

Following the introduction of the Crypto Asset Financial Promotion Amendments Order 2023, and the Financial Services and Markets Act 2000, together with the Economic Crime and Transparency Bill, the sector is now looking ahead at what the impact of this regime has had, and what is planned for the future. Phase 1 of the current regulation seems to have had little effect (perhaps even a negative effect), with some exchanges moving out of the English promotion markets completely. The sector needs further regulation, but the introduction of phase 2 is not yet fixed.

On 11 September 2024, the new UK Labour Government introduced the Property (Digital Assets etc) Bill, which provides that digital assets may be considered to be personal property under the laws of England and Wales, and so may be afforded the same legal protections as traditional categories of personal property. In practical terms, this legislative confirmation is likely to reduce the scope for residual arguments as to whether cryptoassets are capable of attracting traditional property rights and may add to the growing attraction of London’s business and commercial courts as a crypto dispute resolution centre.

It was thought that Phase 2 would be introduced in the latter stages of 2024; heralding a wholescale regulation and establish a more comprehensive set of rules for most cryptoassets; beyond fiat-backed stablecoins. The proposed new rules will cover a wide range of activities, including issuance, exchange, investment, risk management, lending, custody, borrowing, leverage, safeguarding, and administration.. However, the recent election and subsequent new Labour Government’s manifesto priorities have caused these proposed developments to be held in the proposed legislative queue. Notwithstanding, it is widely anticipated that the extensive and impressive work undertaken by HM Treasury, the FCA and the Bank of England will influence the proposed changes; which would see the FCA’s workload significantly increase in its regulation of cryptoassets.

Regarding AI in finance, the new Labour Government has pledged to adopt an “agile” approach to regulation; one that promotes the use of technology to foster growth and inward investment, whilst ensuring consumer protection, as recently reported in the Financial Times.

How are other jurisdictions regulating crypto?

The Cayman Islands/BVI/Bermuda

The Cayman Islands, BVI and Bermuda are all overseas territories of the UK. They are not part of the UK or the EU. Except in relation to matters of foreign policy, sanctions, and defence (for which the UK is responsible), each is self-governing and has its own legislature and parliament.

They have all adopted legislation to implement the Financial Action Task Force’s guidance on virtual assets, which requires “virtual asset service providers” to have appropriate anti-money laundering (AML) and know your customer systems in place and to register with (or be licensed by) the regulator.

Bermuda has had a digital assets licensing regime for over eight years and offers different kinds of licences depending on whether the business is a startup, scale up or a fully operational business. As many digital asset-related activities are in the scope of Bermuda regulation, it tends to attract crypto businesses who are seeking to be regulated and obtain a licence.

The Cayman Islands is popular with community-governed crypto projects which operate a layer 1 blockchain and also conduct grant making and marketing through unregulated director-led foundation companies. These foundation companies do not need to have any shareholders and so are well-suited for a decentralised autonomous organisation.

The Cayman Islands also has a significant number of regulated crypto hedge funds domiciled there (recently estimated at over 60% of all digital asset funds globally). There are a small number of regulated virtual asset service providers (VASPs) operating from Cayman.

The BVI has historically attracted DeFi and unregulated crypto businesses (such as proprietary trading) due to its very modern and flexible companies law. It has only recently brought its VASP Act into force and the number of authorised VASPs is in the single figures (but expected to increase significantly in the next six months).

The issuance and sale of utility tokens is typically outside the scope of the VASP Act and is unregulated in the BVI (by contrast with Cayman and Bermuda which both regulate token sales). The BVI is therefore a very popular jurisdiction to set up single purpose token issuer vehicles.

Often clients will use a combination of the jurisdictions to achieve their business goals: for example, they will set up a BVI token issuer to raise funds and a Cayman foundation to operate and promote a layer 1 blockchain. The funds will be deployed in developing the protocol and promoting its adoption.

Many global digital asset businesses will include a Cayman, BVI and/or a Bermuda business as part of their overall structure to take advantage of the regulatory certainty each jurisdiction provides.

Portugal

Portugal is in a leading position in Europe regarding web3 ecosystems, with reports stating that “the founders of protocols and companies with a deep European footprint regard Lisbon as the world’s most important crypto hub”.

From a policy side, the Portuguese government has implemented a National Strategy for Blockchain to take advantage of investment opportunities (especially within the EU framework), the digital skills and abilities of professionals living in Portugal, the capacity for entrepreneurship and the will to place Portugal at the forefront of innovation in this field.

Cryptocurrencies (or crypto assets) currently have no bespoke regulation in the Portuguese legal framework and, therefore, are subject to the general provisions that regulate similar activities. This is except for specific activities related to the provision of crypto-assets services that are established in Law No. 83/2017, as amended by Law No. 99-A/2021, of December 31 (Portuguese AML Law) which transposed the AML Fifth Directive into national law.

Notwithstanding, Initial Coin Offerings (ICOs) that make crypto assets available which may qualify as financial instruments or securities will fall within the scope of the Portuguese Securities Code, being required to comply with established provisions related to Public Offerings. ICOs that issue crypto assets that are qualified as utility tokens are forbidden to use expressions related to financial markets.

Noteworthy is the Markets in Crypto Assets (MiCA) Regulation, applicable from January 1 2025, which has established a new legal framework for the European Union for the cryptoassets industry, and which will have a ripple effect throughout the world. It is anticipated that Portugal, and other Member-States, will enact national legislation to address specific aspects related to the practical implementation of MiCA. This legislation will primarily focus on defining the relevant national competent authorities responsible for ensuring compliance with MiCA and the specific sanctions regime.

MiCA operates within the European legislative framework, employing a phased approach for implementation. This deferment aims to facilitate the establishment of technical regulatory standards and delegated acts required for further clarity on specific aspects of the regulation.

Under Article 143 of MiCA, entities engaged in offering services with crypto assets under pre-existing legislation before December 30 2024 can operate based on previous standards until July 1 2026. This allowance extends until the authorities grant or refuse the new authorisation under the MiCA Regulation, depending on whichever occurs first.

In alignment with this transitional framework, VASPs registered under Portuguese AML Law can continue rendering services within this transitional period. They may operate until the occurrence of specific conditions:

a) On or before July 1 2026;

b) Obtaining authorisation as per MiCA Regulation; or

c) Refusal of such authorisation.

Member states retain the discretion to opt out or shorten the duration of the transitional regime if they consider their pre-existing national regulatory framework before December 30 2024 to be less rigorous.

Since January 1 2023, Portugal has also specific provisions regarding the taxation of crypto assets activities. Business income is taxed at progressive marginal tax rate up to 48% plus additional solidarity surtax of 2.5% on income between €80,000 and €250,000 and 5% on income exceeding €250,000. Income is either taxable within the so-called “simplified regime” or under the “organised accounts” regime.

Gibraltar

Gibraltar is a market leader in the regulation of cryptocurrency and blockchain technology, becoming one of the first jurisdictions to introduce comprehensive legal frameworks tailored to digital assets. With its pioneering Distributed Ledger Technology (DLT) regulations, Gibraltar has attracted numerous crypto funds and blockchain companies, establishing itself as a hub for innovation in the digital economy.

With the commencement of the DLT Regulations in 2018, Gibraltar became the first jurisdiction in the world to create a regulatory framework for crypto businesses. The DLT Regulations provide a clear, principles based regulatory framework for businesses using DLT for the storage or transmission of value belonging to others.

The primary objective of the Regulations was to ensure the Gibraltar Financial Services Commission (GFSC) could achieve its objectives by regulating the industry in a safe and secure manner and thereby protecting the reputation of Gibraltar and consumers. The DLT Regulations cemented Gibraltar’s position as a crypto-friendly jurisdiction and consequently, Gibraltar experienced significant growth within this industry as businesses started to make Gibraltar their home.

Cryptocurrencies themselves are not regulated. Instead, the DLT Regulations regulate the access points (onramp/offramps) to the markets as opposed to regulating cryptocurrencies specifically.

Firms operating within this space are also required to comply with Gibraltar’s AML, counter-terrorist financing and counter-proliferation financing rules and regulations contained within the Proceeds of Crime Act 2015 (POCA) and its subsidiary legislation.

Gibraltar also regulates the selling of digital assets, whether that be initial token offerings or over-the-counter offerings. Under the Proceeds of Crime Act 2015 (Relevant Financial Business) (Registration) Regulations 2021, a person engaging in that activity is required to register with the GFSC before selling digital assets. This is commonly referred to as a VASP registration.

Gibraltar does not levy capital gains tax, value-added tax, or withholding tax. Furthermore, there are certain personal tax statuses that can apply to individuals whereby one’s individual income tax position is capped. It operates a territorial corporation tax model. Consequently, companies pay 15% corporation tax on all profits that are accrued in or derived from Gibraltar.

Legal Expenses Insurance

It is clear that the regulatory gap in England and Wales plays a significant part in the number of problems we see in this sector. Crypto lawyers are seeing success for victims of fraud through the English Courts, for litigation, and arbitration, primarily via the London Court of International Arbitration, and this is seeping into crypto contracts, with England and Wales being selected as the choice of law and jurisdiction. English courts have been quick and decisive in the ability to plug the gaps in the regulatory shortfall. Louise Abbott of M2 Recovery, and Andrew Maguire of Littleton Chambers have secured many successes for victims of crypto scams through English litigation and arbitral proceedings in the LCIA .

This adds to the growing attraction of London via it’s business and commercial courts and the LICA, as a crypto dispute resolution centre. M2 Recovery Limited offer a legal expenses insurance policy to those wishing to pursue crypto cases. If you have questions or concerns about crypto regulation or insurance, please contact Louise Abbott.

Authored By

Louise Abbott, M2 Recovery Limited (London)

Andrew Maguire, Littleton Chambers (London)

Jay Gomez, Triay Law (Gibraltar)

Sara Hall Walkers Global (London)

Nuno Lima da Luz, Cuatrecasas Law Firm (Portugal)

Digital deception: How the crypto world must evolve to outpace sophisticated fraudsters

Originally posted on: https://www.thedigitalcommonwealth.com/posts/digital-deception-how-the-crypto-world-must-evolve-to-outpace-sophisticated-fraudsters

FRAUD, unfortunately, is a common challenge with any emerging asset class, and crypto is no exception.

Although my professional lens into the industry is one of fraud and scams, I believe that digital assets will play a key role in the future of finance.

The scams

Nowadays, this is just the tip of the iceberg – with scams being more intricate and elaborate by the day:

Romance or “pig butchering” scams, where individuals are targeted through dating apps and manipulated into investing.
Long-term investment scams using fraudulent trading platforms and exchanges.
Scams involving bogus training or educational programs, where victims are tricked into enrolling in a deceptive cryptocurrency course.
Giveaway scams, where investors are deceived into contributing to a project that suddenly collapses, with all liquidity rapidly siphoned off.
Rug pulls, where fraudsters create a seemingly credible project, lure in investors, and then abruptly abandon it, leaving the investors with nothing.

The adverts have reached up to 890,000 people on Meta’s social media sites, which include Facebook and Instagram. Today’s crypto investor faces a new series of challenges.

The recovery

If you are unfortunate enough to fall foul of a scam, retrieving crypto assets is a complicated and costly process. The legal expenses can be significant.

Most cryptocurrency frauds are perpetrated by large-scale organised criminal gangs outside the UK. The first step is tracing the crypto asset, to ensure it is available to be recovered.

The English Courts are well rehearsed in these cases, and it is possible to pursue unknown scammers, or those outside of the jurisdiction.

For those who fall victim to these scams, it is crucial to act swiftly and seek professional help.

M2 Recovery Launches World’s First Cryptocurrency Legal Expenses Insurance Policy

M2 Recovery has launched the world’s first insurance policy to cover the legal costs associated with recovering stolen cryptocurrencies.

Crypto crime hit a new all-time high in 2023, accounting for a record-setting $20.6 billion worth of blockchain transactions last year, with the number of blockchain transactions affected by criminal activity doubling compared to 2022. But for victims of crypto asset investment fraud, the cost of trying to recover stolen assets can quickly escalate. It can cost upwards of £250,000 to investigate and recover lost crypto assets, and if it is possible to find a litigation funder willing to act purely on a contingency basis, they will likely require a significant cut of the value of any recovery.

To combat this, M2 Recovery has launched its pioneering crypto legal expenses policy – the world’s first insurance policy for recovery of crypto assets valued at more than £250,000, addressing the pressing need for protection against the rising tide of crypto fraud.

M2 Recovery founder Neil Holloway says:

“Our insurance policy is the first of its type globally, which provides policyholders with legal expenses following crypto fraud. We can insure legal expenses relating to crypto assets collectively worth tens of millions for investors, neobanks and in-play betting companies.

“This includes digital assets invested through the metaverse, utility tokens such as Freeway Tokens, and crypto assets appropriated through man-in-the-middle attacks. And with more investment scams in play than ever before, reducing your exposure to risk on large crypto investments has never been more important.”

Crypto investors buying a policy have access to M2 Recovery’s market leading in-house legal team to recover the lost assets. The costs of recovery are also covered by the policy.

It’s the only insurance product in the marketplace that covers up to £250,000 of legal expenses and disbursements associated with recovering assets lost as a result of any type of theft or fraud.

McGill and Partners, the global boutique specialist (re)insurance broker, has assisted M2 Recovery in the design and placement of the policy with Lloyd’s of London insurers to allow M2 Recovery to launch this product.

Paul Morgan, Partner in the Financial Lines team at McGill and Partners said:

“The issue of fraud and loss of assets is a growing problem in the crypto world, and we’re delighted to be working with M2 Recovery on this pioneering solution, offering pre-incident crypto legal expenses insurance.

That we’ve been able to work in partnership to develop a solution that responds to a pressing need, emphasises the agility we have as a business to respond quickly and in a way that meets the pressing needs of the marketplace more widely.”

M2 Recovery’s director of legal services Louise Abbott said:

“The threat to crypto assets has never been greater, with cyber criminals becoming increasingly sophisticated in how they act. We have built a team of cyber intelligence specialists, recovery agents, forensic investigators and expert lawyers, all working under one roof with our proprietary technology to combat this fraud.

“In what is an incredibly complicated market, we are incredibly proud to have a high success rate, and this new policy means more victims will be able to use our exceptional skill set to recover their crypto assets”

Purchase your policy today

M2 Recovery crypto insurance launch party

After years of hard work, we have finally made it. Innovation has been the driving force of our new business from its inception. We have come up with something exceptionally unique in the market and were delighted to showcase our products recently at an exclusive launch event in London.

This is the beginning of the M2 story. We want to ensure people feel safe when investing in any crypto asset. Especially in light of recent trends, investing in any crypto assets is risky, and frequently people lose their crypto investments through fraud and theft. Last night we talked about the future of investing in crypto. We revealed our new before-the-event legal expenses insurance product with industry experts to make investing in crypto safer.

What protections do consumers have when investing in crypto?

With the UK regulator – the Financial Conduct Authority – clamping down on Binance, one of the world’s largest cryptocurrency exchanges, this serves as a reminder to anyone looking to invest in cryptocurrency to check both the legal status of the investments (and their host platform) and, more broadly, to check what consumer protections are in place, prior to investment.

In doing so, you may not necessarily be protecting your investments, but you will at least be aware of the risks involved.

The popularity of cryptocurrency has grown exponentially over the last ten years. With the price of Bitcoins selling at around $30,000 and with widespread media attention, it is easy to see why, on the face of it, it seems like an attractive investment proposition. However, there can often be a disconnect between consumers’ understanding of the nature of their investment and the true reality. For instance, according to research from the FCA, less than one in ten potential buyers of cryptocurrency have seen official warnings of investing in the currency. Not only this, but near fifteen percent of current crypto holders believed, incorrectly, that they had some form of a financial safety net.

The Financial Services Compensation Scheme

Unlike other investments, cryptocurrency is not covered by the Financial Services Compensation Scheme, which is able to compensate consumers for up to £85,000. This means that if a consumer invests in another form of currency and the platform which offers the purchase collapses, the consumer is protected.

Although a consumer is only covered up to £85,000, the expectation is that as amateur investors, this safety net goes a long way. However, that is not the case for cryptocurrencies.

Financial regulation and cryptocurrency

The FCA has recently ruled that the worldwide trading platform Binance cannot conduct “regulated activity” in the UK. This is another example of the financial regulators taking a strong stance against cryptocurrencies. This sentiment is not unique to the FCA. Andrew Baily, the Governor at the Bank of England, has previously noted that you should only “buy them if you’re prepared to lose all your money”.

From an advertising point of view, recently the Advertising Standards Authority declared that it would begin a major effort to seek out and remove any misleading or irresponsible crypto advertisements, in particular, those shared online and on social media platforms.

Unregistered cryptoasset businesses

The FCA has published on its website a list of UK businesses that appear to carry out cryptoasset activity and which have not registered with the FCA for anti-money laundering purposes. This extensive list notes the cryptoservices operating without permission and recommends that customers do not do business with them.

In the event that these businesses are shut down, for instance, your investments will not likely be returned.

Taking a legal perspective, it is incredibly important that clients conduct due diligence checks on prospective investments, to ensure that they fully understand the product they are investing in, and to ensure knowledge of how the industry works.

All too often, investors end up seeking legal advice having already been defrauded following crypto investments, and tracing the monies after it has been lost is much harder than carrying out the correct due diligence at the outset. A diligent mindset can hereby provide protection in the long run.

The sale of crypto-based derivatives

In the UK, some crypto products are even banned due to a high risk of consumer losses. For instance, the FCA has banned the sale of regulated crypto-based derivatives and other products to retail customers.

What cryptoassets are regulated?

However, what is of note to any prospective crypto investor is that some types of cryptoassets may be regulated, depending on how they are structured. For instance, the FCA does regulate crypto security tokens.

Cryptocurrency still representing an investment opportunity

Finally, it is worth noting that some businesses are starting to accept cryptocurrency by way of share investment. These can be a very valuable asset if you get it right.

Conclusively, because cryptocurrencies remain largely unregulated at present, they are less protected than other forms of investment. That being said, this does not necessarily mean that those crypto investments cannot represent a sound investment, nonetheless.

If one invests in a legitimate cryptocurrency, knowing full well the risks involved and the rules governing such an investment, crypto no doubt has the potential to bring in significant returns. What is crucial is that one informs themself to the fullest extent, prior to investment, of all the relevant factors that need to be considered.

What are the risks and rewards of investing in cryptocurrency?

Investments in cryptocurrency are becoming increasingly popular. Many such investments have been doing extremely well lately, with Bitcoin leading the way. The cryptocurrency market is at the cutting edge of financial technology and has created a real buzz, which is attracting both amateur and professional investors to spend billions of pounds each year. However, crypto investment can come with huge risks, which all investors should be aware of before looking to purchase cryptocurrencies.

A crucial starting point for all speculative investors is to be aware that unlike legal tender issued in England, cryptocurrencies are not backed by any government authority. This means the consumers cannot (at the present time) access any FCA compensation scheme for cryptocurrency losses due to fraud. Investors, therefore, need to be thorough with their due diligence as it is their responsibility to check the nature of all investments.

This is even more so in the current climate – fraud is on the rise, especially within the financial and banking sector, and cryptocurrency investments are ripe hunting ground for fraudsters who are making the most of its growing popularity and unregulated status.

Investors need to ensure they properly understand the investment they are making and carry out the appropriate due diligence on the scheme/end investment. The risk is entirely on the investors, with no formal protection in place if they take the wrong gamble. There has been a significant rise in crypto scams, with many wallets held on the blockchain being fed into scam companies, and the wallets emptied and stolen.

Financial institutions must maintain certain protection activities against money laundering and fraud, the transmission of funds, and more. New types of wallets are being released all the time, and while cryptocurrency exchanges are always improving their security measures, investors have so far not been able to fully eliminate the legal risks associated with owning cryptocurrencies, and it is likely that they never will.

Organisations are becoming more sophisticated with the services they can offer crypto holders. Digital assets are becoming increasingly popular amongst businesses, as well as individual investors, with many businesses now accepting collateral in the form of cryptocurrencies. The modern business world leans heavily on the success of the cryptocurrencies.

Will borrowers soon demand these types of service from their banks? The potential implications of cryptocurrencies are massive. The banking industry was historically resistant, in large part, to this technical disruption. However, that is beginning to change due to the development of blockchain technology.

As we are moving towards a world when we can buy products using cryptocurrency, this means that crypto holders may start using their crypto wallets on a blockchain platform to buy products, raise loans, use faster payments, etc., so it is more akin to a bank account. If anything, though, having this multifaceted platform in which to conduct a range of matters, only amplifies the need to protect investments.

The reality is that cryptocurrency is here to stay, and it is hugely successful. Banks need to prepare for a more permanent change towards this type of investment. However, given the risks involved, and the importance of our banking services for the economy, it is a move not to be taken lightly.

Recovering stolen cryptocurrency

How the English courts are assisting victims of crypto fraud

The theft of crypto assets, such as Bitcoin, Tether and Ethereum, by fraudsters is becoming increasingly common. The crypto market exploded in 2021, with the total transaction volume growing by some 550% to reach $15.8 trillion. According to Chainanalysis, crypto crime hit an all-time high of $14 billion in 2021.

In this article, civil fraud and asset recovery partner Louise Bennett and barrister Andrew Maguire of Littleton Chambers look at the ability of the English courts to use Freezing Injunctions, Bankers Trust Orders (Disclosure Orders against third parties), and Contempt Proceedings to help solve the identity of the fraudsters and assist victims to recover their stolen assets.

Legal orders available to seize stolen crypto assets

It has been well established for over the past 18 months that the English court considers crypto assets to be property under English law, which means that the court is able to make Proprietary Injunction Orders (subject to the relevant tests being met) in aid of tracing claims and Worldwide Freezing Injunctions over the stolen assets. The English court is also able to grant such orders against Persons Unknown (as long as the description falls within a relevant defined group). This has been particularly important because victims of crypto crime are often powerless to get their money back from anonymous fraudsters who could be anywhere in the world.

Increasingly, over the past few years, proceedings have been issued against Persons Unknown and many Proprietary Injunctions and Worldwide Freezing Injunctions have been granted. In addition, and perhaps more importantly, the court has assisted victims in trying to identity the fraudsters by granting Bankers Trust Orders against the cryptocurrency exchanges, such as Binance, Kraken and Huobi.

Assisting victims of cryptocurrency fraud

Having acted for many victims of frauds in these types of cases, the victim is reliant upon the intervention of the court to enable them to trace their stolen assets.

In a recent case, XY v Persons Unknown (1) Binance Holdings Ltd (2) Huobi Global Limited (3) [2021] EWHC 3352 (Comm) (heard before HHJ Pelling QC sitting as a High Court Judge, 27 October 2021), we obtained a Worldwide Freezing Order made against the unknown fraudsters and a Proprietary Injunction and Bankers Trust Order as against Binance (registered in the Cayman Islands). At the return date, a further Worldwide Freezing Injunction and Bankers Trust Order was made as against Huobi Global Limited (registered in the Seychelles).

This case involved the theft of cryptocurrency US Dollar Tethers (USDT) by cyber criminals acting on the dating site Tinder and other social media, a practice known as honey trapping. The fraudsters built up a relationship with the Applicant and persuaded them to open a Binance account and transfer the USDT to a bogus electronic platform. The sum of £83,515 was stolen, which represented the Applicant’s life savings. As the applicant was ordinarily resident in England, and the loss was suffered in England, the English court was the correct jurisdiction and English law applies, although the assets could be anywhere in the world. The English courts are unusual in this approach, choosing England as the situs of crypto assets owned by someone ordinarily resident in England. This makes England a popular jurisdiction for victims of fraud as the chances of recovery are significantly higher. Both legal tests need to be met for English law and jurisdiction to apply.

Cross-undertaking in damages

The usual price to be paid for obtaining any injunction is for the applicant to offer a cross-undertaking in damages, the purpose of which is designed to mitigate the risk of leaving a person restrained by the injunction unprotected if ultimately the underlying claim fails. Such an undertaking is usually accompanied by evidence of the applicant’s financial health and ability to meet any undertaking. In this case, the Judge (unusually) permitted the cross-undertaking in damages to be given although it was valueless. The Applicant was not able to proffer any financial cross-undertaking, yet the fraud was obvious. It was ordered that whilst a cross-undertaking was given, it was noted that it was presently worthless as there were no presently held assets to back it up. The Judge decided that to refuse an injunction in the circumstances of this case would be unjust and he had “no difficulty” in proceeding.

Persons Unknown

The English courts are showing a real desire to assist with the recovery of crypto frauds. The courts recognise that at the time of issuing proceedings against Persons Unknown, it is difficult, if not impossible, to ensure that service of the papers is received through official channels by the fraudsters. In this case, the fraud had been committed through social media and WhatsApp. The Applicant and the fraudsters had been in correspondence via WhatsApp and so the Judge permitted service by WhatsApp message. The added benefit of receiving the WhatsApp two blue ticks was proof that the message has been received and read. This case has also demonstrated a reluctance on the part of the exchanges to co-operate with victims of fraud in disclosing the identify of fraudsters without a court order. In some case, exchanges are opposing Bankers Trust Orders.

As these cases become more frequent and more Bankers Trust Orders are granted, the court increasingly will not hesitate to seek to enforce any of those Orders that are not complied with by committal proceedings for contempt of court, against directors of exchanges.

Through the proactive action of the courts, there is a higher rate of recovery, and there is hope for victims who act quickly and have the full force of the law behind them.

If you have any questions or have experienced a crypto fraud and need advice on how to recover lost assets, please contact Louise Bennett.

A new frontier for law

Increasing sophistication

The fightback

The crypto safety net

M2 Recovery Hosts Parliamentary Panel in the House of Lords

How The DeFi Industry Can Strengthen Its Cyber Defenses

The Increasing Frequency Of Hacks

Why DeFi Is Vulnerable

Strengthening Cybersecurity

Firms in and around Mayfair are helping investors navigate the market and combat fraudulent scammers targeting areas of high wealth

Digital deception: How the crypto world must evolve to outpace sophisticated fraudsters

Lord Bellingham: ‘Cryptocurrency has become a new frontier for scammers’

Crypto’s ‘Trust’ Problem

Former NI Secretary of State ‘thrilled’ with new job away from politics

Former Secretary of State for Northern Ireland joins M2 Recovery

M2 Recovery Wins at Prestigious Digital Commonwealth Awards

M2 Recovery nominated for Best Insurance Provision at The Digital Commonwealth Awards

M2 Recovery Crypto Fraud & Recovery Webinar: Key Insights

Democracy Talks: Crypto as a force for democracy and the requirement for an impartial judiciary.

Understanding M2 Recovery’s Unique Approach to Crypto Fraud Insurance

M2 Adds Legal Expenses to Its Crypto Insurance Product

M2 Recovery tackles crypto scams with new insurance policy

M2 Recovery Expands Groundbreaking Crypto Insurance to Include an After-the-Event legal expenses policy Amid Rising Crypto Scams

The future of Crypto regulation

How are other jurisdictions regulating crypto?

Legal Expenses Insurance

Digital deception: How the crypto world must evolve to outpace sophisticated fraudsters

The scams

The recovery

M2 Recovery Launches World’s First Cryptocurrency Legal Expenses Insurance Policy

M2 Recovery has launched the world’s first insurance policy to cover the legal costs associated with recovering stolen cryptocurrencies.

Purchase your policy today

M2 Recovery crypto insurance launch party

What protections do consumers have when investing in crypto?

The Financial Services Compensation Scheme

Financial regulation and cryptocurrency

Unregistered cryptoasset businesses

The sale of crypto-based derivatives

What cryptoassets are regulated?

Cryptocurrency still representing an investment opportunity

What are the risks and rewards of investing in cryptocurrency?￼

Recovering stolen cryptocurrency￼

How the English courts are assisting victims of crypto fraud

Legal orders available to seize stolen crypto assets

Assisting victims of cryptocurrency fraud

Cross-undertaking in damages

Persons Unknown

What are the risks and rewards of investing in cryptocurrency?

Recovering stolen cryptocurrency