Law firm urges crypto care after £130,000 High Court win for scam victims

Ellis Jones Solicitors acted for the pair after they transferred digital tokens to a UK-based individual to trade on their behalf.

Under their agreement, they expected to receive profits when he invested the tokens, known as Ethereum.

But after some initial trading activity and updates, he failed to return any funds.

Solicitor Daniel Lewis, a banking and finance litigation specialist and a member of Ellis Jones’ recently launched cryptocurrency team, said: “It became clear he was not going to be adhering to the agreements he had with both of our clients.

“We engaged in pre-action correspondence which the defendant likewise failed to properly engage in, so we issued a claim for both clients for the monetary value of the cryptocurrency owed.

“We identified cryptocurrency within three wallets as the only known assets to enforce our clients’ judgement against and applied to the High Court for a freezing injunction, disclosure and preservation order.

“We were successful in obtaining a default judgment value of £130,000.”

Daniel said the case illustrates the risk of cryptocurrency investment scams and comes amid a huge rise in reported digital frauds.

He said: “Courts are alive to the fact that more people are being scammed and are looking for redress to get their money back, so are willing to provide a number of remedies to assist claimants in doing so.

“Scams are more common now as crypto becomes more attractive as an investment. Because it can be quite complicated, unsophisticated investors may not really understand how cryptocurrency works. A fraudster posing as a trusted investment manager will say they can do it all for you, leaving an individual ripe to be taken advantage of.”

Cryptocurrencies are based on blockchain technology which acts as an ‘online ledger’ to verify that transactions using a cryptocurrency, and stages within a transaction, have taken place and that the digital tokens involved have the requisite value.

Daniel said: “Although rules now exist regarding the marketing and promotion of cryptocurrencies, cryptocurrency is still largely unregulated and people do need to be careful about offers of unrealistic returns.

“As with any ‘get rich quick’ scheme, if it sounds too good to be true, it most probably is.

“Our advice is always to do your research before investing. Check with the Financial Conduct Authority (FCA) as to whether the company, prospective investment manager and the exchange they propose to use is FCA-regulated and registered and, if an FCA registration number is provided on a company website, that the company matches the one actually on the register.”

“Prospective investors should also keep an eye on what kind of scams are out there and be aware of advances in regulation.”

In line with a big rise in crypto-related enquiries, Ellis Jones has created a dedicated six-strong digital asset team working across the departments of: Banking & Finance Litigation; Dispute Resolution; Family; Business Services; and Wills, Trusts & Probate.