BTC scammers make UK their home, exploiting lax company registration laws: report

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Digital asset scams have surged in the past few years, with millions of victims losing billions of dollars. A new report now points to the U.K.’s lax company registration laws as a key factor in promoting this sector, with the country reportedly home to hundreds of scam companies.

An investigation by the Bureau of Investigative Journalism and the weekly U.K. newspaper The Observer found that organized cybercriminal groups are increasingly using the U.K. as a virtual base for their operations. The probe found at least 168 registered U.K. companies accused of fraud through digital assets and forex.

The criminals are reportedly exploiting the lax company registration requirements in the U.K. to set up shop. Not only is it extremely cheap to set up a company in the country—it costs about $15—but it’s also easy to get away with fraud as no identification is required, the report noted. In addition, applicants can use fake addresses to conceal their identity.

The probe found that the fraudulent companies were registered to fake addresses, ranging from empty shops to popular restaurants and residential homes. They, however, appeared to have no genuine links to these addresses. The probe further found that this practice is well known to U.K. authorities, but little had been done to address it.

Commenting on the rise of fake companies, Margaret Hodge, who chairs the Anti-Corruption and Responsible Tax group in Parliament, stated, “This horrible story is not an isolated incident. People traffickers, drug smugglers, fraudsters and scammers have been exploiting our lax and opaque corporate laws for years.”

Hodge believes that the country needs stricter rules and higher fees for company registration.

“Anything short of that and the world’s criminal and corrupt will see that they can continue to manipulate and exploit us,” she pointed out.

The rise of ‘pig butchering’ BTC scams in the UK

In 2022, digital asset scams in the U.K. shot up 72%, with victims losing more than $400 million, a report by ActionFraud revealed. Other reports worldwide, from the U.S. to Australia, have also disclosed hundreds of millions in annual losses to BTC scams.

In the most common cases, criminals establish a relationship with their victim first. Investigators say that the script is almost always similar, with the scammers exploiting greed or romance to reel in their victims. Once the victim trusts enough, they suggest a digital asset investment, promising lucrative returns. The scammers then cut off all communications once they have defrauded their targets.

This kind of scam is known as pig butchering, borrowing from sha zhu pan in Chinese, which refers to the process of fattening a pig before slaughtering it.

According to the Observer’s investigation, the U.K. is home to hundreds of companies engaging in pig butchering BTC scams. Most of the directors for these companies are reportedly based in China. And while these scammers initially targeted male victims in China and the U.K., they have expanded globally, with victims in the U.S., Canada, Turkey, Germany, Poland, and more.

Most victims say they fell for the scams because the companies were based in the U.K. This, they claim, gave the scammers credibility and the victims a false sense of safety.

“You subconsciously think you have a way to go after them if they take away all your money. Had this company been registered in China, I wouldn’t trust it. I just wouldn’t,” one software engineer from California who lost $536,000 to a pig butchering BTC scam commented.

While the U.K. houses most of these companies, the criminal rings running them have been found to be based in Southeast Asia and China. A probe by ProPublica found criminal syndicates to be trafficking unsuspecting job seekers to “fake sweatshops” where they are forced to scam their victims.

Watch: Trust But Verify: Everything