The use and popularity of cryptocurrency and blockchain technology has grown exponentially through the years. With it, the prevalence of crypto-related disputes, fraud included, has also grown. Law firms and lawyers play a key role in recovering fraudulently obtained funds through processes involving investigation and tracing.
Cryptocurrency fraud
Cryptocurrency fraud often involves investment managers or new businesses offering to help individuals grow their money if they buy a cryptocurrency and transfer it to the fraudster’s account, where after a long period of time, the victims are unable to withdraw money from the account. Recently, a cryptocurrency on the Solana Blockchain gained widespread attention for a different kind of alleged fraud. The cryptocurrency, termed “Hawk Tuah”, gained popularity due to the viral popularity of its namesake, with Hailey Welch, the creator of the cryptocurrency, marketing the currency and driving its initial market capitalization to 490 million USD. Within 20 minutes, the market capitalization dropped to 41 million USD. Welch and her team were accused of a “rug pull” scam, selling the majority of the tokens to insiders before launch and releasing only 3% to the public. These kinds of frauds are likely to become more and more prevalent. Law firms and lawyers are able to assist in the recovery of these funds through methods mentioned below.
Asset Tracing
In Singapore, victims of fraud will traditionally seek either recovery of the funds or some form of compensation through civil proceedings. Initiating such proceedings allows the victim to pursue their claim before, at or after the proceedings through a variety of methods. Compared to criminal proceedings, which are governed by Singapore’s prosecutorial office, the Attorney-General’s Chambers, the victim has little control over the proceedings. Asset tracing is a method of recovery used in civil proceedings when the victim’s property has been mixed with other property or funds. The victim will identify the proceeds of their property, who they lie with, usually the fraudster, and justifies their claim that the proceeds can be regarded as representing the property of which they have been defrauded. This process can often be complicated; which is where lawyers can assist in the process.
Establishing Fraud and Recovery
In order to succeed in a claim of fraudulent misrepresentation, the following needs to be established:
A representation made by words or conduct; the representation needs to be
- Made with knowledge that it is false
- Made with the intention of being acted upon by the victim
- The victim had acted upon the false statement
- The victim had suffered damages by doing so
The damages sought from a claim of fraudulent misrepresentation will be compensatory, meaning that it will be for financial loss from said misrepresentation. In establishing this misrepresentation, lawyers play yet another key role in investigating the situation and hence ensuring that the victim is able to prove that all the terms have been satisfied.
In the case of criminal proceedings
In the cases involving criminal proceedings, the Monetary Authority of Singapore will often work jointly with the Commercial Affairs Department to resolve the case. At the end of the investigation, the Attorney-General Chambers will decide whether to charge the perpetrator, give the perpetrator a warning or take no further action. In this kind of proceedings, victims often have little to no information about the investigation
Conclusion
In conclusion, lawyers play an important role in the recovery process, not only in tracing the assets, but also proving that fraudulent misrepresentation occurred and hence allowing for compensatory recovery of funds.
Please contact our panel of lawyers who specialise in Crypto Frauds, Asset Tracing and Investigation if you require any support in these areas.
