COVID-19 – the rise of cryptoasset scams
Whilst communities have rallied together during the ongoing COVID-19 pandemic, opportunistic fraudsters have at the same time sought to exploit the situation by targeting owners of cryptoassets including Bitcoin.
As covered in our recent Perspective series on cryptoassets; Part I, Part II, Part III and Part IV, in 2019, the High Court held that cryptoassets are capable of constituting property. This means legal tools are available to victims seeking to recover misappropriated cryptoassets.
Within a month of lockdown restrictions being imposed, numerous COVID-19 related cryptoasset scams were reported in the UK. Manchester City Council, Pembrokeshire County Council and Norfolk County Council all issued COVID-19 scam alerts, making reference to cryptoasset scams, including:
- Information Scams - criminals pretending to be from organisations such as the Centre of Disease Control and Prevention or the World Health Organisation, promising non-existent or fake COVID-19 information in return for payments made using cryptocurrency.
- Medical Provisions Scams - criminals purporting to be online vendors of Personal Protective Equipment requesting payment in the form of cryptocurrency for goods that are subsequently not delivered.
- Charitable Donations Scams - criminals asking for cryptocurrency donations supposedly to aid the NHS in its fight against COVID-19.
The Financial Conduct Authority has also warned investors to avoid COVID-19 related cryptocurrency schemes that appear too good to be true.
Legal principles governing cryptoassets
The key legal principle that determines whether action can be taken to recover stolen cryptoassets is whether it is deemed to be property in the eyes of the law. Given that cryptocurrency constitutes lines of code stored in an electric ledger (i.e. the blockchain), it is, on one view, mere information rather than something constituting property. Fortunately, that view has not prevailed.
In AA v Persons Unknown  EWHC 3556, the High Court recognised that cryptoassets are capable of constituting property. In short, the Court held that Bitcoin meet the four criteria set out in Lord Wilberforce’s seminal definition of property in National Provincial Bank v Ainsworth  1 AC 1175. These cases were discussed in previous Perspectives; Part III and Part IV respectively.
Steps victims of cryptoasset scams can take
As cryptoassets are recognised as capable of constituting property, the English law of property will apply to the day-to-day use and transfer of such assets. In circumstances where there has been a scam or other criminal event, the English Courts can be used to seek to trace and recover such cryptoassets.
Whilst individuals and businesses should remain alert against potential COVID-19 related scams, there is at least now the real possibility of using legal tools in the recovery of misappropriated assets, thanks to recent legal developments.