• Emily Drake & Mikhail Lastovskiy, head of forensics and business intelligence & legal director at Gateley Legal


• 03.05.2022 02:30 pm
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Digital assets and cryptocurrency lost to fraud can sometimes be recovered, but only if you act fast and seek expert support. 

That’s the advice from Emily Drake, a legal director at Gateley Legal, who comments: “It’s tempting to see blockchain as a ‘black hole’ for fraud, but records of ownership and the right discovery techniques do mean that stolen digital assets can be traced”.

“If the identity of the fraudster is known, these assets can be frozen and seized. If not, experts can employ the right discovery techniques to reveal who the fraudster is. Timing, however, is crucial.”

According to Emily, detailed global transaction ledgers, as well as the impossibility of forging records in blockchain technology, mean that stolen assets can sometimes be traced to their final destinations.

“Ledgers showing every transaction are maintained and verified by thousands of users around the world,” she explains. “Furthermore, it’s often likely that the fraudster will actually hold on to the stolen assets, either to launder them or perpetrate more fraud.”

Despite their volatility, digital assets and cryptocurrency are becoming more widespread, with HMRC even recognising the value of these assets and developing a more proactive approach to recovering them as proceeds of fraud.

However, cryptocurrencies and NFTs (non-fungible tokens) are also popular amongst hackers and fraudsters, with many requiring payments in digital assets.

Mikhail Lastovskiy is head of forensics and business intelligence for Gateley Omega, which provides specialist, multi-jurisdictional forensics and business intelligence services, including asset mapping, tracing and recovery support. He says: “It’s easy to see why they’re so popular. Digital currencies are easy to move and provide the hacker with a level of pseudo-anonymity. Furthermore, although regulation of this market is evolving, it is still relatively immature and, therefore, open to exploitation.”

He continues: “This shouldn’t dissuade people from investing in these assets, but it does mean your approach to risk management and crisis response needs to be watertight. You need the resource to act quickly and access to the right expertise.”