The Crypto Crash - What next?

Since the crypto market stormed across the financial landscape it has been almost invariably floated as a good investment and for some it proved to be so. As confidence grew in the new concept of virtual currency, new entries to the market grew and by bringing faster money transfers and a raft of other benefits, cryptocurrencies rode an ever-rising wave.

Slight warning bells were heard concerning the market’s volatility and the fact that fraudsters and money launders had warmly embraced this new vehicle for their nefarious activities and also novice investors were being scammed as they flocked to access the latest “make a fortune quick” scheme. The global challenges experienced over the past two years seemed to accelerate the need to invest in systems that delivered well. Functioning outside the existing underlying foundation for the financial sector and without backing from public organisations cryptocurrencies are largely unregulated. Since January 2020 the Financial Conduct Authority (FCA) has overseen the registration of firms dealing with crypto assets in compliance with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. The FCA warns on its website that crypto assets are extremely high-risk investments and individuals investing in crypto assets are unlikely to have access to the Financial Ombudsman or the Financial Services Compensation Scheme in the event of something going wrong.

Demetri Bezaintes, an Associate, commented “The latest and most disastrous turn of events in the crypto market appears to have fulfilled the doomsayers' predictions. However, if and it is by no means guaranteed when, the market begins to rise investors must recognise that extreme caution must be practised in this explosive and unpredictable market. Its very structure suggests that the lack of substance might prove to be its undoing.”

Giambrone & Partners dedicated cryptocurrency team point out that this latest crash has highlighted the fact that so many investors were lulled into a false sense of security and blinded into investing their entire savings in a market with little or no regulatory security for investors. The price fall of 94 in a period of 24 hours will slow down or even halt the global acceptance of cryptocurrencies.

HM Treasury report if adopted may go some way to shore up the crypto sector's reputation and ensure that when the recovery begins investors have at least some point of reference. The government recognises the benefits in efficiency and also notes that owners of cryptocurrencies buy goods and services; it seeks to find a way to bring crypto into the regulatory fold and protect consumers from the catastrophic consequences of an abrupt overnight drop in value. This may lead to a fundamental change in scale and in the environment, impacting across all markets.

Demetri Bezaintes is a Greek lawyer (dikigoros) admitted to practise in England & Wales as a Registered Foreign Lawyer (RFL). He is an associate based in the London office within the financial services litigation department.

Demetri has a thorough knowledge of investment fraud and fund tracing. He works tenaciously for our clients, advising on cryptocurrency, Forex trading disputes and regulatory investigations. He draws his expertise in investment law from his experience in the banking sector and his studies in banking and financial services regulation. Before joining Giambrone & Partners Demetri worked at an international bank, where his main focus was the enforcement of freezing orders and third-party debt orders.

He approaches cross-border jurisdiction matters with a comprehensive view, based on his knowledge of both civil and common law. After qualifying as a lawyer in Greece, he obtained a Graduate Diploma in Law from the University of Westminster and is currently studying for the LPC at the University of Law.

Giambrone & Partners banking and financial fraud team can provide a comprehensive legal and regulatory service, including criminal investigations for both organisations and individuals. Our lawyers have developed strategies to assist in recovering lost assets across the market.

If you would like to know more about cryptocurrencies please contact Demetri’s clerk Sam Groom SG@giambronelaw.com or please click here