Synopsis: The UK Serious Fraud Office has launched its first major crypto probe into Basis Markets, accused of a $28 million scam using NFTs and tokens. Two men were arrested in London and Bradford on fraud and money laundering charges, highlighting risks in unregulated crypto investing.
The UK Serious Fraud Office (SFO) has launched its first major cryptocurrency investigation, targeting Basis Markets, a failed crypto hedge fund accused of defrauding retail investors of $28 million. Two men were arrested in coordinated raids in London and near Bradford on suspicion of fraud and money laundering. This high-profile case brings renewed attention to risks faced by retail investors in the unregulated crypto space.
Basis Markets marketed itself as a crypto hedge fund promising low-risk, arbitrage-based returns. The scheme raised $28 million via two fundraising rounds in late 2021: one through non-fungible token (NFT) sales and another through token offerings.
Investors received NFTs and tokens that ultimately became worthless, while funds allegedly funneled into personal wallets. The project abruptly shut down in June 2022, citing US regulatory changes though authorities suspect this was a calculated “rug pull.”
Scheme Overview and Fundraising Strategy
Basis Markets portrayed itself as a yield optimizer using sophisticated crypto arbitrage strategies traditionally reserved for institutional players. In November and December 2021, it raised significant capital by convincing retail investors to buy NFTs for “membership” and tokens offering governance and profit-sharing rights. Promises of extraordinary returns such as monthly yields multiple times higher than initial investments enticed many to participate.
In truth, these claims lacked credibility. Investigators pointed out unrealistic projections and confirmed funds were misappropriated rather than invested as advertised. Investors were handed worthless digital assets, while the founders allegedly flaunted luxury items on social platforms, raising red flags about misuse of money.
Arrests and Ongoing Investigation
With support from local police, the SFO raided sites in Herne Hill, London, and near Bradford, West Yorkshire. Two men, aged in their 30s and 40s, were arrested on suspicion of multiple counts of fraud and money laundering. Authorities have yet to disclose their identities.
SFO Director Nick Ephgrave emphasized the agency’s growing expertise in crypto investigations and its commitment to holding fraudsters accountable. The SFO called on investors with information to come forward, as the investigation remains active. Seized digital devices and documents are being analyzed to trace the flow of funds and expose the full scope of the scam.
Broader Impact and Investor Implications
The Basis Markets case underlines the dangers inherent in unregistered crypto investment schemes, particularly those targeting retail investors with promises of quick, low-risk gains. It also signals the UK’s increasing resolve to combat crypto-related fraud through rigorous enforcement and regulatory scrutiny.
Following the investigation announcement, the Basis Markets’ native token plummeted by nearly 40%, reflecting shaken investor confidence. This probe could establish regulatory precedent for how the UK manages future cryptocurrency frauds, especially as digital assets grow in popularity and complexity.
For retail investors, the case serves as a stark reminder to exercise caution, demand transparency, and thoroughly research crypto projects before investing. The allure of high returns must be balanced against the risk of sophisticated scams.
This expanding SFO investigation into Basis Markets offers hope for justice and recovery for defrauded investors. Yet, it shows the need for investors to remain vigilant in the fast-evolving crypto world. While crypto innovation continues, scams like this highlight the ongoing battle between legitimate growth and fraudulent schemes.
The UK’s resolute action also echoes recent high-profile crypto fraud prosecutions, including the conviction of the so-called “cryptoqueen” Zhimin Qian, who was sentenced to 11 years for a multibillion-dollar Bitcoin laundering scam. Together, these cases show regulators are tightening scrutiny on digital asset crimes.
Written By Fazal Ul Vahab C H