The U.K. Serious Fraud Office (SFO) has initiated a criminal investigation into Basis Markets, a defunct crypto hedge fund accused of defrauding retail investors out of $28 million. On Monday, two individuals believed to be central figures in the alleged scam were arrested during coordinated raids in London and near Bradford.
While details regarding the specific roles of the arrested men remain undisclosed, they face multiple charges related to fraud and money laundering. The SFO has characterized Basis Markets as a suspected cryptocurrency scam, noting that it operated without proper registration and was active during the peak of the 2021 crypto market surge.
Promoting itself as a “crypto hedge fund,” Basis Markets attracted investment by offering low-risk, arbitrage-based yields. This led to the successful raising of at least $28 million through two fundraising rounds in late 2021, during which investors received worthless non-fungible tokens (NFTs) and tokens. However, the operation was abruptly halted in June 2022, with the team citing “proposed new US regulations” as the reason for the suspension.
The U.K. has seen a proliferation of failed or fraudulent crypto ventures, largely attributed to its stringent regulatory environment. The Basis Markets case, however, suggests a more egregious scenario, potentially involving a calculated rug pull as funds were allegedly misappropriated into personal wallets. Following a prolonged silence of over three years, the SFO has ramped up its efforts to investigate the fundraising activities and the subsequent collapse of Basis Markets, starting with this week”s arrests.
In a public statement, SFO Director Nick Ephgrave QPM emphasized the agency”s commitment to combating cryptocurrency-related fraud. “With our expanding cryptocurrency capability and growing expertise in this area, we are determined to pursue anyone who would seek to use cryptocurrency to defraud investors. Today”s action is an important step in our investigation, and we”re urging anyone with information to come forward and support our enquiries,” Ephgrave stated.
This investigation follows another high-profile case in the U.K. involving Zhimin Qian, a Chinese national dubbed the “cryptoqueen,” who faced a lengthy prison sentence for her role in a multibillion-dollar scam affecting over 128,000 individuals in China. Qian had fled to the U.K. after her fraudulent scheme collapsed, ultimately receiving a sentence of over 11 years after pleading guilty to laundering substantial amounts of Bitcoin linked to her $5.5 billion fraud.
