The board’s role in digital asset fraud cases

The board’s role in digital asset fraud cases: What should a board do when digital asset fraud is suspected?

A growing number of mainstream companies now hold or transact in digital assets in some form: as part of treasury strategy, in supplier or client payments, or embedded in acquisitions. Boards that previously had no exposure to digital assets are increasingly investing in them.

As cryptocurrency and blockchain technology continue their meteoric rise in popularity, complex digital asset fraud is rapidly emerging as a major threat to businesses. To remain secure, compliant, and risk aware, boards must consider strategies to protect their digital assets. This may involve establishing risk frameworks and monitoring digital assets to better understand them and their supply chain.

If a business falls victim to digital asset fraud, the fraud must be investigated in the first instance to maximise the chances of a successful recovery. Professional support can be called upon to investigate, trace, and recover assets, including in insolvency cases.

A general timeline of events after suspecting digital asset fraud includes:

• Mapping the movement of assets across wallet addresses, identifying patterns, consolidation points, and attempts to obscure ownership
• Linking anonymous wallet addresses to identifiable individuals or entities

• Creating a robust digital asset security framework to minimise the risk of infiltration. This may include distributing authorisation power between board members and creating board-level policy to clearly establish how digital assets can be held, transferred, and audited — and by whom.

For boards, the governance lesson is straightforward: the response to suspected digital asset fraud is also a board-level matter, not a matter to be delegated entirely to management. From business opportunity fraud to fraudulent initial coin offerings, crypto scams targeting businesses are multiplying, prompting directors and board-level staff to intervene early. This is where expert guidance from a forensic technology specialist may be urgently required to investigate digital asset fraud and recover assets.

Digital asset investigators are experienced in forensic blockchain analysis and digital asset recovery. They will often use industry-leading proprietary intelligence tools to help map and monitor the journey of digital assets across wallets, exchanges, and decentralised finance platforms.

The role of a digital asset investigator involves:

• Wallet and transaction tracing across major cryptocurrency networks
• Building risk and compliance frameworks
• Attributing wallet addresses using open-source intelligence and platform data
• Using advanced blockchain investigation platforms
• Exchange liaison and witness statement support for asset recovery
• Providing expert witness support for litigation and arbitration
• Collaborating with legal and insolvency professionals

In 2024, more than £500,000 (€578,000) in cryptoassets was identified in insolvency cases – a staggering 364 times higher than in 2019/20, according to the Insolvency Service in the United Kingdom. In response to the changing digital asset landscape, the agency also created a new role to help recover more money owed to creditors in insolvency cases where digital assets are involved. A crypto intelligence specialist and former police investigator was appointed to the role.

As more businesses see cryptocurrency as a form of payment, liquidity and investment, cryptocurrency ownership is likely to increase in insolvency cases, increasing demand for digital asset investigation services. Unlike conventional financial fraud, digital asset fraud can move at extraordinary speed and across multiple jurisdictions in seconds. Urgent support is available to help navigate the complexities of the digital asset market in confidence. Early intervention can also help dial down the risk of insolvency.

For expert digital asset support, reach out to Brian Simpson on [email protected]. BTG’s digital asset support services are also available worldwide, as BTG is a member of BTG Global Advisory, which covers all continents through multiple offshore bases.