Document Type

Article

Publication Date

12-14-2021

Publication Title

Journal of Financial Crime

Keywords

financial crime, fraud, cryptocurrency, digital assets, space transition theory

Abstract

Purpose

The purpose of this study is to describe the evolution of fraud schemes with historically conducted with fiat money in physical space to the crypto-assets in digital space as follows: ransomware, price manipulation, pump and dump schemes, misrepresentation, spoofing and Ponzi Schemes. To explain how fraud schemes have evolved alongside digital asset markets, this study applies the space transition theory.

Design/methodology/approach

The methodology used is a review of the media regarding six digital asset fraud schemes that have evolved from physical space to virtual space that are currently operational, as well as a review of the literature regarding the space transition theory.

Findings

This paper finds that the digital space and digital assets may facilitate pseudonymous criminal behavior in the present regulatory environment.

Research limitations/implications

The field is rapidly evolving, however this study finds that the conversion from physical to virtual space obfuscates the criminal activity, facilitating anonymity of the perpetrators, and creating new challenges for the legal and regulatory environment.

Practical implications

This paper finds that the digital space and digital assets may facilitate pseudonymous criminal behavior in the present regulatory environment. An understanding of the six crypto-asset fraud schemes described in the paper is useful for anti-financial crime professionals and regulators focusing on deterrence.

Social implications

The space transition theory offers an explanation for why digital space leads criminals to be better positioned to conduct financial crime in virtual space relative to physical space. This offers insights into behavior of digital asset fraudster behavior that could help limit the social damage caused by crypto-asset fraud.

Originality/value

To the authors’ knowledge, this paper is the first to detail the evolution of fraud schemes with fiat money in physical space to their corresponding schemes with digital assets in physical space. This study is also the first to integrate the space transition theory into an analysis of digital asset fraud schemes.

DOI

10.1108/JFC-11-2021-0242

Version

Postprint

Creative Commons License

Creative Commons Attribution-NonCommercial 4.0 International License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Volume

Ahead of print

Issue

Ahead of print

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