In 2024, the City of London Police’s Report Fraud service received 25,843 reports related to investment fraud, with victims losing a total of £649,062,146 – 13% higher than the previous year.
Cryptocurrency continued to be the most common asset used in fraud, accounting for 66% of all reports. While those aged 35-44 are most likely to be targeted for investment fraud, it is those aged 55-64 who suffer the greatest financial loss. Several cases reported by the media in 2025 underline the vulnerability of the elderly to cryptocurrency frauds.
In February, a pensioner lost over £100,000 in a crypto fraud. In September, an elderly couple was scammed out of £150,000. In November, an elderly man lost £35,000 through an online crypto scam.
As private client solicitors, we need to consider how we assess whether our clients have capacity to take investment decisions and in particular whether they understand the information required to invest in more esoteric investments like cryptocurrency.
We routinely assess whether a client has capacity to manage their financial affairs generally. However, we know that each client’s finances are different in value, type and history. Equally, managing a bank account which is receiving the client’s pensions and dividends requires very different skills, experience and understanding compared with investing the client’s funds in a wide variety of different investment types, including crypto.
We are bound to go back to basics and consider the requirements set out by the Mental Capacity Act 2005. This provides that a person is unable to make a decision if s/he is unable:
a) to understand the information relevant to the decision;
b) to retain that information;
c) to use or weigh that information as part of the process of making the decision; or
d) to communicate their decision (whether by talking, using sign language or any other means).
So what information does a person need to understand a crypto investment decision?
The Financial Conduct Authority provides helpful information, stressing: ‘If you are thinking about buying crypto you need to know the basics and understand the risks before jumping in. And remember, if you decide to invest in crypto then you should be prepared to lose all the money you have invested.’
Crypto types
Bitcoin is the most prominent and established crypto brand, but there are many. They are managed by groups, individuals or companies rather than a central bank. In the UK, crypto is not regulated to the same degree as stocks and shares. Indeed, the unregulated nature of crypto-assets is an attraction for many investors. But this carries significant risks.
For clients to take decisions on crypto investments, the following are all relevant considerations.
- How do they use crypto and what is involved?
- Are they aware that the volatility of the crypto’s price means it is of very limited use for the owner when it comes to making payments using it?
- Do clients understand that there are many providers from whom it can be very difficult to get their money back?
- Are clients aware that there may be capital gains tax to pay on any crypto gains and income tax on certain transactions?
- Do clients understand that any crypto investment is high-risk and speculative?
- At present, it is unlikely that the client will be able to recover any lost funds through the Financial Services Compensation Scheme (FSCS) or be able to complain to the Financial Ombudsman Service (FOS).
Any investor should be fully aware of the number of scammers and fraudsters operating in the crypto environment. They should also be aware of the number of vulnerable individuals who have been targeted by such scammers. For many investors, the attraction of crypto is its convenience and accessibility, but that also makes it a trap for the vulnerable.
The Report Fraud website explains: ‘Scammers often use social media to advertise, frequently featuring celebrities to attract victims. They also target individuals searching for investment opportunities via search engines like Google and Bing.
‘The advertisements typically link to professional-looking websites where fraudsters use software to manipulate prices and investment returns. After you have invested, they might quickly close your account and disappear with your money. Sometimes, they maintain the pretence to lure in more victims. Many people only realise they’ve been scammed when they try to sell their supposed investments.’
Accordingly, practitioners should also ask their clients whether any of the following red flags were present when they made the investment:
- Were they approached through social media? Social media platforms feature in 36% of Action Fraud reports.
- Did the client verify the name of the firm on the financial services register? (tinyurl.com/4vmwfchm). If the firm is not listed, then it is not licensed.
- Were they put under time pressure to invest?
- Did the provider downplay the risk of losing money, or were the promised returns too good to be true?
- Does the client know where the crypto is stored, in what currency and in what kind of wallet?
- Does the client know the seed recovery phrase for their wallet in order to recover funds?
It is clear from this list that having simple financial capacity requires a very different level of understanding from having an awareness of the risks of investing in crypto-assets. It is important that practitioners are able to fully instruct a capacity assessor where the client’s capacity is in doubt with all the relevant questions and information that are needed for the client to take the relevant decision.
Solicitors and their clients can also consider the guidance on the Office of the Public Guardian’s website. This is a useful introduction to investment decision-making, updated in May 2019 (tinyurl.com/3tc924tj).
This explains what an investment is, what returns are and what constitutes investment risk. It also sets out duties for the attorney or deputy and how to get started with investments. When assessing investment capacity, this is a helpful starting point. However, when it comes to crypto, we do need to further understand the complexity of the decisions that are required.
The FCA has a further list of questions that any investor should ask themselves. Practitioners should take these into account when considering capacity:
1. Am I comfortable with the level of risk?
2. Can I afford to lose my money?
3. Do I understand the investment?
4. Could I get my money out easily?
5. Are my investments regulated?
6. Am I protected if the investment provider or my adviser goes out of business?
7. Should I get financial advice?
Consumer duty
The FCA’s Consumer Duty final guidance, issued in July 2024, provides rules requiring firms to identify customers in vulnerable circumstances, to understand their needs and to act to meet those needs where necessary. Since January 2020, the FCA has issued licences to crypto-asset firms and maintains a register of these. The government announced in December 2025 that new laws would come into force in 2027, regulating crypto businesses. These will, for example, extend the FCA’s consumer duty rules to crypto firms (rules that must be followed by firms offering other financial products like stocks and shares).
Crypto customers will be enabled to complain to the FOS, but there will be no access to the FSCS. It remains to be seen how effective these regulations will be.
Diminishing cognitive powers
How will all this affect investors with diminishing cognitive powers? In the UK, there are more than 900,000 people living with dementia and the Alzheimer’s Society estimates that this will increase to 1.6 million by 2040. A survey by IPSOS in 2023 found that 39% of UK adults were actively investing. A third of them started investing during Covid. Between February 2020 and May 2022, there was a threefold increase in the number of adults holding crypto-assets.
There is no doubt that younger investors were more likely to invest in crypto. However, older adults may be easier targets for crypto scammers due to their age and cognitive state. They also tend to have more assets.
It has also been noted that a person’s confidence or overconfidence may be a bigger predictor, and that those who fall prey to fraud tend to engage in riskier investment activities such as more frequent stock trading and remotely buying investments from unknown brokers.
Private client practitioners need to be more aware of their clients’ investing habits. We should be asking them about any risky investments they have made, including in crypto. We must ensure that they are doing so through licensed firms which will enable them to recover funds either themselves or via their appointed attorneys. The spike in investing during Covid, with little input from investment advisers, remains a potential problem. The sooner we ask clients about their investment history the easier it will be to help them or their attorneys as their capacity diminishes.
Ann Stanyer is a consultant at Wedlake Bell
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