Crypto Trading Scams: Legal Protection and Steps for Victims

In recent years, cases of crypto trading scams have been on the rise in Malaysia. The modus operandi is often similar whereby victims are promised extraordinary returns within a short period of time through online platforms that appear legitimate but are, in reality, controlled by fraudsters.

Victims are typically approached through phone calls, private messages, or social media connections. Scammers are adept at manipulating emotions, often exploiting personal or religious sentiments to gain trust. Once victims agree, they are instructed to transfer money into a corporate bank account, allegedly as investment capital. At the early stages, victims may even be allowed to withdraw small sums of profit to build confidence. However, as deposits increase, victims eventually find themselves unable to withdraw their funds, with scammers citing technical excuses such as the need to “upgrade membership” or “pay additional fees.”

Crypto Scam

Legal Protection Available to Victims

1. Civil Action in Court

   1. Victims may file a lawsuit against the recipients of the funds, whether individuals or companies.

   2. Claims may be advanced under fraudulent misrepresentation, deceit, unjust enrichment, and money had and received.

   3. Where company accounts are used to channel the funds, company directors may also be held personally liable if it is shown that they were aware of, or complicit in, the fraud.

2. Mareva Injunction

   1. A court order to freeze bank accounts or assets of the defendants.

   2. The purpose is to ensure funds are not dissipated or transferred away before final judgment.

   3. Without such an injunction, even if the victim wins in court, the judgment may be rendered worthless if the funds have already vanished.

3. Criminal Investigation

   1. Such scams may be investigated under the Penal Code, including Section 420 (cheating) and Sections 406/409 (criminal breach of trust).

   2. Authorities such as the Royal Malaysia Police (CCID), the National Scam Response Center (NSRC 997), and Bank Negara Malaysia have the power to investigate and freeze accounts.

The Securities Commission (SC) may also intervene where unlicensed investment schemes are involved.

Immediate Steps for Victims

1. File a police report & report to NSRC – critical to prevent further outflow of funds.

2. Engage a lawyer – to assess the evidence, identify proper defendants, and consider urgent remedies such as injunctions.

3. Preserve all evidence – including bank transfer receipts, WhatsApp/Telegram messages, emails, and screenshots from the investment platform.

4. Act quickly – time is of the essence; the sooner action is taken, the higher the chance of recovery.

Conclusion

Crypto trading scams are highly organised crimes that prey on victims with promises of unrealistic profits. Nevertheless, Malaysian law provides mechanisms to protect victims, including through civil lawsuits, court injunctions, and criminal/regulatory reports.

The most important step is not to remain silent. By engaging a lawyer and reporting immediately to the authorities, victims stand a far better chance of recovering their losses while also helping to prevent others from falling prey to the same fraudulent schemes.

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