The Rise of Digital Asset Concealment

Many businesses are seeking to participate, including looking to crypto assets as a form of payment, liquidity and investment. Naturally, adopters are hoping they find a competitive edge in doing so. Within this turbo-charged and highly entrepreneurial environment, a persistent and potentially expanding core of illicit actors is continuing to take advantage of the technology for their own gains. In particular, stable coins such as USDT power thousands of criminal enterprises through a vast transfer of illicit gains, eventually finding conversion to real world currency to be laundered into the global economy.

For the time being, adopters are particularly vulnerable to loss through a variety of schemes. These losses can come about in a similar way to traditional misfeasance (a person accessing a wallet to misappropriate crypto from its owner or a director using it for an improper purpose), traditional scams with a crypto angle (think rug pulls, and pump and dump schemes previously associated with stock investments) or which are crypto-specific (such as using social engineering to orchestrate a hack of a crypto-exchange). A main driver for the popularity of crypto assets among the perpetrators of misfeasance and criminality is the relative ease with which crypto assets can be transferred and concealed.

Specialist consultancies are locked in a relay race to develop sophisticated software products that enable investigators to monitor and trace the use of digital assets across blockchains. Legislators seek to develop policies and frameworks for virtual asset use in their economies, walking the tightrope of free market opportunity while attempting to mitigate risk and protect consumers.

Despite a ramping up of education and capabilities to both police and legislate the crypto ecosystem, those engaged in the task often find themselves treading on virgin soil. The bottom line is that crypto-related losses from misfeasance, scams, hacks or theft will inevitably occur. But they may be recoverable, under existing legislation, thanks in part due to the technology that underpins it.

Begbies Traynor Group’s DAIU stands ready to support in these instances, with a blend of technical expertise, legal understanding, and insolvency experience.

The Rise of Digital Asset Concealment
The cryptocurrency market has expanded dramatically over the past five years, growing from under $200 billion in early 2020 to nearly $4 trillion by mid-2025. This reflects both the sector's increasing maturity and accessibility but raises challenges for compliance, regulation, and asset tracing

Satoshi Nakamoto’s 2008 whitepaper envisaged Bitcoin as decentralised peer-to-peer currency, free from central control. In today’s world it has evolved into a global asset far beyond original expectations. Bitcoin’s current substantial capital has in part been maintained by the very real prospect of wholesale financial market adoption through exchange traded funds (ETFs) investing directly into BTC and other crypto assets, as well as globally influential government policies. Decentralised finance (DeFi) protocols continue to offer innovative investment opportunities into cross-border lending, trading and payments, broadening the ecosystem. Non-fungible tokens (NFTs), as unique digital assets recorded on blockchains, continue to persist. At their peak in 2021, NFT sales topped $25 billion annually, while DeFi platforms held over $280 billion in total value locked (TVL). Although both markets were heavily impacted by the collapse of FTX in late 2021, they are now showing signs of growth. NFTs are shifting toward utility-based models, while institutional interest in crypto-tokenised real-world assets is also reviving interest in DeFi. An application to list an NFT ETF has even been filed with the SEC.

Legal, Financial and AML Risk Exposure

The rapid expansion of digital assets as a sector has gone hand-in-hand with an increase in misuse. Illegitimate businesses operating cryptocurrency trading, DeFi tools, and NFTs are being deployed to facilitate fraud, conceal assets, and launder money. As transactions are tied to cryptographic addresses rather than identifiable individuals, traditional tracing methods become more complex.

Blockchain settlements often occur within minutes – faster than traditional financial systems, and leaving little time for detection. Privacy coins and mixing services can further obscure asset origin and ownership, while decentralised exchanges often sit on the periphery of the courts’ and regulators’ reach. Varying global regulatory frameworks only add to enforcement complexities.

In insolvency scenarios, misclassification, inaccessibility, or simply not accounting for digital assets entirely impacts recovery efforts and can cause practitioners serious reputational damage.

Regulatory expectations are evolving. For instance the UK’s Financial Conduct Authority’s frameworks require that professionals should be verifying asset sources and ownership, assessing custody arrangements, and reporting suspicious activity.

Common Concealment Tactics

When investing in a crypto business, do you know how the asset will be stored/used, and is it verifiable?

Mixers/Tumblers: These services pool and redistribute coins among users to break transaction links. Outside of a libertarian idealists’ utopia, there is no real-world legitimate purpose to this. Platforms such as the previously sanctioned Tornado Cash operate to sever on-chain traceability.

Privacy Coins: Cryptocurrencies such as Monero use technology to mask the owner’s identity as well as transaction details.

Peel Chains/Layering: Large asset sums are broken into smaller transactions and moved through multiple wallets to mask use and create extensive blockchain trails.

Chain Hopping and Bridges: Assets are transferred between blockchains via cross-chain swaps or bridges, making tracing more complex.

Non-Custodial Wallets: User-controlled wallets such as cold wallets require no third-party oversight, complicating ownership identification and access.

Offshore and Decentralised Exchanges: Some platforms operate in jurisdictions with less effective or no client identification requirements compared to other exchanges, potentially hampering investigations into account holders.

DeFi Protocols: Pseudonymous transactions and peer-to-peer fund movements make DeFi a useful tool for hiding asset flows.

Introducing the Digital Asset Investigations Unit

To address these challenges, Begbies Traynor Group has established a dedicated Digital Asset Investigations Unit (DAIU), becoming one of the UK's early leaders in crypto tracing, recovery, and compliance within insolvency, misfeasance, litigation, and financial crime contexts.

Formed in partnership with blockchain intelligence firm Chainalysis, the DAIU integrates forensic blockchain analysis, legal investigations, banking, and real-world insolvency expertise. Services include wallet attribution, transaction mapping, tracing, litigation support, including expert witness reports, and engagement with exchanges.

The unit is available to practitioners of both personal and corporate insolvencies, complex financial disputes, and international cases. It helps clients establish the whereabouts of high-value digital assets, protect stakeholder interests, and manage risk. The DAIU also collaborates with external legal, restructuring, and financial services professionals on crypto enforcement matters.

Real-World Applications: Use Cases

The ability to trace digital assets is increasingly essential to value protection and asset recovery.

Insolvency Investigations: The DAIU uses tools and intelligence to identify undisclosed crypto assets in both personal and corporate estates, tracing them across wallets and exchanges even after obfuscation or layering.

Litigation Support: Certified investigators assist legal teams with evidentiary tracing, expert witness input, and coordination with exchanges to obtain freezing orders and support enforcement.

Private Equity & Funds: Institutions and asset managers work with the DAIU to secure digital holdings, prevent unauthorised use, and manage portfolio risk.

Case Study: Mercy Global Consult: Begbies Traynor traced over £20 million in payroll and VAT fraud to 70 Bitcoin held by a company director. The court approved a Worldwide Freezing Order and post-judgment recovery of assets. Evidence from Chainalysis Reactor supported one of the UK's first court-ordered crypto recoveries, establishing a precedent for digital assets as recoverable property.

Why This Matters Now

Businesses seeking a competitive advantage are actively looking to see how they can become part of the crypto revolution. While regulatory oversight is increasing, which may reduce illicit activity, the risk of significant loss remains high. Shareholders will expect businesses to have suitable checks and controls to preserve company assets. The FCA expects compliance across firms handling crypto, including recording details of their customers and reporting of suspicious activity. There is also the failure to prevent fraud offence for larger organisations, which becomes enforceable in the UK on 1 September. The EU’s MiCA regulation introduces stricter asset disclosure and consumer protection rules. Courts, shareholders and creditors expect crypto to be treated like any other asset class requiring source verification, secure custody, and inclusion in statutory reporting.