UK Fraud Office investigates collapse of $28 million crypto fund, two arrested

British prosecutors are investigating a failed crypto project that raised tens of millions from private investors before being shut down.

The British Serious Fraud Office announced this on Thursday arrested two men as part of an investigation into Basis Markets, a collapsed crypto hedge fund that allegedly defrauded lenders of $28 million.

The office executed search warrants in Herne Hill and near Bradford, seizing digital devices and documents. Authorities suspect the men, whose identities are not disclosed, of fraud and money laundering in connection with two fundraising rounds that took place between November and December 2021.

According to the SFO, Basis Markets was able to raise at least $28 million through two public fundraising efforts: one in November 2021 through an NFT membership sale and another in December through a token offering. The funds were intended to launch ‘crypto hedge fund’ arbitrage strategies for retail investors.

“With our growing cryptocurrency capabilities, we are committed to pursuing anyone who seeks to use cryptocurrency to defraud investors,” SFO chief executive Nick Ephgrave said in a statement.

The investigation is ongoing and so has the SFO asked the public to provide any information that may help. Declutter contacted the SFO for comment on whether victims are eligible for restitution and whether other enforcement agencies are coordinating.

Hours after British authorities announced their investigation, the BASIS token fell nearly 40% before posting a 28% loss on the day. According to CoinGecko’s historical data, the token has been effectively dead since April 27, 2022, when $10.8 million was dumped in one day.

In June of the same year, “investors were informed that, due to proposed new US regulations, the project could no longer proceed as planned,” the SFO said.

Basis Markets presented itself as a “return optimizer for directionless trading,” according to snapshots recorded on Wayback Machine.

“Our direction is that we are going to build a decentralized liquidity pool,” one of the founders, operating under the pseudonym TraderSkew and identified as Adam in what appears to be an investor call, said in a filing. video. “The owners of restricted stock […] You become the owner of all possessions.”

The individual appears to be Adam Cobb-Webb, a 48-year-old British citizen, identified through CFTC documentation from 2023, where the commission fined Cobb-Webb $150,000 for falsifying oil futures contracts during the same period he was promoting Basis Markets.

Investors were promised low-risk returns through basic trading, a strategy that uses futures premiums across markets. The money was allegedly funneled directly into personal wallets controlled by the anonymous team, according to an investigative series published by the group Crypto Sleuth Investigations.

Declutter has contacted the group for comment.