Remember when everyone thought crypto hedge funds were the safe, grown-up way to play the 2021 bull market? Yeah, about that.
Three years after a little-known outfit called Basis Markets disappeared with what authorities now believe was roughly $28 million of retail money, the UK Serious Fraud Office just kicked the door down – literally.
On a quiet Monday morning, coordinated raids hit London and the Bradford area. Two men walked out in cuffs. And suddenly a ghost story from the last cycle is very much alive again.
The Rise and Sudden Fall of Basis Markets
Let’s rewind to late 2021. Bitcoin was pushing all-time highs, DeFi yields were still double digits, and everyone with a Twitter account and a Canva subscription was launching a “fund.” Into that madness stepped Basis Markets.
The pitch was seductive in its simplicity: a crypto hedge fund using boring old arbitrage to generate steady returns with basically no risk. No crazy 1000x memecoins, no leveraged liquidations – just calm, professional trading. The kind of thing you could comfortably tell your friends about without them looking at you like you’d lost your mind.
They even threw in NFTs and governance tokens as bonuses. Because of course they did – it was 2021.
Two fundraising rounds later, somewhere north of $28 million had flowed in. Then, in June 2022, the website went dark. The Telegram stopped responding. Investors were told, with a straight face, that “proposed new US regulations” made it impossible to continue.
That was the last anyone heard. Until now.
What the SFO Actually Found
The UK’s Serious Fraud Office doesn’t move fast, but when it moves, it’s serious. Their statement this week was unusually blunt for British authorities: Basis Markets was never a registered company. It was, in their words, an unregistered cryptocurrency scheme.
The arrests were made on suspicion of fraud by false representation and money laundering. Translation: investigators believe the entire operation may have been built to extract money rather than manage it.
Perhaps the most chilling detail? The SFO says the NFTs and tokens handed out to investors were essentially worthless from day one.
“With our expanding cryptocurrency capability and growing expertise in this area, we are determined to pursue anyone who would seek to use cryptocurrency to defraud investors.”
– Nick Ephgrave QPM, SFO Director
Red Flags Everyone Missed in 2021
Hindsight is painful, but let’s be honest – the warning signs were screaming.
- No regulatory registration anywhere in the world
- Team members using obvious pseudonyms
- Promises of “low-risk arbitrage” with double-digit yields (mathematically questionable)
- Sudden shutdown blamed on vague “US regulations” that never actually materialized
- Funds allegedly moved to personal wallets shortly before the collapse
Any single one of these should have been a hard stop. Together? Run-for-the-hills territory.
Yet thousands of people sent money anyway. I’ve spoken to some of them over the years – doctors, teachers, regular folks who thought they’d finally found the “safe” crypto play. The psychology is heartbreakingly familiar.
Why This Case Matters More Than Most Rug Pulls
We’ve seen plenty of projects die in the bear market. Some were honest teams that simply ran out of runway. Others were blatant exit scams. Basis Markets feels different, and here’s why:
It specifically targeted the cautious crowd. The people who avoided shitcoins and leverage. The ones who thought they were being responsible by choosing a “hedge fund.”
If even the supposedly sophisticated options were fake, what was real?
This case hits at the heart of trust in the entire ecosystem. And authorities know it.
The Broader Crackdown Context
The Basis Markets arrests didn’t happen in isolation. The UK has been quietly building serious crypto enforcement muscle.
Recent convictions include the jailing of the so-called “cryptoqueen” involved in a multi-billion dollar fraud, and multiple money-laundering cases tied to cryptocurrency. The SFO now has a dedicated digital assets team. They’re not playing around anymore.
For once, the regulators are moving slower than the technology but faster than the criminals thought they would.
What Happens Next
The two arrested individuals haven’t been charged yet – in the UK system, that can take months. But the SFO is actively appealing for victims to come forward with evidence.
Recovery of funds seems unlikely after three years, but successful prosecution would send a powerful message: geographical distance and pseudonymity are no longer bulletproof shields.
In my view, this case could become the template for how mature jurisdictions handle mid-sized crypto frauds that fall between the giant exchange collapses and the obvious meme-coin rugs.
Lessons for the Next Cycle
Because there will be a next cycle. There always is.
And when Bitcoin starts making new highs again, a new generation of projects will appear offering “low-risk, institutional-grade” crypto exposure. Some will be legitimate. Many won’t.
The Basis Markets story is a reminder that the most dangerous scams aren’t the obvious ones. They’re the ones that tell you exactly what you want to hear, in the most reasonable tone possible.
- Check registration. Always.
- Be skeptical of guaranteed yields, especially “arbitrage”
- If the team won’t show their faces, there’s usually a reason
- Past performance in a bull market proves nothing
- When in doubt, keep your money in your own wallet
The crypto space has matured a lot since 2021. But human nature? That part hasn’t changed at all.
The Basis Markets investigation is just beginning. Whatever comes out in court, one thing is already clear: the era of consequence-free rug pulls is ending. And honestly? That’s probably the most bullish development the industry has seen in years.
Stay safe out there.
