The Importance of Adaptive Due Diligence Beyond a Simple Checklist

During the first half of 2024, Americans lost an estimated US $2.5 billion to investment fraud and scams. Cryptocurrency was the most commonly used payment method in these schemes, with the Federal Trade Commission reporting approximately US $679 million lost to cryptocurrency-related fraud alone. The increasing use of digital assets and decentralized financial platforms has created new opportunities for fraudsters to target investors through sophisticated and convincing schemes.

One notable example involved a US $60 million cryptocurrency Ponzi scheme allegedly operated by brothers Jonathan Adam and Tanner Adam between January 2023 and June 2024. On 27 August 2024, the Securities and Exchange Commission (SEC) charged the brothers and their companies, GCZ Global LLC and Triten Financial Group LLC, with running the scheme. The brothers reportedly promised investors monthly returns of up to 13.5% and claimed to use advanced automated trading technology to generate profits through cryptocurrency arbitrage.

According to the SEC, the investment operation was fraudulent, with funds from new investors allegedly being used to pay earlier investors rather than being invested as promised. Authorities also claim that large portions of the funds were diverted toward luxury purchases, including property and expensive vehicles. The case highlights how convincing narratives and emerging technologies can be used to create a false sense of legitimacy and security for investors.

The Growing Complexity of Cryptocurrency Crime

Cryptocurrency-related fraud has evolved rapidly in both scale and sophistication. On 15 May 2024, Anton Peraire-Bueno and James Pepaire-Bueno were indicted for conspiracy to commit money laundering after allegedly exploiting the Ethereum blockchain to fraudulently obtain approximately US $25 million worth of cryptocurrency in a matter of seconds.

Ethereum, a decentralized blockchain platform widely known for its smart contract functionality, was allegedly manipulated after months of careful planning. Prosecutors claim the brothers gained access to pending transactions and altered the movement of digital assets for their own financial benefit. Authorities further allege that they took significant measures to conceal their identities, including the use of shell companies, multiple cryptocurrency addresses, and overseas exchanges.

Investigators also reported that the individuals researched “Know Your Customer” (KYC) requirements and extradition processes in an effort to move funds through financial systems with minimal oversight. This case demonstrates how modern financial crime increasingly combines technical expertise, international structures, and attempts to exploit regulatory gaps, making traditional due diligence methods insufficient on their own.

Why Adaptive Due Diligence Matters

Investment fraud is not limited to online platforms or cryptocurrency markets. Many schemes rely heavily on personal trust, relationships, and reputations. On 19 February 2024, Guy Flintham was found guilty of fraud by false representation after persuading approximately 240 investors over a five-year period to invest around £19 million into his scheme.

Mr Flintham presented himself as a successful trader and allegedly supplied investors with falsified documentation showing consistent returns and profits. In several cases, investors received payments presented as profits or returned capital, when in reality those payments were reportedly made using the investors’ own funds. During sentencing, the court noted that many of the victims were friends and family members whose lives had been permanently affected by the losses they suffered.

These examples demonstrate why due diligence must be treated as an adaptive and ongoing process rather than a simple compliance checklist. Whether assessing investment opportunities, business partners, senior hires, mergers and acquisitions, or high-value clients, organisations must adopt a risk-based approach that evolves alongside emerging threats. Comprehensive due diligence can help identify inconsistencies, uncover hidden risks, and reduce the likelihood of financial loss, fraud, and reputational damage.

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