The UK’s Serious Fraud Office (SFO) has launched its first major investigation into a cryptocurrency hedge fund, following the collapse of a $28m scheme, highlighting rising scrutiny on crypto-focused alternative investment vehicles, according to a report by Reuters.

Basis Markets had raised capital through two public fundraisers in late 2021 by selling non-fungible tokens (NFTs), which it then used to establish a crypto hedge fund targeting retail and professional investors. In June 2022, the fund reportedly informed investors that new US regulations threatened its operations.

Two individuals have been arrested on suspicion of fraud and money laundering after coordinated raids in London and West Yorkshire, signaling the SFO’s intent to clamp down on misused crypto investment structures.

“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,” said SFO Director Nick Ephgrave.