The Federal Trade Commission (FTC) is the key U.S. regulatory body responsible for protecting consumers from unfair or deceptive practices in the marketplace. With the public’s interest in cryptocurrency growing so rapidly, thousands of people have been scammed through a range of different crypto fraud schemes. According to the FBI’s data, Americans lost $3.94 billion to cryptocurrency scammers in 2023, up from $2.57 billion in 2022.
This extraordinary loss of wealth to cryptocurrency scams has led the FTC to actively target crypto scams through an approach designed to protect consumers and maintain market integrity. The approach includes education, regulation, enforcement, and collaboration. Our attention in this article will focus primarily on the FTC’s enforcement strategies.
As government efforts targeting cryptocurrency scams become more vigorous, some people who may not be guilty of knowingly participating in such schemes can get swept up by law enforcement and charged with serious crimes. Stechschulte Nell, Attorneys at Law understands the law covering frauds of all types, including cryptocurrency-related fraud.
If you or someone you know becomes involved in a prosecution related to a cryptocurrency transaction, contact our office in Tampa for a comprehensive review of your case and to consult with an experienced fraud defense lawyer.
Education and Awareness and Regulation
The FTC works on educating consumers about the nature of cryptocurrency and the potential scams associated with it. The agency believes that informed consumers are less likely to fall victim to fraudulent schemes. As a result, the FTC has launched a wide range of educational campaigns aimed at raising awareness about how cryptocurrency scams operate, the signs to watch for, and the steps to take to protect yourself from being victimized. These initiatives include publishing articles about how the scams work, issuing public warnings about new emerging scams, and offering resources to consumers through its website.
In addition to educating consumers, the FTC also regulates the cryptocurrency market by issuing guidance and recommendations to both consumers and businesses engaging in cryptocurrency transactions. These guidance bulletins usually report best practices for secure transactions, data protection, and the legal responsibilities of businesses that participate in cryptocurrency sales or other transactions.
Enforcement Actions
The FTC’s enforcement actions against cryptocurrency scams are its most direct method of targeting fraudulent activities within the sector.
The Commission has the authority to investigate and bring legal action against individuals and companies that engage in deceptive or unfair business practices, including cryptocurrency scams. This approach has resulted in the government shutting down operations it deemed to be fraudulent, freezing their assets, and sometimes providing restitution to victims of cryptocurrency scams. Enforcement actions can range from issuing cease and desist orders to filing lawsuits in federal court.
It’s important to remember that the FTC does not itself commence criminal prosecutions. When the FTC’s investigation reveals what the agency believes to be criminal conduct, its Bureau of Consumer Protection Criminal Liaison Unit (BCP CLU) reports the case to the Department of Justice and the FBI for prosecution. The agency collaborates closely with law enforcement agencies that have the full authority to investigate and prosecute crime, both in the U.S. and internationally.
Collaboration with Other Agencies
Cryptocurrency transactions are borderless. It is not unusual for people in the U.S. to become victims of cryptocurrency scams carried out by individuals and organized groups of people located in Europe, Asia, or Africa. This fact requires the FTC to collaborate with other regulatory and law enforcement agencies, both domestically and internationally, to combat cryptocurrency scams.
Collaborating with agencies like the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Department of Justice (DOJ), and international regulatory bodies can enable the FTC to track, investigate, and take action against fraudulent cryptocurrency schemes.
Recent Enforcement Actions Against Cryptocurrency Scams
One of the most successful cryptocurrency scams used to deceive people into giving away their money is called “Pig Butchering.”
Pig Butchering refers to the scammer’s practice of stringing the victim along, gradually enticing them to invest more and more in a fraudulent cryptocurrency venture. Then, just as a pig is fattened up over time before being butchered, the scammer disappears with the victim’s money.
Pig Butchering usually begins with a nonfinancial relationship being developed between the scammer and the victim. Once the victim’s trust is won, the scammer begins to introduce opportunities to invest in cryptocurrency, claiming that they themselves have already made lots of profits doing so. As the scheme continues, the victim-investor is provided with fake financial statements showing that they are making significant profits. That encourages them to invest still more money. In reality, the money has been going directly into the scammer’s pocket.
Government Seizure of $9 Million from Cryptocurrency Scammer
An example of the government’s success in disrupting cryptocurrency scams took place in October of 2023. A company called Tether was alleged to have engaged in several forms of cryptocurrency scams, including Pig Butchering.
Four People Federally Indicted for Money Laundering Millions from Cryptocurrency Scam
In December 2023, the U.S. Department of Justice announced money laundering indictments against four individuals located in California and Illinois who are accused of obtaining millions of dollars from pig butchering victims throughout the U.S. and then transferring the funds through multiple cryptocurrency accounts to conceal that the money was proceeds of criminal activity.
Three People Charged with $1.89 Billion Cryptocurrency Scam
In January 2024, three people were charged with defrauding victims out of almost $2 billion through a fraudulent cryptocurrency marketplace promotion. While one of the named defendants is located in the United Arab Emirates, the others reside in Florida and Maryland respectively. Charges include conspiracy to commit securities fraud, wire fraud, and operating an unlicensed money transfer business, among others.
Defenses If You Are Charged with Cryptocurrency Fraud
Criminal charges related to cryptocurrency fraud are serious and require the immediate involvement of an experienced criminal defense attorney. To obtain a conviction for offenses related to cryptocurrency-related offenses, the government must prove through legally admissible evidence that the defendant knowingly and willfully acted with the intent to deceive the alleged victim.
However, given the very complex nature of cryptocurrency transactions, blockchain technology, and the potential for innocent participants to take part in activities they believed to be legitimate, having been misled by others, skilled criminal defense representation is essential.
Cryptocurrency Fraud Defense of Florida
As the landscape of cryptocurrency continues to evolve, so does the sophistication of scams targeting investors. If you find yourself or someone you know facing charges related to cryptocurrency transactions, it’s imperative to seek legal assistance immediately. Stechschulte Nell, Attorneys at Law, offers skilled fraud defense counseling to navigate the complexities of these situations.
Don’t wait until it’s too late; protect yourself and your investments by staying informed and prepared to act. Contact Stechschulte Nell, Attorneys at Law, for a thorough review of your case and experienced legal advice.
