The US Department of Justice (DOJ) has initiated a review of how victims of digital asset fraud are compensated, following concerns over outdated valuation methods.
According to a recent internal DOJ memo, many investors affected by crypto platform collapses, such as FTX, Celsius, Voyager, Genesis, BlockFi, and Gemini Trust, have only received reimbursement based on the value of their holdings at the time they filed claims, not at current market rates.
While not all these bankruptcies stemmed from criminal charges, the DOJ emphasized that many assets were lost due to theft or fraud. As a result, investors missed out on significant potential gains they could have realized if they had retained their crypto.
For context, when FTX filed for bankruptcy in November 2022, Bitcoin traded at under $20,000. By January 2025, the top digital asset’s value had surged to over $108,000, representing an over 500% increase.
Yet, creditors are receiving payouts in fiat currency based on the 2022 valuation. These repayments fall far short of the assets’ current value, even with added interest.
The DOJ acknowledged that current regulations limit recovery to the asset’s dollar value at the time of the fraud. The agency said this approach effectively denies victims the upside of the asset’s appreciation, despite having borne the risk of loss.
One FTX creditor advocate, “Mr. Purple,” emphasized the urgency of such reforms, noting that digital assets deserve legal recognition similar to traditional financial instruments under bankruptcy law.
To address the issues, the DOJ has tasked the Office of Legal Policy and the Office of Legislative Affairs with evaluating potential regulatory and legislative updates. These changes could include reforms to the bankruptcy code, particularly to reflect the unique characteristics of digital assets.
DOJ’s broader crypto shift
This initiative forms part of a broader strategic shift within the DOJ’s approach to digital assets.
Last week, CryptoSlate reported that the department disbanded its National Cryptocurrency Enforcement Team (NCET), a unit focused initially on probing crypto-related crimes.
The DOJ said it wants personnel to concentrate on clear criminal activities such as scams and market manipulation, rather than investigating lawful entities like crypto exchanges, wallet providers, or decentralized tools.
In addition, the DOJ is actively participating in President Donald Trump’s Working Group on Digital Asset Markets. The group was formed under Executive Order 14178 to assess the regulatory landscape of the crypto industry.
The DOJ will provide attorneys to assist in drafting proposals and recommendations for legislation and agency guidance. These recommendations will be compiled in a formal report to the president, aiming to modernize digital asset regulations to align with national policy objectives.
Once the president approves the proposals, the DOJ has committed to implementing the recommended actions to ensure better investor protection and more clarity for digital asset companies operating within the US.
Mentioned in this article
Credit: Source link