Blockchain & Crypto Fraud Attorney
Cryptocurrencies such as Bitcoin, Ethereum, and even Dogecoin have been on the rise for years. Every day, there is news about the latest person who has become exceptionally wealthy through crypto markets. The popularity of crypto has boomed, and this has also attracted cyber criminals. If you’ve experienced financial losses due to the fraudulent activities of others involved in cryptocurrency, you need an experienced crypto fraud lawyer.
The increasing use of cryptocurrencies and other digital assets has given rise to complex legal issues relating to regulatory status (including requirements to register as broker-dealers, commodity pool operators, commodity trading advisors, investment advisers, investment companies, securities exchanges, and money service businesses), compliance (including valuation, custody and reporting), corporate law (such as maintain shareholder records), securities transactions (including initial coin offerings and M&A transactions), fund formation, the launch of ETFs and derivatives, venture capital, taxation, anti-money laundering, litigation and regulatory enforcement.
Rome LLP offers sophisticated and knowledgeable legal counsel to clients navigating this rapidly evolving space. At the heart of our cryptocurrency and blockchain practice is a deep understanding of the technologies that drive blockchain and related developments in distributed computing networks.
What Is Cryptocurrency?
Cryptocurrencies are digital currencies that operate independently from traditional financial systems and are secured through blockchain technology. It relies on cryptographic techniques to secure transactions which makes it a person-to-person system and bypasses intermediaries like banks.
Functioning on the blockchain, which records transactions across multiple computers and ensures transparency and security, users store and manage their crypto holdings in their digital wallets. Digital wallets are software programs that interact with the blockchain.
The technology behind crypto is decentralized and creates an immutable ledger online of all transactions. However, since it is decentralized and relatively new to the market, crypto has little oversight from state or federal regulators. The lack of oversight is evolving, and the SEC has taken a much more focused interest and regulatory approach toward various cryptocurrency companies.
Cryptocurrency is risky and is less protected leaving it open to many types of fraud, scams, and abuse. This creates uncertainty in investors who are at risk for fraud such as Ponzi-like schemes and may be vulnerable to digital hacking. While transactions utilizing blockchain technology are secure and difficult to change once entered the ledger, the devices that are used to hold digital information may be prone to security and data breaches.
While there are many benefits of crypto, the decentralized and anonymous nature of the digital currency has made it a prime target for cybercriminals who are looking to exploit investors and take advantage of its regulatory gray areas.
Risks of Fraud in the Cryptocurrency Space / Fraud on the Crypto Exchanges
There are thousands of cryptocurrencies currently on the market, but only a small portion have made waves with investors. These digital investments range in value from fragments of a dollar to tens of thousands in the case of Bitcoin. For most investors, cryptocurrency and digital investments are extremely speculative.
Crypto exchanges have also been plagued by Ponzi schemes, deception, and other fraudulent activities. Critically, there is an evolving area of law, both regulatory and caselaw, that governs crypto exchanges’ obligations to their customers, such as when a depositor’s account is hacked.
Separate from the viability of legal claims, exchanges typically provide two types of insurance coverage: exchange insurance and client insurance. In the event of a hack, exchange insurance protects the exchange itself. This type of insurance typically covers exchange losses caused by a hack, such as lost funds and operational expenses.
Client insurance, on the other hand, protects clients whose funds have been stolen because of a hack. Clients may be required to pay a premium for this type of insurance, which typically covers losses up to a certain amount, such as $100,000. At Rome LLP, we have considerable expertise in identifying and recovering from all available sources for aggrieved crypto owners.
Common Crypto Scams
While there are many types of cryptocurrency fraud, here are some of the most common:
- Pump and dump schemes. A pump-and-dump scheme is about inflating the price of the cryptocurrency by spreading false or misleading information. Once the price is inflated, the scammers will sell their holdings at a profit while leaving the other investors with little to nothing. This is not a new scam, as it has also been used within the stock market.
- Ponzi schemes. Ponzi schemes are when earlier investors are given higher returns from the funds contributed by the later investors. These scammers reel investors in by providing promises of high returns in very short periods, are not transparent with how that will work, and utilize high-pressure tactics.
- Phishing scams. A phishing scam is when scammers send fraudulent emails or messages trying to trick you into giving out your personal information so they can steal your cryptocurrency. Many of these messages will appear to be from a reputable source and usually create a sense of urgency to get you to react quickly without thinking.
- Fraudulent wallet and exchanges. There are many different crypto exchanges. Among these, there are fake exchanges and wallets that steal information from investors, such as their login information, private keys, and funds.
- Initial coin offering fraud. Initial coin offerings (ICOS) enable companies or individuals to raise funds for new cryptocurrencies by selling virtual coins for real currency. Scammers can exploit this process and promote fraudulent ICOs to steal digital wallets from people.
- SIM card swap hack. SIM card swapping is a cyberattack where a scammer tricks a mobile carrier company into transferring a person’s phone number to a SIM card the scammer is in control of. This means they can take calls, and messages, and even access the person’s online accounts and cryptocurrency wallets.
Cryptocurrency Sim Card Swap Hack
In a recent case, T-Mobile has been hit with a multi-million-dollar lawsuit after Reginald Middleton lost millions of dollars when hackers gained unauthorized access to his account. The hackers used information supplied by T-Mobile to successfully circumvent the two-factor authentication measure, which allowed them to obtain a SIM card containing all of Middleton’s financial and personal information. Ultimately, $8.7 million in cryptocurrency was transferred out of Middleton’s account.
Rome LLP attorneys have deep insight into the mechanics of crypto transactions and work with the foremost forensics analysts to identify hacks and track the funds. While crypto is, typically, a “decentralized” currency, it remains trackable on a ledger, thereby often enabling the identification of the ultimate recipient of stolen tokens. Rome LLP attorneys are experienced in using all tools to track hacked funds.
Cryptocurrency Practice Areas
Our firm is dedicated to helping victims of cryptocurrency fraud and theft reclaim their financial losses. Our cryptocurrency practice areas include:
- Recovery of funds on behalf of defrauded investors in ICOs, capital raises in aid of ICOs,
- Recovery of funds in SIM-Card Swap Hacks
- Recovery of funds and/or damages resulting from hacked accounts on exchanges
- Cryptocurrency Ponzi Schemes
- All manner of cryptocurrency fraud, hacking, and investor fraud
No matter what type of cryptocurrency challenges you could be facing, our team can help.
Wire Transfer Fraud
For years, our firm has helped the victims of wire transfer fraud. We assist clients in identifying all potential sources for recouping wire fraud losses, from criminals acting intentionally to third parties acting negligently.
We represent companies and individuals who are the victims of wire transfer fraud.
For the past ten years, wire transfer fraud losses have increased consistently, with bad actors developing more sophisticated schemes each year with which they can defraud their victims. One of the most reported types of wire transfer fraud is business email compromise/email account compromise (BEC/EAC).
Wire fraud in the form of BEC/EAC is a sophisticated type of scam that targets both businesses and individuals during the planning for and Act of wiring funds from one bank to another.
The BEC/EAC scam often starts with the bad actor compromising legitimate business email accounts using a form of hacking or social engineering. With access to a legitimate email account, the bad actor can monitor conversations to detect the possibility of the need for a future wire transfer.
At this point, the scam can unfold in a variety of ways, but the result is often a party wiring funds not to the intended recipient but instead to a bank account controlled by the bad actor.
The losses from BEC/EAC wire fraud are staggering.
The losses from BEC/EAC wire fraud are large and continue to have a major impact on businesses, and the impact on individuals can be devastating. Overall losses have increased each year from $1.29 billion in 2018 to a staggering $1.86 billion in 2020.
Real estate is a particularly high-risk sector for BEC/EAC wire fraud. In 2020, 13,638 people were victims of wire fraud in the real estate and rental sectors, with losses more than $213 million, according to the FBI. With wire fraud in the real estate sector, the bad actors often assume the identities of real estate agents, escrow officers, or closing attorneys, to encourage victims to wire funds to the criminal’s bank account.
For years, Rome, LLP has helped victims of wire fraud. Sometimes, our firm’s goal is to identify those responsible for intrusions into email accounts or for establishing bank accounts for fraud; however, our goal can also be to identify or exclude employees or others with close contact with a victim as potential wrongdoers. Often the negligent actions of third parties lead to losses from wire fraud from banks to technology consultants, to payroll services.
Our firm assists clients in identifying all potential sources for recouping wire fraud losses, including criminals acting intentionally and third parties acting negligently.
What State and Federal Laws or Regulations Apply to Cryptocurrency?
The rise of cryptocurrency has prompted state and federal governments to move on regulating the industry. These laws include:
- Digital Financial Assets Law (DFAL). This law was enacted in California in 2023 and provides the regulatory framework for cryptocurrency businesses operating out of the state. It requires these businesses to have proper licensing, imposes consumer protection measures, and mandates specific disclosures.
- Securities Act of 1933 and Securities Exchange Act of 1934. These federal statutes regulate the offer and sale of securities as enforced by the Securities and Exchange Commission (SEC). If the cryptocurrency is deemed a security, it falls under the same regulations as stocks and bonds.
- Wire Fraud Act. The Wire Fraud Act is a federal law that protects people from schemes perpetrated through interstate wire communications like email, phone calls, or text messages. Cryptocurrency scams can be prosecuted under this Act because most scammers lure victims using these methods of communication.
FAQs
How Long Do I Have to File a Claim for Crypto Fraud?
The length of time you have to report crypto fraud in California depends on the type of fraud. For general fraud, the statute of limitations is around three years, and for securities fraud, you have up to five years. If the fraud violates the Consumer Protection laws, this could impact the statute of limitations. It is recommended you speak to an attorney as soon as you believe you might have been scammed.
How Long Does it Take to Resolve a Crypto Fraud Case?
Every crypto fraud case will have different factors that will impact its resolution timeline. Factors such as the complexity of the case, speed and efficiency of the legal system, cooperation between different agencies, and the strength of the evidence. Simple cases could resolve in a few weeks or months, but more complex cases are more likely to last a while.
What Evidence Do I Need to Prove Cryptocurrency Fraud?
The more evidence to support your case, the better, so you should gather emails, social media messages, text messages, financial records like bank statements or transaction histories, and police reports. Be sure to document everything and consult with a lawyer who can help you with the evidence-gathering process.
How Do I Know If I Have Been a Victim of Crypto Fraud?
You might be a victim of crypto fraud under several circumstances. Some of the more common instances include the opportunity promising abnormally high returns, receiving an unsolicited message about new investment opportunities, being asked to send crypto to an unknown wallet address for verification, are not able to access your funds, poorly designed website on the platform you are using, or no contact information available.
Crypto Fraud Lawyer | Blockchain & Cryptocurrency Attorney
If you have been a victim of cryptocurrency fraud, hacking, misrepresentation, or other related crimes, contact the team at Rome LLP. We can guide you through your options, protect your rights, and fight for the compensation you deserve.
If you or your company is the victim of wire transfer fraud, we would be happy to help.
