DOJ Reevaluates Crypto Fraud Payouts as Values Surge
The U.S. Department of Justice (DOJ) has launched a comprehensive review of how victims of digital asset fraud are compensated, citing growing concerns over outdated valuation practices that have left many investors shortchanged in the wake of crypto market rebounds.
The DOJ memo shows its present system pays victims according to their digital asset worth at claim submission rather than market appreciation. People closely examine this enforcement strategy following major crypto failures including FTX, Celsius, Voyager, Genesis, BlockFi, and Gemini Trust.
FTX Collapse Reveals Recovery-Payout Value Gap
The DOJ exposed how part of the lost investor funds originated from fraudulent activities during these failures. The agency points out that current valuation procedures prevent victims from gaining asset appreciation value even though they started with the financial risk.
Take FTX, for example. Bitcoin dropped below $20,000 when the exchange went bankrupt in November 2022. At the start of January 2025, Bitcoin reached $108,000 through its fivefold market growth since before.
Although creditors receive payments in fiat currency based on 2022 market value, these payments still fail to recover their expected value due to very low interest offered.
Digital assets require specialized recognition instead of using conventional recovery procedures, according to DOJ. The victims must miss out on the market increase despite suffering complete financial loss.
FTX creditor advocate, Mr. Purple, maintains digital assets deserve equal bankruptcy protection with standard securities or commodity investments. People look at crypto as mere financial risk but it stands as a fresh financial system. He stated that our laws need to keep up with this market evolution.
DOJ Explores New Crypto Bankruptcy Framework
The DOJ tells its Office of Legal Policy and Office of Legislative Affairs to study how to update bankruptcy regulations and set rules for digital assets. The review seeks to capture how cryptocurrencies behave like an unstable digital entity with no central control.
The DOJ now proves a different direction in managing digital assets with this new initiative. On July 30, the DOJ eliminated the National Cryptocurrency Enforcement Team, which now focuses exclusively on clear criminal crypto-related offenses instead of exploring legitimate crypto corporations.
The DOJ works with the newly established President Trump’s Digital Asset Markets Working Group as part of Order 14178. The interagency group creates new legislative suggestions to improve crypto regulation for every federal agency.
The DOJ has assigned legal staff to join the effort while producing a formal recommendation report for the president. After assembly these ideas will establish new framework rules regarding digital assets in American business.
The head official at DOJ believes the laws controlling crypto should change as the digital currency market develops, evolving to protect digital asset users from harm while developing standards for successful innovations that fight unlawful business practices.
The DOJ project should finish late summer 2019 and could bring suggested laws to Congress by year end.
