The US Department of Justice (DOJ) is taking steps to address the issue of how victims of digital asset fraud are compensated, with a focus on updating outdated valuation methods. Many investors who have been affected by the collapse of crypto platforms like 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, rather than at current market rates.
While not all of these bankruptcies were a result of criminal charges, the DOJ highlighted that many assets were lost due to theft or fraud. This has resulted in investors missing out on potential gains that they could have realized if they had retained their crypto assets.
For example, when FTX filed for bankruptcy in November 2022, the price of Bitcoin was below $20,000. By January 2025, the value of Bitcoin had surged to over $108,000, a more than 500% increase. However, creditors are being paid out in fiat currency based on the 2022 valuation, which falls significantly short of the current value of the assets.
The DOJ recognizes that current regulations restrict recovery to the dollar value of the asset at the time of the fraud, denying victims the opportunity to benefit from the appreciation of the asset, despite bearing the risk of loss.
Advocates for FTX creditors, like “Mr. Purple,” are urging for urgent reforms to ensure that digital assets receive legal recognition similar to traditional financial instruments under bankruptcy law. To address these issues, the DOJ has tasked the Office of Legal Policy and the Office of Legislative Affairs with evaluating potential regulatory and legislative updates, including reforms to the bankruptcy code to reflect the unique characteristics of digital assets.
This initiative is part of a broader strategic shift within the DOJ’s approach to digital assets. Recently, the department disbanded its National Cryptocurrency Enforcement Team (NCET) to focus on investigating clear criminal activities such as scams and market manipulation, rather than lawful entities in the crypto space.
Additionally, the DOJ is actively participating in President Donald Trump’s Working Group on Digital Asset Markets 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, with the aim of modernizing digital asset regulations to align with national policy objectives.
Once the president approves the proposals, the DOJ is committed to implementing the recommended actions to enhance investor protection and provide clarity for digital asset companies operating within the US.