DOJ Reviews Compensation Rules for Crypto Fraud Victims Amid Market Surges

The US Department of Justice (DOJ) has launched a review of its compensation rules for victims of digital asset fraud, driven by concerns over outdated valuation methods. This review comes in the wake of several high-profile crypto platform collapses, including FTX, Celsius, Voyager, Genesis, BlockFi, and Gemini Trust.

According to an internal DOJ memo, many investors affected by these collapses have only received reimbursement based on the value of their holdings at the time they filed claims, rather than at current market rates. This approach has led to significant discrepancies, as the value of digital assets has fluctuated dramatically over time. For instance, when FTX filed for bankruptcy in November 2022, Bitcoin was trading at under $20,000. By January 2025, Bitcoin's value had surged to over $108,000, representing an over 500% increase. However, creditors are receiving payouts in fiat currency based on the 2022 valuation, which falls 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. 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 these 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. The DOJ’s broader strategic shift includes a focus on clear criminal activities such as scams and market manipulation, rather than investigating lawful entities like crypto exchanges, wallet providers, or decentralized tools.

The DOJ is also actively participating in President Donald Trump’s Working Group on Digital Asset Markets. This 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 and will aim 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.