DOJ's Shift Away From Crypto Enforcement May Fuel 45% Rise In Fraud

The Department of Justice has recently issued new guidance directing prosecutors to scale back their efforts to investigate and litigate cryptocurrency crimes. This move includes the disbandment of the government’s National Cryptocurrency Enforcement Team (NCET) to prioritize immigration and procurement issues over cryptocurrency enforcement. While the DOJ frames this as a move to streamline resources, it signals an enforcement vacuum that cybercriminals are likely to exploit.

Cybercriminals are highly adaptable and thrive in moments of regulatory ambiguity. When criminal enforcement becomes limited, threat actors take note and often shift their operations outside the lines of prosecutable conduct. This is particularly true in the cryptocurrency space, where the decentralized, unregulated, and fast-moving nature of Web3 and crypto creates fertile ground for impersonation scams, fake airdrops, phishing campaigns, and spoofed tokens.

Even before this policy change, scams involving fake coins, phishing sites, and wallet siphons were already on the rise. The FBI’s latest Cryptocurrency Fraud Report indicates that cryptocurrency fraud amounted to $5.6 billion in losses, a 45% increase since 2022. As federal scrutiny moves away from the crypto space, individuals, exchanges, and brands vulnerable to impersonation must prepare for a rise in cryptocurrency fraud. Cybercriminals will continue to exploit platforms and dupe investors, especially in spaces where technical complexity, anonymity, and lack of regulation already hamper detection and enforcement.

The administration’s decision to rethink crypto enforcement has elicited mixed reactions from legal experts. Vanderbilt University Law Professor Yesha Yadav underscored the importance of the NCET in disrupting criminal activity across the crypto space, noting that the government may find it harder to prosecute the “incredibly nimble, very opportunistic actors in this space.” Similarly, Kleptocracy Initiative director and anti-corruption expert, Nate Sibley, emphasized that “Dangerous US adversaries rely on cryptocurrencies to launder money and evade sanctions.”

However, within the industry, advocacy group DeFi Education Fund, led by executives from organizations including Coinbase and Kraken, Executive Director and Chief Legal Officer Amanda Tuminelli stated that it was heartened to see that the DOJ announced it is redirecting resources to prosecuting the bad actors who are actually culpable for misuse of technology rather than the builders of our financial future.” On one side, experts looking from the outside warn that the move may lead to an increase in cybercrime, while those within the industry argue that shifting focus to crimes relating to terrorism and drug cartels is a better use of resources. Only time will tell which side is correct.

Complicating matters is the increasing use of AI by attackers. With an arsenal of generative AI tools at the fingertips of anyone with an internet connection, fraudsters can now produce scams that go beyond phishing links – they’re full ecosystems of deception: fake social media accounts, copycat token launches, cloned websites, and AI-generated influencers pushing scams. The result? Digital fraud is not only becoming more prevalent, it’s becoming more believable and harder to detect.

As the United States government reprioritizes its criminal focus, the responsibility of protecting investors and brand reputations will fall even more heavily on the private sector. Blockchain platforms, exchanges, brands, and investors operating in this space can respond by auditing their brand perimeter regularly, using threat intelligence tech, engaging with regulators early, and collaborating across the ecosystem. Sharing information across platforms is key to identifying emerging fraud patterns.

The DOJ’s pivot may be strategic, but its ripple effects — especially in a fast-moving space like crypto — are already visible. If you're building in web3, now’s the time to tighten your defenses. Because for every dollar the government pulls back, bad actors are investing tenfold. At the heart of every financial system – traditional or decentralized – is trust. And, right now, trust is one of crypto’s biggest vulnerabilities. Widespread impersonation and scams, coupled with limited enforcement, have created a sense of skepticism that keeps the broader public on the sidelines. If companies operating in the crypto space want digital assets to become mainstream, they must take ownership of building trust from the ground up. That means doubling down on transparency, accountability, and proactive protection. Because until trust becomes the norm, adoption will remain the exception.