tl;dr
The US Department of Justice (DOJ) is reviewing compensation rules for victims of digital asset fraud due to concerns over outdated valuation methods. Currently, reimbursements are based on the value of holdings at the time claims were filed, not current market values, causing victims to miss out on...
The US Department of Justice (DOJ) is undertaking a comprehensive review of compensation rules for victims of digital asset fraud, prompted by concerns over outdated valuation methods. Currently, reimbursements are based on the asset values at the time claims were filed rather than the current market prices, leading victims to lose out on substantial gains.
This review comes in the wake of major crypto platform collapses such as FTX, Celsius, Voyager, Genesis, BlockFi, and Gemini Trust. Many investors affected by these collapses have only been able to recover the dollar value of their holdings based on the valuation at the time of the claim, despite the significant appreciation of assets like Bitcoin. For example, Bitcoin’s price surged from under $20,000 at FTX’s November 2022 bankruptcy filing to over $108,000 by January 2025—over a 500% increase—yet creditors received payouts pegged to the earlier, much lower value.
The DOJ recognizes that existing regulations restrict compensation to the dollar value when the fraud occurred, denying victims the benefits of any subsequent asset appreciation. Advocates, including a prominent FTX creditor known as “Mr. Purple,” stress the need for reforms to legally recognize digital assets similarly to traditional financial instruments under bankruptcy laws.
To address these challenges, the DOJ has engaged its Office of Legal Policy and Office of Legislative Affairs to explore regulatory and legislative amendments. Potential reforms include updating bankruptcy codes to accommodate the unique nature of digital assets and ensure fairer recovery processes for victims.
This initiative is part of a broader shift in DOJ policy toward digital assets. Recently, the DOJ disbanded the National Cryptocurrency Enforcement Team, opting to focus more narrowly on clear criminal acts like scams and market manipulation rather than pursuing lawful crypto businesses. Simultaneously, the DOJ is actively contributing to President Donald Trump’s Working Group on Digital Asset Markets. This group aims to modernize crypto regulations by drafting legislative proposals and agency guidance intended to bolster investor protection and clarify regulatory frameworks within the US market.
Once finalized and approved by the president, these reforms promise to reshape the landscape for digital asset compensation and regulation, potentially enabling victims of fraud to recover losses reflecting current market realities rather than outdated valuations.