Cryptocurrency Fraud Defense: Federal Digital Asset Fraud Charges Explained

By Elizabeth Franklin-Best, Esq., and Christopher Zoukis, JD, MBA

Cryptocurrency has become one of the most active fronts in federal white-collar enforcement, and the government prosecutes digital asset cases aggressively — and creatively. If you are a founder, developer, promoter, trader, or exchange operator under federal scrutiny over a token, a platform, or a transaction, retaining a cryptocurrency fraud lawyer early can shape everything that follows, because these cases combine fast-moving technology with established fraud statutes and unsettled regulatory lines. Elizabeth Franklin-Best, P.C. defends digital asset prosecutions nationwide within our broader federal fraud defense practice.

There is no single “cryptocurrency crime” statute. Instead, the Department of Justice maps digital asset conduct onto laws that already exist — wire fraud, securities fraud, commodities fraud, money laundering, and the statute governing unlicensed money transmitting businesses. The result is that a project a founder viewed as legitimate, or a service an operator believed was lawful, can become the subject of a serious federal prosecution.

Our defense of these cases rests on a deep federal-court record. Our principal attorney, Elizabeth Franklin-Best, has appeared in more than 330 federal proceedings, including over 100 appeals, and is admitted to the United States Supreme Court and every federal circuit court of appeals. Best Lawyers in America names her a 2026 “Best Lawyer” for Appellate Practice, and the 2026 edition of Chambers USA ranks her for Litigation: White-Collar Crime & Government Investigations. We meet every cryptocurrency matter by pinning down the precise charges, mapping their elements, and pressure-testing whether the government can prove fraudulent intent rather than a failed project or a good-faith reading of unsettled rules. If you are facing a cryptocurrency fraud investigation or charge, we invite you to schedule a paid, one-hour initial consultation.

Cryptocurrency Fraud: Quick Answer

Question	Answer
What is cryptocurrency fraud?	The use of deception in connection with digital assets — fraudulent token offerings, exchange schemes, or investment programs — prosecuted under existing federal fraud, securities, commodities, and money laundering laws.
What must the government prove?	For fraud counts, a scheme to defraud and the specific intent to defraud; for unlicensed money transmitting, knowingly operating an unregistered or unlicensed money transmitting business.
What penalties can apply?	Wire fraud carries up to 20 years per count; securities fraud under 18 U.S.C. § 1348 up to 25 years; money laundering carries substantial penalties; unlicensed money transmitting up to 5 years.
Is intent required?	Yes, for the fraud statutes. A failed crypto project or honest losses are not, by themselves, a crime.
Where do we come in?	Our team handles digital asset investigations and prosecutions in federal courts nationwide; the first step is a paid, one-hour initial consultation through our booking page.

Key Takeaways

• There is no dedicated cryptocurrency crime statute; the government charges digital asset conduct under existing federal laws.
• The most common charge is wire fraud, because crypto offerings and transactions are conducted over the internet.
• Token offerings can be charged as securities fraud where the tokens are treated as investment contracts, and digital asset commodities fall within commodities-fraud authority.
• Operating a crypto exchange or transfer service without proper registration or licensing can be charged under 18 U.S.C. § 1960 as an unlicensed money transmitting business.
• Moving or converting digital assets connected to fraud frequently adds money laundering counts.
• The fraud statutes require specific intent to defraud — a failed project or honest investment losses are not a crime.
• The regulatory status of many digital assets remains genuinely unsettled, which can support good-faith defenses.
• Criminal securities fraud under 18 U.S.C. § 1348 reaches only securities of registered or reporting issuers — a limit that excludes most token projects and pushes prosecutors toward wire fraud.
• An April 2025 Justice Department memorandum narrowed digital-asset charging priorities to investor-victimizing fraud, while leaving the fraud statutes themselves untouched.
• Because these cases blend technology, finance, and intent, early and knowledgeable defense work is critical.

What Is Cryptocurrency Fraud?

Cryptocurrency fraud, in federal practice, is the use of deception in connection with digital assets — Bitcoin, Ether, stablecoins, utility and security tokens, and the platforms built around them. The technology is new, but the underlying offense is not: the government treats crypto fraud as ordinary fraud carried out through a new medium, and it applies the same statutes it has used against financial fraud for decades.

The conduct the government targets includes fraudulent token offerings and initial coin offerings, “pump-and-dump” schemes in which promoters inflate a token’s price and then sell, “rug pulls” in which a project is abandoned after raising funds, fraudulent or insolvent exchanges and lending platforms, crypto investment programs that operate as Ponzi schemes, and so-called investment scams that solicit victims and then convert their money into digital assets. Money laundering through digital assets is a recurring theme across all of these.

It is essential to be clear about what cryptocurrency fraud is not. Crypto is a volatile, high-risk asset class, and projects fail constantly for reasons that have nothing to do with fraud — market collapses, technical failures, mismanagement, and bad timing. An investor losing money, a token losing value, or a venture failing is not a crime. Cryptocurrency fraud requires proof of a knowing intent to deceive, and that line between a failed project and a fraud is the foundation of the defense.

How Cryptocurrency Fraud Is Charged

Federal cryptocurrency cases are assembled from established statutes:

• Wire fraud, 18 U.S.C. § 1343. The workhorse of digital asset prosecutions. Because crypto offerings, promotions, and transactions are conducted online, nearly every crypto fraud case can be framed as a scheme to defraud carried out by interstate wire — without the government ever having to resolve whether a token is a security. It carries up to 20 years per count.
• Securities fraud, 18 U.S.C. § 1348 and the criminal securities laws. Where a token or offering is treated as a security — an investment contract under SEC v. W.J. Howey Co., 328 U.S. 293 (1946) — fraud connected to it can be charged as securities fraud. Section 1348 carries up to 25 years per count, but by its terms it covers only securities of issuers registered under § 12 of the Exchange Act or required to file reports under § 15(d) — a class that excludes most token projects, and another reason prosecutors default to wire fraud.
• Commodities fraud. Digital asset commodities such as Bitcoin fall within federal commodities-fraud authority, and fraud in connection with crypto commodities and related derivatives can be charged accordingly.
• Unlicensed money transmitting business, 18 U.S.C. § 1960. Operating a crypto exchange or transfer service without the required state licenses or federal registration can be charged under this anti-money-laundering statute, which carries up to 5 years.
• Money laundering, 18 U.S.C. §§ 1956 and 1957. Moving, converting, or concealing digital assets connected to unlawful activity frequently adds laundering counts with substantial penalties of their own.
• Conspiracy, 18 U.S.C. §§ 371 and 1349. Agreements to commit any of these offenses, common in multi-founder and multi-promoter cases.

Because the same conduct can fit several of these statutes, crypto indictments are often multi-count and combine fraud, money laundering, and regulatory charges. A defense must address each statute on its own terms.

Applied Insight: Whether a particular token is a “security,” a “commodity,” or something else is one of the most contested questions in this field — and it is not merely academic. The classification drives which statutes and which regulators apply, and in a genuinely unsettled area, a founder’s reasonable, good-faith view of a token’s status can bear directly on the intent the fraud statutes require.

What the Government Must Prove

For the fraud statutes — wire fraud and securities fraud — the government must prove a scheme to defraud and the specific intent to defraud. The scheme must be aimed at obtaining money or property, and in crypto cases courts have recognized that digital assets and the funds raised through them are money or property for this purpose. The decisive element is almost always fraudulent intent.

This is where crypto cases are genuinely contestable. The technology is complex, projects are inherently speculative, and the rules governing digital assets have evolved unevenly. A founder who made optimistic projections that did not pan out, who described a roadmap the project could not ultimately deliver, who relied on developers or counsel, or who held a defensible view of how a token should be classified may lack the intent to defraud. Good faith is a complete defense to a fraud charge, and the contemporaneous record — code, communications, whitepapers, legal advice, and the actual flow of funds — often tells that story.

For an unlicensed money transmitting charge under § 1960, the government must prove the defendant knowingly conducted, controlled, managed, supervised, directed, or owned a money transmitting business that affected interstate or foreign commerce and that was unlicensed — because it operated without a required state license, failed to comply with federal registration requirements, or transmitted funds known to be criminally derived. Courts have applied § 1960 to unlicensed operations that exchange traditional currency for digital currency.

Applied Insight: In our experience, the fund flow is the spine of a crypto fraud case. Tracing on-chain and off-chain movements — what investors were told, where the money actually went, and what the founders knew at each stage — frequently complicates the government’s narrative and is among the most valuable factual work the defense can do.

The Regulatory Uncertainty Problem

One feature sets cryptocurrency cases apart from most financial fraud: the underlying rules are still developing. Whether a given digital asset is a security, a commodity, or neither has been the subject of ongoing litigation and shifting guidance. Federal and state regulators have at times taken differing or evolving positions, and registration and licensing obligations for crypto businesses have not always been clear.

This uncertainty cuts in two directions. The government uses it to argue that participants should have been cautious and sought guidance. But it also creates real defenses. A defendant who held a reasonable, good-faith view of an asset’s classification, who relied on counsel, or who operated in an area where the obligations were genuinely unsettled has a meaningful argument against the knowing, willful, or fraudulent state of mind these statutes require. A capable defense develops that record carefully and uses it.

What Changed in Digital Asset Enforcement (2023–2026)

Federal crypto enforcement shifted sharply in this period, and understanding the current posture matters to anyone under investigation. On April 7, 2025, the Deputy Attorney General issued a memorandum titled “Ending Regulation By Prosecution” declaring that the Justice Department “is not a digital assets regulator.” The memo disbanded the National Cryptocurrency Enforcement Team, directed the Criminal Division’s market-integrity unit to step back from cryptocurrency enforcement, and refocused charging priorities on people who victimize digital asset investors or who use digital assets to further other crimes.

The memo also gave prosecutors a concrete charging instruction: regulatory-style violations — unlicensed money transmitting under § 1960(b)(1)(A) and (B), Bank Secrecy Act violations, unregistered securities offerings, unregistered broker-dealer activity, and Commodity Exchange Act registration violations — should not be charged unless the evidence shows the defendant knew of the licensing or registration requirement and violated it willfully. Two cautions belong alongside that statement. The directive is an exercise of discretion, not a change in the law; the memo itself disclaims any view that § 1960 requires willfulness as a statutory matter, and it leaves the criminally-derived-funds prong of § 1960(b)(1)(C) untouched. And department policy can change — what a memorandum gives, a later memorandum can take away.

The Supreme Court has been recalibrating the fraud statutes in the same window, and those decisions reach crypto cases directly. Ciminelli v. United States, 598 U.S. 306 (2023), eliminated the right-to-control theory, so depriving investors of “valuable economic information” is not, by itself, wire fraud — the scheme must target money or property. Kousisis v. United States, 605 U.S. 114 (2025), confirmed that fraudulent inducement remains a valid theory even without net economic loss, while emphasizing materiality as the real limit. In a token case, those two decisions frame the central question: were the alleged misstatements material to what investors paid for, or is the government dressing up a regulatory grievance as fraud?

The digital-asset application of that property limit arrived in United States v. Chastain, 145 F.4th 282 (2d Cir. 2025), the first criminal NFT case to reach a federal court of appeals. The Second Circuit vacated wire fraud and money laundering convictions arising from a marketplace insider’s trading on confidential information about which NFTs would be featured, holding that the jury was wrongly allowed to convict without finding that the misappropriated information had commercial value to the company — and that it was error to instruct that a mere departure from “fundamental honesty and fair play” can support fraud. For founders and insiders accused of misusing confidential or intangible information, Chastain is a powerful reminder that novel digital-asset theories still must be anchored to a traditional money-or-property interest, and that overbroad jury instructions are vulnerable on appeal.

Congress, meanwhile, has been redrawing the regulatory map. The House passed the Financial Innovation and Technology for the 21st Century Act (FIT21) in May 2024, and successor market-structure legislation continued advancing through 2025 and 2026. We note this only as context, not legal advice: the rules are genuinely in motion, and the unsettled landscape is itself a fact that a defense team can develop when the government must prove a willful or fraudulent state of mind.

Penalties for Cryptocurrency Fraud

The statutory exposure is serious. Wire fraud carries up to 20 years per count. Securities fraud under 18 U.S.C. § 1348 carries up to 25 years per count. Money laundering counts carry substantial penalties of their own, and operating an unlicensed money transmitting business carries up to 5 years. Because crypto indictments are often multi-count, aggregate exposure can be very high.

The actual sentence is driven by the advisory United States Sentencing Guidelines, and in crypto fraud cases the dominant factor is the loss amount, along with the number of victims, the use of sophisticated means, and the defendant’s role. Restitution and forfeiture of proceeds — including seized digital assets — are standard, and the government frequently moves to freeze and forfeit crypto wallets early in a case.

Loss in crypto cases is genuinely complex. Digital asset values are highly volatile, which raises real questions about the date and method of valuation, credits for assets recovered, and causation. The stakes grew when the Sentencing Commission’s 2024 amendment carried the intended-loss concept into the body of U.S.S.G. § 2B1.1, inviting government theories pegged to a token’s peak hype rather than what investors ultimately lost. A disciplined, well-supported loss calculation challenge is often the most consequential part of a sentencing defense and can change a sentence substantially.

Defenses to Cryptocurrency Fraud Charges

Each digital asset prosecution turns on its own code, communications, and fund flows, and we make no predictions about results. These are the defense themes that do the most work in crypto cases — the strategy comes from pairing them with the record:

• Lack of intent to defraud. The defendant genuinely believed in the project, expected it to succeed, and did not set out to deceive anyone.
• Failed project, not fraud. Market collapse, technical failure, or mismanagement — not deception — caused investor losses.
• Good faith and reliance. Reliance on developers, counsel, auditors, or advisers, and a sincere belief in the representations made, negate fraudulent intent.
• Reasonable view of unsettled rules. A good-faith, defensible position on whether a token was a security, or on licensing obligations, undercuts the required state of mind.
• No material misrepresentation. The statements at issue were accurate, were forward-looking projections, or were not material to a reasonable investor.
• No falsity in a permissionless protocol. Where conduct exploits the published rules of a decentralized protocol that imposes no terms, promises, or prohibitions, wire fraud can fail for lack of any misrepresentation — the reasoning that produced a Rule 29 judgment of acquittal in the Mango Markets prosecution, United States v. Eisenberg, No. 1:23-cr-00010 (S.D.N.Y. May 23, 2025).
• Limited role and knowledge. In a multi-party project, a developer or promoter who did not know of and did not share in a fraud is not criminally liable for it.
• Search, seizure, and forfeiture challenges. The seizure of devices, wallets, and data, and the freezing of assets, can be challenged where the government overreached.
• Sentencing and valuation challenges. Even where conviction is likely, contesting loss valuation and enhancements can sharply reduce exposure.

The right combination depends entirely on the facts, the code, and the record. We treat each count as its own contest: examining the proof behind every element, assembling the exculpatory story from repositories, communications, and on-chain data, and litigating it from the first subpoena through trial and appeal.

How Cryptocurrency Investigations Begin

Cryptocurrency investigations surface in several ways. A grand jury subpoena, an FBI or IRS Criminal Investigation interview, a Securities and Exchange Commission or Commodity Futures Trading Commission inquiry, an exchange’s suspicious activity report, blockchain-analytics tracing, investor complaints, or a cooperating witness can each be the first visible sign. Crypto cases frequently involve parallel civil regulatory proceedings alongside the criminal investigation.

The opening moves set the trajectory. Preserve all records — code repositories, communications, whitepapers, corporate documents, wallet information, and any legal advice received — and avoid giving informal explanations to investigators. Crypto fraud turns on intent, and a casual account of “what the project was supposed to do” can later be recast as evidence of a scheme. Understanding whether you are a witness, a subject, or a target, and whether parallel regulatory matters exist, should guide every decision from the first contact.

Why Work With Elizabeth Franklin-Best, P.C.

Cryptocurrency fraud cases sit at the intersection of fast-moving technology, complex finance, and unsettled regulation. They reward defense lawyers who understand how the government maps new conduct onto old statutes, who read the law and the record closely, and who can separate a failed project from a fraud.

Elizabeth Franklin-Best, the firm’s principal attorney, is the author of Reversing Your Criminal Conviction, holds bar admissions before the U.S. Supreme Court and every federal circuit court of appeals, and appears pro hac vice in district courts around the country. That appellate depth — a docket of over 100 federal appeals across all twelve circuits — is exactly what a crypto case needs when an intent ruling, a loss calculation, or a novel property theory has to be preserved and pressed on review, not merely argued once below. Managing Director Christopher Zoukis concentrates on the federal sentencing and Bureau of Prisons questions that decide how a digital asset case actually ends. Founders, developers, promoters, traders, and platform operators come to us at every stage — some before a subpoena arrives, some after indictment.

Promising a result in a crypto prosecution would be dishonest, and we refuse to do it. What we offer instead is the work itself: tracing the fund flows, reconstructing what was actually said to investors and when, pressing the materiality and intent limits the Supreme Court has drawn, and giving you an unvarnished view of your exposure. If a token, platform, or transaction has drawn federal scrutiny to you, schedule a paid, one-hour initial consultation with us.

Talk With a Cryptocurrency Fraud Defense Lawyer

A digital asset prosecution threatens liberty, frozen wallets, and a project’s survival all at once — and the government’s tracing work is usually months ahead of the defense by the time charges land. Closing that gap starts with counsel who know both the statutes and the technology. Book your paid, one-hour initial consultation with our team today.

Cryptocurrency Fraud FAQs