Exposing Digital Asset Violations: Your Complete Guide to Safe Cryptocurrency Fraud Whistleblowing

As cryptocurrency markets continue to expand, so does the prevalence of digital asset fraud. Crypto fraud schemes have caused investors to lose more than one billion dollars and undermine public confidence in the digital asset and cryptocurrency ecosystem. According to the FBI’s 2023 Cryptocurrency Report, losses from cryptocurrency-related investment fraud schemes reported to the FBI Internet Crime Complaint totaled $3.96 billion in 2023. For individuals with knowledge of these violations, understanding how to report cryptocurrency fraud safely while protecting yourself from retaliation is crucial.

Understanding Cryptocurrency Fraud and Regulatory Oversight

Digital assets are regulated by, in part, the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the US Treasury Department. The key question to making a determination about which agency has regulatory authority is analyzing whether a cryptocurrency product or technology is a security, which would make it regulated by the SEC, or a derivative, which would make it regulated by the CFTC, or whether it is a currency, which would make it regulated by the Treasury Department.

Common types of cryptocurrency fraud include Initial Coin Offerings (ICOs) when cryptocurrencies are offered as ICOs and the company does not fully disclose all necessary information to investors, romance scams where crypto scammers often target individuals through dating apps and social media sites, convincing unknowing individuals to invest in crypto schemes that turn out to be fake, and pump and dump schemes where crypto companies falsely promote and then secretly sell off their assets.

Federal Whistleblower Programs for Cryptocurrency Violations

Multiple federal agencies offer robust whistleblower programs that provide both financial incentives and protection for those reporting cryptocurrency fraud:

SEC Whistleblower Program

In 2023, the Commission brought 46 cryptocurrency-related actions, the highest since the SEC Whistleblower Program’s inception, a 53% increase from the year prior. The program provides awards to individuals who provide original information leading to a successful enforcement action resulting in sanctions of $1 million or more. Whistleblowers who prevail in a successful enforcement may receive an award between 10 and 30 percent of the monetary sanctions collected.

CFTC Whistleblower Program

The CFTC has issued more than $390 million in awards to whistleblowers. Most of the whistleblower tips received by the Commodity Futures Trading Commission (CFTC) in fiscal year 2023 related to fraud and misappropriation of crypto/digital assets. Crypto fraud whistleblowers are eligible to receive between 10% and 30% of the monetary sanctions collected in successful enforcement actions.

How to Report Cryptocurrency Violations Safely

Reporting cryptocurrency fraud requires careful preparation and understanding of the process to ensure your safety and maximize the effectiveness of your disclosure:

Document Everything

Gather all relevant communications (emails, messages), transaction records, account statements, and any digital footprints that indicate fraudulent activity. Detailed records of dates, amounts, and parties involved will strengthen your case.

Choose the Right Agency

If you’re an insider with information about crypto asset fraud or a violation of securities laws, such as unregistered crypto asset offerings or celebrity touting, you can submit your information using the SEC’s Tips, Complaints and Referrals (“TCR”) portal or by hard copy. The CFTC will pay monetary awards to persons who voluntarily provide original information on a Form TCR about violations of the CEA or its rules, if that information leads to a successful CFTC enforcement action resulting in more than $1 million in monetary sanctions.

Consider Anonymous Reporting

SEC, CFTC, and AML whistleblowers reporting cryptocurrency fraud may also blow the whistle anonymously if they are represented by an attorney. Protecting the confidentiality of Wall Street whistleblowers is among the most important breakthroughs in federal whistleblower law. Under the Dodd-Frank Act, whistleblowers can file anonymous cases, and everything about their case, including who they sued, remains secret.

Legal Protections for Cryptocurrency Whistleblowers

The program also offers anti-retaliation protections under Section 23(h), which prohibit an employer from taking retaliatory action against whistleblowers for reporting possible violations of commodities laws, or working with the CFTC in an investigation. It also offers protection against retaliation, prohibiting an employer from discharging, demoting, suspending, harassing, or discriminating against an employee who has reported crypto fraud or any other violation of securities laws.

Cryptocurrency fraud whistleblowers are protected against retaliation if they hold a “reasonable belief” a law was violated. The anti-retaliation provisions protect against termination or demotion, but also cover subtle forms of retaliation like reduced responsibilities, negative performance reviews, or harassment or hostile work environment creation.

The Importance of Experienced Legal Representation

Given the complexity of whistleblowing, we strongly encourage you to contact an experienced SEC whistleblower attorney. Since cryptocurrency whistleblowing is extremely complicated because of the nature of the schemes it is highly recommended to contact or hire a whistleblower attorney to help you.

When seeking legal representation for cryptocurrency fraud whistleblowing cases, it’s essential to work with experienced professionals who understand both the technical aspects of digital assets and the complex regulatory landscape. For those in the New York area, consulting with a qualified whistleblower attorney Manhattan, NY can provide the specialized expertise needed to navigate these challenging cases successfully.

The Howley Law Firm, located in Manhattan, specializes in employment and whistleblower law, focusing on representing individuals in the areas of employment rights in New York and whistleblower rewards nationwide. They give individuals the same high-quality legal representation that corporations have, providing the same high-quality, aggressive representation that corporations get at large law firms. They understand that more than your legal rights are at stake – you also need to protect your reputation and your career. They help you understand your rights and all of your options.

Taking Action: Your Next Steps

Report your suspicions with as much detail as possible. Regulatory bodies and investigators can use your information as a starting point for a deeper investigation. It’s important to come forward even if you feel your evidence is not conclusive.

Remember, reporting crypto fraud is a significant step in combating illegal activities in the digital finance world. Your actions not only help in potentially recovering lost assets but also protect others from falling victim to similar schemes.

If you have information about cryptocurrency fraud, don’t wait. Whistleblowers can help the CFTC identify and combat crypto fraud schemes by promptly providing specific and credible information. The regulatory agencies are actively pursuing these cases, and your information could be the key to stopping ongoing fraud and protecting other investors.

Remember that you do not need to be an “insider” (like an app developer or employee) to be a whistleblower. Victims of fraud and other market participants who observe misconduct committed by others may also qualify as whistleblowers. With proper legal guidance and the protection of federal whistleblower programs, you can safely report cryptocurrency violations while potentially earning substantial financial rewards for your courage to speak up.