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Introduction to Cryptocurrency and Digital Asset Fraud and Crime

Scharfman, Jason (2023) — The Cryptocurrency and Digital Asset Fraud Casebook

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DOI: 10.1007/978-3-031-23679-2_1 (opens in a new tab)

Type:   Journal Article
Country:   Global
Tags:   Consumer Protection, Crypto Romance Scams, Cryptocurrency Fraud, Fraudulent Trading Websites, Online Dating Platforms, Pig Butchering, Prevention, Victim Losses
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Synopsis

            
The publication offers a structured survey of fraud and crime in the cryptocurrency and digital asset space, aiming to raise awareness of how scams arise as the technology and markets expand. It describes a broad landscape of threats, from exchange hacks and rug pulls to Ponzi schemes, NFT fraud, and misrepresentation in ICOs and token sales, and it places these issues in a historical context by relating them to traditional fraud patterns. Its approach centers on interpretive analysis of widely documented case studies. Early chapters set out fraud typologies and motivations, then explore specific incidents across centralized and decentralized exchanges, Ponzi and MLM structures, NFT markets, DeFi platforms, and crypto hedge funds. The work combines technical explanations of platforms and protocols with narrative examinations of notable schemes, including well-known exchange breaches, insider promotions, and celebrity-endorsed offerings. The text also emphasizes regulatory and enforcement perspectives, illustrating how securities laws and anti-fraud provisions have been applied to digital assets in several high-profile actions. While it catalogs numerous fraud archetypes and concrete cases, the edition notes ongoing limitations in regulation, oversight, and market protections, underscoring the need for vigilance among participants and practitioners. Overall, the publication presents a catalogued, case-driven panorama intended to inform professionals and students about the evolution of crypto fraud and the practical implications for governance and risk management.

          

        
                  

            
Identified Gaps

            
Cryptocurrency fraud statistics likely understate the true scale because most crypto-related crime is self-reported. The text also identifies an unresolved prevention gap: criminals may become more sophisticated faster than investors, exchanges, law enforcement, prosecutors, and regulators, while crypto asset recovery can be more difficult than recovery of fiat assets.

          

        
                  

            
Methods

            
This casebook provides a descriptive, secondary-source synthesis of cryptocurrency fraud. It defines fraud concepts, reports complaint and loss statistics, summarizes government and industry materials, and presents illustrative case studies of romance scams, pig-butchering scams, exchange hacks, Ponzi schemes, and other crypto frauds. It does not report an original empirical study design or systematic evidence-review protocol.

          

        
                  

            
Limitations

            
The work is a descriptive casebook rather than a primary empirical study. Its examples and statistics rely substantially on reported complaints, press releases, media accounts, and external reports. Reported crypto-crime figures are likely undercounts because most crime is self-reported. Some criminal-case descriptions are allegations rather than adjudicated findings.

          

        
                  

            
Future Work

            
Develop lessons learned and best-practice recommendations to reduce the risk of future cryptocurrency exchange hacks. The text also calls for future practices that make the crypto ecosystem safer and for assessing whether regulatory resources, security controls, and consumer-protection measures can deter fraud.

          

              

    
    

        
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