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The Cryptocurrency and Digital Asset Fraud Casebook

Scharfman, Jason (2023)

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

Type:   Journal Article
Country:   Global
Tags:   Crypto Exchanges, Cryptocurrency Fraud, Investment Fraud, Online Dating, Phishing, Pig Butchering, Regulation, Romance Scams
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Synopsis

            
The Cryptocurrency and Digital Asset Fraud Casebook, published in 2023 by Jason Scharfman, presents a structured survey of fraud and crime in the crypto and digital-asset space through a broad set of case studies. The work aims to raise awareness and help readers recognize warning signs by mapping fraud typologies to real-world incidents across multiple subfields, including exchanges, Ponzi/Pyramid MLM schemes, NFTs, DeFi hacks, and crypto hedge funds. The Preface explains that the text traces historical patterns of fraud, analyzes motivations using models like fraud triples, and examines how scammers adapt familiar schemes to crypto, with the overarching goal of reducing victimization as the ecosystem grows. The chapters proceed to ground these themes in concrete examples and legal/securities context. Chapter 1 outlines concepts of crypto fraud, theft versus fraud, and market dynamics, while Chapters 2 through 4 analyze exchange fraud and hacking, Ponzi/pyramid schemes, and MLM-style promotions, drawing on international cases and regulatory actions. Chapters 5 through 8 turn to NFTs, DeFi fraud and hacks, and crypto hedge funds, including discussions of direct NFT theft, rug pulls, insider trading cases, and high-profile DeFi exploits. Chapters 9 through 12 cover ICOs, celebrity-promoter cases, and related securities-law considerations, with examples like Sparkster and Ormeus Coin, and investigations by the SEC and DOJ. Throughout, the book presents case studies, regulatory responses, and connected implications for compliance, risk management, and investor caution, while cautioning readers that the analysis focuses on documented incidents and does not extend to unsupported generalizations about risk or prevalence.

          

        
                  

            
Identified Gaps

            
The book identifies unresolved questions about what victims, exchanges, governments, and law enforcement could have done to prevent hacks, what documentation and due diligence are appropriate, and whether exchanges should bear liability. It also notes uncertainty over whether stricter regulation and institutional investment will reduce fraud as offenders become more sophisticated.

          

        
                  

            
Methods

            
This is a narrative casebook that synthesizes definitions, fraud statistics, publicly reported incidents, regulatory materials, law-enforcement press releases, and case examples. It describes cryptocurrency fraud typologies and uses illustrative cases to discuss offender tactics, losses, security failures, enforcement actions, and emerging trends. No systematic search, sampling protocol, or original empirical data collection is described in the supplied text.

          

        
                  

            
Limitations

            
The text is a descriptive compilation rather than a systematic empirical study. Many cases and quantitative claims are drawn from secondary reporting, agency statements, and self-reported complaint data; the author notes that crypto-crime statistics likely underreport actual fraud because most crime is self-reported. Some case descriptions concern allegations rather than adjudicated facts.

          

        
                  

            
Future Work

            
Evaluate which exchange security measures, regulatory approaches, and operational standards reduce cryptocurrency fraud and hacks. Assess whether prevention, law-enforcement, and exchange-safety efforts can keep pace with increasingly sophisticated offenders, and identify lessons and best practices from documented cases.

          

              

    
    

        
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