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Highlights
- DOJ regulation 28 CFR 9.8(c) prioritizes government claims over victims' restitution.
- Cryptocurrency fraud victims often see limited recovery due to this regulation.
- Rising crypto value increases the urgency for revising restitution processes.
Victims of cryptocurrency fraud often face an additional challenge in recovering their losses due to a little-known Department of Justice regulation. Regulation 28 CFR 9.8(c) prioritizes the government’s right to retain forfeited funds over ensuring victims receive restitution. This regulation has significant implications, especially as cryptocurrency continues to rise in value, attracting increasing fraud risks.
Unfairness in Crypto Fraud Restitution The Government’s Priority Over Victims
Victims of cryptocurrency fraud often find themselves at a significant disadvantage due to a little-known Department of Justice regulation. The regulation, 28 CFR 9.8(c), places government claims above the rights of fraud victims to recover their losses, ultimately allowing the government to keep forfeited funds, rather than providing restitution to those who were defrauded. This regulatory issue has been a silent issue in the justice system, with little public scrutiny or judicial review, but it significantly affects those who have been harmed by crypto scams.
Regulation 28 CFR 9.8(c) Puts Victims Last in Line
The regulation is designed to prioritize the government’s claim to funds that are forfeited in federal crimes, but it has a direct and damaging impact on victims of fraud. By preventing fraud victims from having first rights to restitution, it undercuts Congress’ intent to ensure victims are made whole after a crime. Unfortunately, the regulation is so obscure and little-known that it has largely escaped attention. This lack of transparency and accountability leaves victims powerless in a situation where they should have been prioritized.
Crypto’s Rapid Growth Coincides with Increased Fraud Risk
The rise of cryptocurrencies like Bitcoin and Ethereum has been nothing short of remarkable, with values increasing exponentially over the past few years. Bitcoin has surged more than 1,200%, and Ethereum has jumped by over 2,400% during the same period. However, this growth has been paired with an increase in fraudulent activities. Scams such as phishing, social engineering, SIM swapping, and extortion schemes are now widespread in the crypto space. As the value of digital currencies continues to climb, so too does the opportunity for bad actors to exploit vulnerable individuals, leaving many with significant financial losses.
The Need for Change in DOJ Regulations
Despite the growing prevalence of cryptocurrency fraud and its severe consequences for victims, 28 CFR 9.8(c) continues to be a barrier to the full restitution of defrauded parties. The regulation is a form of government protection that places the interests of the state over the victims, denying them the opportunity to recover their stolen assets. Given the rapid growth of the cryptocurrency market, it is critical for lawmakers to address the imbalance created by this regulation to protect the rights of fraud victims.
As the crypto market continues to evolve, it is essential that legal frameworks adapt to prioritize victims and ensure they have a fair chance at recovering their losses. Without such changes, many victims will continue to lose out while the government keeps control of forfeited funds. The crypto industry’s rapid growth and the increase in fraudulent activity make it clear that urgent reforms are needed in the current system.
