The United States Securities and Exchange Commission (SEC) is scaling back its cryptocurrency enforcement unit, a decision that comes at a time when financial crimes linked to digital assets are reaching unprecedented levels. This move has sparked concerns among experts who argue that crypto-related fraud is worsening rather than improving.
A Surge in Crypto Crime
Last month, the cryptocurrency exchange Bybit suffered the largest theft in industry history, with hackers stealing approximately $1.5 billion. This incident underscores the growing vulnerabilities within the digital asset market. Analysts estimate that illicit crypto addresses received between $40 billion and $75 billion in 2024, setting a new record for crypto-related crime.
Cryptocurrency has become a key tool for cybercriminals, affecting individuals and businesses alike. Ransomware attacks, in particular, have been on the rise, with hackers demanding payment in digital currencies to maintain anonymity and evade law enforcement. In February 2024, UnitedHealth Group fell victim to a ransomware attack that disrupted hospitals, pharmacies, and medical services across the country. The company ultimately paid a $22 million ransom in Bitcoin to restore operations.
The Rise of Meme Coin Scams
Beyond ransomware, fraudulent meme coins have become another significant concern. These digital tokens, often tied to internet trends or celebrities, attract investors with the promise of quick returns but frequently result in financial devastation.
One such case involved Hailey Welch, widely recognized as the “Hawk Tuah Girl” after a viral TikTok video. In December, Welch capitalized on her sudden fame by launching a meme coin, which initially surged in value. However, the coin’s price plummeted by more than 90% after a small group of investors offloaded over 80% of its supply. One investor lamented on social media, “I am a huge fan of Hawk Tuah but you took my life savings.”
The Devastating Impact of Romance Scams
Crypto-related scams also extend to personal fraud, including “pig butchering” or “romance baiting” schemes. Criminals posing as romantic partners lure victims into fraudulent investment opportunities, leading to catastrophic financial losses.
Shai Plonski, a California resident, fell victim to such a scam after meeting “Sandy” on Facebook. Their online conversations revolved around mutual interests in yoga and poetry, but when Plonski revealed his business struggles, Sandy convinced him to invest in cryptocurrency. He eventually transferred his life savings into a fake investment platform, only to discover he could not withdraw any funds. He was among more than 40,000 Americans defrauded by such schemes.
Exploiting Bitcoin ATMs
Bitcoin ATMs have also become a tool for financial fraud. Scammers typically convince victims to deposit cash into these machines using a QR code that directs the funds to the fraudster’s digital wallet. Seniors are particularly vulnerable to these schemes.
In Beaufort County, South Carolina, where the elderly population is significant, residents reported losses exceeding $3.1 million from crypto-related scams in 2024. One retired healthcare worker fell prey to a scam call from someone posing as law enforcement, claiming she had missed jury duty and needed to post a $7,500 bond. She deposited the money into a Bitcoin ATM, only to realize it was an elaborate ruse.
Calls for Stronger Regulation
As financial crimes linked to cryptocurrency grow, experts are calling for tighter regulations rather than relaxed enforcement. Some argue that the SEC’s decision to scale back its crypto crime unit could allow fraudulent activities to proliferate unchecked.
“The SEC’s new leaders say they don’t want crypto to ‘be a haven for fraudsters.’ Unfortunately, it already is,” said Benjamin Schiffrin, director of securities policy at Better Markets. “It’s up to them and other regulators to protect the American people from the crime that pervades this industry.”
While the debate over crypto regulation continues, the impact of digital asset fraud is already being felt across the United States. Without decisive action, financial criminals could gain even greater footholds in the evolving digital economy.
