US Moves to Freeze $26.4 Million in Crypto Scam Funds, But It Remains Uncertain Whether Victims Will Get Their Money Back

Author: CryptoSlate

Compiled by: TechFlow

TechFlow Editor's Note: The Department of Justice announced the recovery of $26.4 million from five cases, with cumulative frozen funds exceeding $800 million. However, "recovery" and "victims receiving it" are two different things—courts have not yet ruled on forfeiture, suspect identities are unclear, there is no compensation timetable, and how much of these funds will ultimately reach victims remains unknown.

On July 21, U.S. prosecutors filed five civil forfeiture complaints regarding five separate international fraud investigations, seeking to forfeit approximately $26.4 million worth of cryptocurrency.

Investigators can freeze suspected criminal proceeds without knowing the identity of the masterminds, then seek forfeiture while continuing to pursue suspects, with final forfeiture and victim compensation decided later.

The U.S. Attorney's Office for the District of Columbia stated that one investigation tracked over 270 suspected victim transactions involving fraudulent investment platforms. Another involved over 200 pig butchering scam victims and hundreds of intermediate addresses used for mixing funds.

The Department of Justice stated that in all five cases, money launderers were primarily located in Southeast Asia, with relevant IP addresses in China, Malaysia, and Cambodia.

From Freezing to Compensation

The purpose of freezing is to prevent identified cryptocurrency from being transferred. Civil forfeiture complaints initiate the next legal procedure, requiring the court to transfer ownership of the property to the government.

The Department of Justice stated that civil judicial forfeiture targets property and does not require a criminal conviction. However, prosecutors must prove the connection to criminal activity by a preponderance of the evidence. Therefore, filing a complaint does not mean completion of forfeiture or establishment of anyone's criminal guilt.

The Department of Justice described these five forfeitures as part of over $800 million recovered by the Fraud Center Strike Force.

The Strike Force project page (updated June 18) reported different data: $832.8 million worth of cryptocurrency was frozen. These numbers use different terms and dates, so they are not before-and-after comparisons, nor are they victim compensation statistics. They show that assets reported by the Department of Justice as recovered or frozen have reached hundreds of millions of dollars, but final disposition remains unresolved.

Recovered funds do not automatically put money back into victims' hands. Eligible victims may obtain forfeited assets later through the Department of Justice's remission or restoration process, which can also send funds to the court for restitution.

The July 21 announcement did not provide allocation amounts, a list of eligible claimants, or a timetable for these five cases. What remains unresolved is: whether the court will approve forfeiture, who investigators ultimately confirm identities to be, and how much of the involved cryptocurrency will ultimately reach victims' hands.