Crypto Scandals: Experts Say Human Misconduct, Not Tech, Drives Fraud

HomeNews* Blockchain-related scandals often stem from familiar types of fraud, not technology itself.

• Technical knowledge enables new forms of crimes in crypto, such as exploiting blockchain protocols.
• Legal gray areas exist, especially around white hat Hackers who return stolen funds.
• Regulators sometimes struggle to understand the workings of decentralized systems.
• Authorities may prioritize certain crypto crimes based on the amount of financial loss or recovery of funds. Recent discussions on The Clear Crypto Podcast featured industry experts who addressed ongoing issues in the blockchain sector. Jennie Levin, chief legal and operations officer at the Algorand Foundation, joined the hosts to clarify that many current scandals in crypto are not unique, but rather reflect misconduct seen in traditional finance.

• Advertisement - Levin stated that events like the collapse of exchanges such as FTX are examples of misuse that parallels crimes found in conventional sectors. She explained, “Front-running securities trades happens all the time in traditional finance. This is just a way of doing it using the crypto industry. It’s native to the crypto industry, but the theme of the fraud happening happens elsewhere as well. There are just ways to do it now within the technical aspects of the crypto community.”

Many high-profile crypto crimes involve the exploitation of blockchain protocols, according to Levin. These cases often require a deep understanding of the technology. She added, “If you mess with the underlying system and the ordering of blocks, then yes, you can use that to your advantage. It takes knowing the protocol code, knowing the different players, and being able to have a really deep understanding.” For example, some crimes target technical weaknesses to achieve illicit gains, similar to recent federal seizures of crypto assets, as seen when the U.S. Department of Justice moved to seize $225 million in crypto linked to pig butchering schemes.

The podcast also highlighted the legal complexities around white hat hackers—individuals who return stolen assets after exposing security vulnerabilities. Levin emphasized, “A crime is a crime is a crime. Claiming good intent does not negate the crime or the elements of the crime. From a strictly legal standpoint, you can still be charged.” However, law enforcement may focus more on cases where losses are not recovered or if the scale meets federal prosecution standards.

Regulation remains a challenge in parts of the world, according to host Gareth Jenkinson, because authorities may not fully understand how decentralized technologies operate. He explained that requests to remove data could be misapplied to blockchain systems, creating confusion in regulatory processes.

Listeners can access the full episode of The Clear Crypto Podcast through Apple.com/us/podcast/the-clear-crypto-podcast/id1805146224″ rel=”noopener nofollow” target=”_blank”>Apple Podcasts or Spotify for further details.

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