Understanding the Patterns, Types, and Consequences of Cryptocurrency Fraud

• In Event: Navigating the Nexus of Cryptocurrency Fraud, Cybercrime, and Regulatory Public Sentiment

Abstract

The rapid adoption of digital currencies such as Bitcoin and Ethereum has been paralleled by an increase in fraudulent schemes that exploit the inherent anonymity and decentralization of blockchain technology. This study examines various deceptive practices—including phishing scams, Ponzi schemes, and fraudulent initial coin offerings (ICOs)—that manipulate victims into disclosing sensitive information or investing in illegitimate ventures. By integrating data from two primary sources—research on cryptocurrency fraud victimization and court documents from cryptocurrency-related cases—this paper investigates four key research questions: (1) What are the most common types of cryptocurrency fraud reported by victims? (2) How do victim experiences differ across various fraud schemes? (3) What patterns emerge in the prosecution and sentencing of cryptocurrency fraud cases? and (4) What challenges do law enforcement and judicial systems face in addressing these crimes? The insights gained from this research aim to inform strategies that can better protect investors and users in an evolving crypto market, highlighting the urgent need for enhanced regulatory frameworks and proactive fraud prevention measures.

Authors

• Claire Seungeun Lee, University of Massachusetts Lowell

• Sowndaryan Jayaprakashanand, University of Massachusetts Lowell