US Rep to Regulators, Crypto Firm: How Do You Deal With Fraud?

The head of the House Subcommittee on Economic and Consumer Policy has written to numerous federal agencies and cryptocurrency exchanges seeking answers on the steps they’re taking to deal with crypto fraud.

 “As stories of skyrocketing prices and overnight riches have attracted both professional and amateur investors to cryptocurrencies, scammers have cashed in,” Rep. Raja Krishnamoorthi said in a news release Tuesday (Aug. 30).

“The lack of a central authority to flag suspicious transactions in many situations, the irreversibility of transactions, and the limited understanding many consumers and investors have of the underlying technology make cryptocurrency a preferred transaction method for scammers. For all these reasons, I am concerned about the growth of fraud and consumer abuse linked to cryptocurrencies.”

Krishnamoorthi, a Democrat from Illinois, addressed the letter to the U.S. Department of Treasury, Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and Federal Trade Commission (FTC), as well as the digital asset exchanges Binance, Coinbase, FTX, Kraken, and KuCoin.

Read more: SEC Homes in on Small Cryptos to Bolster Oversight Case

He argues that although the private sector has taken steps to prevent cryptocurrency fraud, there is still a significant risk.

“Consumers are often unaware of the patchwork of resources available to inform their cryptocurrency investing decisions, and insurance companies are reluctant to provide insurance to individual consumers given the lack of regulation of digital assets,” the release said.

See also: FBI: Cyberthieves Increasingly Target DeFi Platforms

Krishnamoorthi’s request came on the same day that the FBI warned that cyberthieves are increasingly going after decentralized finance (DeFi) platforms, urging investors to carry out thorough research and telling platforms to amplify monitoring and code testing.

DeFi’s “complexity of cross-chain functionality and open source nature” make it easier for cybercriminals to take advantage of “investors’ increased interest in cryptocurrencies,” the FBI’s Internet Crime Complaint Center said in a notice.

Almost 97% of the $1.3 billion swiped in crypto by cyberthieves was taken from DeFi platforms, a 72% increase compared 2021 and a 30% increase over 2020, the notice said. These platforms don’t use third parties to conduct financial transactions on the blockchain and have been the targets of several attacks this year alone.