Facing Cryptocurrency Fraud Charges in New York?

Cryptocurrency fraud in federal court often stems from securities fraud, wire fraud, money laundering, bank fraud, commodities fraud, or related white-collar offenses involving digital assets.

These charges carry severe consequences, from lengthy prison terms to forfeiture of assets, making experienced legal defense crucial.

Recent federal cases illustrate how seriously prosecutors treat crypto-related fraud:

• Alex Mashinsky (Celsius founder) received a 12-year federal prison sentence for securities and commodities fraud in New York, plus over $48 million forfeited.
• Sam Bankman‑Fried (FTX) was found guilty on multiple wire fraud and conspiracy counts and is serving a 25-year sentence.
• Do Kwon (Terraform Labs) faces federal charges in S.D.N.Y. for securities, commodities, wire fraud, market manipulation, and money laundering conspiracies.

What Can Federal Authorities Accuse You Of?

Wire & Mail Fraud (18 U.S.C. §§ 1343, 1341)

• Use of communications systems to execute a fraudulent scheme can lead to rackable counts—up to 20 years, or 30 years if involving financial institutions.

Securities & Commodities Fraud

• Misrepresentations or deceptive promotion of tokens (e.g., ICOs, lending platforms) may trigger charges under securities statutes like Section 10(b) of the Securities Exchange Act and Rule 10b‑5, or under commodities fraud laws.

Money Laundering (18 U.S.C. § 1956)

• Converting or hiding crypto proceeds can be treated as money laundering—especially when layered through exchanges or mixing services.

Bank Fraud (18 U.S.C. § 1344)

• Charges arise if crypto transactions integrate traditional banking channels fraudulently.

RICO (Racketeering Influenced and Corrupt Organizations)

• If prosecutors allege multiple fraudulent acts are part of an organized scheme, RICO charges permitting enhanced penalties may accompany fraud allegations.

How We Fight Cryptocurrency Fraud Charges in New York

Core defense strategies, centered on attacking the elements of the charge, include:

Lack of Intent/Knowledge Defense:

• A viable defense in securities fraud cases is demonstrating that you lacked knowledge of any false statements or did not possess the specific intent to deceive investors. This strategy involves providing clear evidence of your honest efforts to share accurate information. Prosecutors must prove you knowingly intended to deceive. Your defense can counter this by showing there was no malicious intent. For example, you can demonstrate that you relied on incorrect data in good faith, supported by evidence like emails, financial communications, or testimony that indicates there was no deliberate effort on your part to mislead anyone.
• Key Elements:
  
  • It must be established that you lacked any intent to deceive donors or misappropriate funds. Your defense will work to demonstrate that any alleged misrepresentations resulted from genuine misunderstandings or honest errors, not from deliberate fraudulent conduct.
  • Your defense can show that any crypto losses stemmed from volatile market changes, not from your criminal intent. This is similar to proving a lack of intent in other virtual currency cases where market forces, not fraud, are the cause of financial loss.

Good Faith Compliance Defense

• The defense can show that you made genuine, documented efforts to understand and comply with the complex and often ambiguous cryptocurrency regulations, demonstrating a responsible and proactive approach. Furthermore, you can build a strong defense by showing you relied on the good-faith advice you received from qualified experts, such as lawyers or accountants. 

Challenging Technical Evidence

• The prosecution's case in an ICO investigation often relies heavily on complex technical evidence. Your counsel can challenge the government's blockchain analysis by highlighting its inherent limitations and potential flaws, questioning whether the digital evidence truly and unequivocally supports the prosecution's claims. Your legal team may also scrutinize digital trails, present compelling alternative explanations for the data, or expose critical errors made during the investigation to contest the connection the government attempts to draw between you and the alleged illegal activities.

Lack of Control/Knowledge of Transactions

• Arguing that you did not have knowledge of the illicit activities or that you lacked control over the specific transactions in question can be a potential defense. Demonstrating your limited involvement or, in some cases, proving that you were a victim of identity theft or hacking, can significantly strengthen this defense and distance you from the alleged fraudulent scheme.

Expert Testimony Strategy

• Expert witnesses often become game-changers in complex securities cases. Your defense can retain experts to clarify intricate financial details and explain cryptocurrency industry practices from a professional, objective perspective. While you must anticipate that the prosecution will try to discredit these experts, preparing them properly with your legal team is a critical part of a successful defense, as their testimony can be pivotal in explaining your actions to a judge and jury.

Possible Sentencing & Penalties in New York

Sentencing and penalties vary depending on the specific charge:

Wire Fraud (18 U.S.C. § 1343):

• Maximum imprisonment of 20 years and fines under

Mail Fraud (18 U.S.C. § 1341):

• Conviction results in either a fine, imprisonment, or both with the same 20-year maximum as wire fraud

Money Laundering - 18 U.S.C. § 1956:

• Maximum penalty of 20 years imprisonment and a fine of not more than $500,000 or twice the value of the property involved in the transaction, whichever is greater

Conspiracy Charges:

• Conspiracy to commit fraud carries the same penalties as those prescribed for the underlying offense

Primary Guideline - § 2B1.1

Most cryptocurrency fraud cases are sentenced under Primary Guideline § 2B1.1, which uses a loss-based calculation system. The loss table provides sentencing enhancements in two-level increments, with the current table providing up to 30 levels for offenses where the loss exceeded $400,000,000

Key Enhancement Factors

• Loss Amount: The primary driver of sentence length under § 2B1.1
• Number of Victims: Enhanced penalties apply for more than 10 victims (2 levels), 50 or more victims (4 levels), and 250 or more victims (6 levels total) Amendment 653 
• Sophisticated Means: Additional enhancements for complex schemes
• Leadership Role: Enhancements for organizers and leaders
• Abuse of Trust: Additional penalties for defendants in positions of trust

Forfeiture and Asset Recovery

• Civil and Criminal Forfeiture: Any property involved in a transaction or attempted transaction in violation of sections 1956, 1957, or 1960, or any property traceable to such property, is subject to forfeiture 18 U.S.C. § 981

Supervised Release and Probation

Courts typically impose supervised release terms of 1-3 years for fraud offenses, with standard conditions including:

1. No further criminal activity
2. Cooperation with probation officers
3. Financial disclosure and monitoring
4. Computer and internet usage restrictions
5. Restitution payments

Furthermore, special conditions for cryptocurrency cases include:

1. Prohibition on cryptocurrency trading or transactions
2. Asset monitoring and reporting requirements
3. Technology usage restrictions
4. Financial account monitoring

Examples and Related Cases

Our office has handled matters pertaining to cryptocurrency fraud. While there are specific nuances related to these currencies, from a defense standpoint, there is also extensive overlap with a traditional grand larceny or bank fraud prosecution. In this sense, it is prudent to hire an experienced defense lawyer to conduct a rigorous forensic accounting and begin a defense investigation immediately. More specifically, as it relates to cryptocurrency fraud, we recently represented an individual charged with felony grand larceny in New York State court due to an alleged theft relating to an online crypto wallet. In this case, we were able to successfully defend our client, who was facing upstate prison time, by negotiating a non-jail disposition.

Your Defense Begins Now

If you or a loved one is facing a subpoena, indictment, or investigation related to cryptocurrency fraud, contact The Law Offices of Jason Goldman immediately. Having a strategic, creative, and relentless defense attorney can be the difference in protecting your rights, assets, and your future.