Crypto Losses in US Courts: Fraud Claims, Frozen Wallets and Failed Exchanges

Somewhere on a public ledger, your money still exists. That is the peculiar cruelty of a crypto loss: the tokens drained from your wallet, or stranded on a collapsed exchange, are usually still visible — a balance at an address that anyone can inspect and nobody will return. The question that brings victims to an American courtroom is not whether the assets exist, but whether the law can turn a wallet address into a defendant, a defendant into a judgment, and a judgment into recovered money.

Often it can — at a price. United States courts have proved willing to treat cryptocurrency as property that can be stolen, traced, frozen and clawed back, and the past few years have assembled a serviceable civil toolkit: fraud and conversion claims, suits against unknown wallet holders, expedited subpoenas to exchanges, restraining orders over accounts, and, when the platform itself fails, the grinding machinery of federal bankruptcy. But every tool costs money to deploy, several are blunted by arbitration clauses and offshore defendants, and sometimes the shrewdest move is not to litigate at all but to queue — carefully, and with immaculate records — behind a government-appointed receiver.

This guide maps the routes in roughly the order a victim should consider them. It deals with civil recovery in the United States only; other jurisdictions get their own guides.

First, name your wrong: the civil claim menu

American pleading requires you to say what legal wrong was done to you. For crypto losses the usual menu has five items, and a well-drawn complaint typically pleads several at once.

Fraud. The workhorse claim for scams: a false representation, made knowingly, intended to induce reliance, actually and reasonably relied upon, causing loss. Romance and "pig-butchering" investment scams, fake trading platforms, tokens sold on invented promises — all fit this frame. Fraud must be pleaded with particularity: who said what, when, through which channel, and how it was false.
Conversion. The civil cousin of theft: an intentional exercise of dominion over your property inconsistent with your rights. Courts in a number of states have accepted that cryptocurrency is property capable of being converted, which makes conversion the natural claim for a straightforward wallet drain or unauthorised transfer — cases where nobody lied to you; they simply took.
Unjust enrichment. The defendant holds value that in good conscience belongs to you. This claim is useful against downstream recipients of stolen tokens who never made any representation to you at all.
Constructive trust. Strictly a remedy rather than a standalone wrong: the court declares that the defendant holds specific, traceable assets on trust for you. In crypto cases this matters enormously, because a proprietary claim to identified assets — as opposed to a bare claim for damages — unlocks stronger interim freezing relief and better treatment if the holder goes bankrupt. More on both below.
State consumer-protection statutes. Every state has some form of unfair-and-deceptive-practices law, and many allow enhanced damages or recovery of attorney's fees. Where a platform or promoter marketed to consumers, these statutes add real settlement leverage.

For the mechanics of how a US civil suit actually runs — complaint, service, motions, discovery, judgment — see our companion guide to responding to a lawsuit in the US; the same architecture applies when you are the one suing.

Suing a wallet address: John Doe suits and expedited discovery

The defining problem of crypto litigation is that you frequently do not know who robbed you. You know an address. American procedure has a pragmatic answer: sue the unknown holder as a John Doe defendant, then use the court's compulsory process to find out who Doe is.

The engine of that process is the subpoena. Stolen crypto is hard to spend without touching a regulated exchange, and regulated exchanges keep know-your-customer records: names, identity documents, linked bank accounts, IP logs. A blockchain-analytics tracing report follows the tokens from your wallet to a deposit address at an exchange; a subpoena to that exchange asks who controls the account. Because the federal rules ordinarily bar discovery until the parties have conferred — impossible when the defendant is anonymous — you must ask the court for leave to take expedited discovery, showing good cause: a plausible claim, a genuine on-chain trail, and no other means of identifying the defendant. Courts in crypto-theft cases have frequently granted such applications. The wider machinery of subpoenas, depositions and document demands is covered in our guide to discovery in US civil litigation.

Two cautions. Tracing reports cost real money, incurred before you know whether the person at the end of the trail is worth suing. And the trail may terminate at an offshore exchange that ignores American subpoenas — a preview of the enforcement problem discussed further below.

Freezing what is left: TROs and prejudgment attachment

Identifying the thief is worth little if the assets move first, so in live cases the interim relief is often where the case is won or lost. Two instruments matter.

A temporary restraining order, followed by a preliminary injunction, can prohibit the defendant — and, critically, any exchange holding the deposit address — from transferring the assets. Exchanges with US operations generally comply with court freezes, and an order obtained quickly, sometimes without notice to the defendant, can trap tokens in an account before they scatter through mixers and cross-chain bridges.

There is, however, a distinctly American trap. In Grupo Mexicano de Desarrollo, S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308 (1999), the Supreme Court held that federal courts have no general equitable power to freeze a defendant's assets before judgment in a suit for money damages. The United States, in other words, has no Mareva-style freezing order of the kind Commonwealth courts grant as a matter of course. The way around the rule is equitable: where you assert a proprietary claim — a constructive trust or equitable lien over specific, traceable tokens — the freeze attaches to property you say is yours, and courts have generally held that Grupo Mexicano does not stand in the way. This is why the equitable counts on the pleading menu are not decoration.

The second instrument is prejudgment attachment, a creature of state law that federal courts can borrow. It permits seizure or restraint of a defendant's property at the outset of a case as security for the eventual judgment, typically on a showing of probable success plus a statutory ground such as fraud. The requirements differ sharply from state to state, and the applicant is usually required to post a bond against the possibility that the attachment turns out to be wrongful.

When the exchange itself fails: bankruptcy reality

Celsius, Voyager, BlockFi, FTX: the platform failures of 2022 taught American customers a brutal lesson in insolvency law. When an exchange or lending platform files for Chapter 11, an automatic stay halts every lawsuit and every withdrawal. From that moment your remedy is a claim in the bankruptcy, and the controlling question becomes one that almost nobody checked when they signed up: whose coins were they?

If, under the platform's terms of service, you retained ownership and the platform merely held custody, your assets are arguably not part of the bankruptcy estate at all, and you may recover them in kind. If instead the terms transferred title to the platform — as yield-bearing "earn" products typically did — you are an unsecured creditor, standing in a very long queue for a share of whatever the estate scrapes together. In In re Celsius Network LLC (Bankr. S.D.N.Y. 2023), the court held that the platform's terms of use meant crypto in Celsius Earn accounts belonged to the estate, not to the customers — a ruling that converted hundreds of thousands of account holders into unsecured creditors at a stroke. The terms of service you clicked through are not boilerplate; in bankruptcy they are close to the whole case.

FTX added a second lesson: bankruptcy claims are valued in dollars as at the petition date. Customers whose coins were trapped in November 2022 held claims priced at November 2022 values, and even the eventual repayment of those dollar claims — unusually generous by insolvency standards — left many with a fraction of what the same coins were later worth. The practical morals are unglamorous: read the terms before you deposit, prefer genuine custody over yield products, and treat withdrawal delays or "paused" products as a fire alarm rather than an inconvenience.

The arbitration clause you already agreed to

Before you sue any surviving exchange — over a hacked account, a botched liquidation, wrongly frozen funds — reread its terms of service, because you almost certainly agreed to mandatory individual arbitration and waived any right to join a class action. Under the Federal Arbitration Act, American courts enforce these clauses readily, and challenges based on unfairness succeed only occasionally. The consequence is that many disputes with exchanges never see a courtroom at all: they go to a private arbitrator, one claimant at a time.

Arbitration is not always a disaster. For a modest, well-documented claim it can be quicker and cheaper than court, and coordinated "mass arbitration" filings have occasionally turned the platform's own fee obligations into settlement pressure. But it forecloses the public, collective procedures that make small claims economical to bring. How these clauses work, and the narrow routes around them, are the subject of our guide to arbitration clauses in US consumer and employment contracts.

Token issuers and promoters: the securities route

When the loss comes not from theft but from a token that collapsed, the claim usually runs against the people who created and promoted it, and federal securities law supplies the frame. The test comes from SEC v. W. J. Howey Co., 328 U.S. 293 (1946): an arrangement is an investment contract — and therefore a security — where there is an investment of money in a common enterprise with an expectation of profits derived from the efforts of others. Many token sales fit that description comfortably; whether any given token does is fought case by case, and the boundaries remain genuinely unsettled. Where a token was a security, its issuers and promoters can face private claims for selling unregistered securities or for false statements made in connection with the sale — claims that have reached celebrity endorsers as well as founders. That is the extent of the securities law you need at the triage stage; the full doctrine is deep water.

Because thousands of buyers lose money in the same collapse on the same facts, these cases travel as class actions: one representative sues for everyone, contingency-fee counsel carry the costs, and absent class members need do little beyond keeping their transaction records and responding to notices. For most retail token holders, remaining in a certified class is the only economically rational way into court. Certification, opt-outs and settlement mechanics are covered in our guide to US class actions.

The government's parallel track: receivers, forfeiture and fair funds

Private litigation is only half the American picture. The SEC and the CFTC bring civil enforcement actions against crypto frauds; the Department of Justice prosecutes them; and each track can end in money for victims without any victim filing suit. The SEC can obtain disgorgement and civil penalties and, through a fair fund, distribute the money to injured investors. Courts in fraud enforcement cases appoint receivers who take control of the fraudster's entities, claw back assets and run structured claims processes. Criminal convictions end in forfeiture, and forfeited assets can be returned to victims through remission programmes. The criminal side gets no more than that signpost here — it is the government's case, not yours.

For many victims, particularly of large collapsed schemes, the receivership queue is the best recovery route on offer: the government's investigative powers dwarf any private plaintiff's, the costs are not yours, and receivers routinely reach assets — foreign accounts, seized wallets — that a private judgment never would. The price is patience, a total lack of control, and recoveries that arrive years later at cents on the dollar. The rational strategy is usually to do the cheap things immediately — report, register your claims — and reserve actual litigation for cases where a solvent, reachable defendant makes the spend worthwhile.

The offshore problem

Crypto is borderless; judgments are not. A large share of scams are run from abroad, through exchanges with no US presence, by operators whose names appear on no company register. Serving foreign defendants is slow — service abroad generally runs through the Hague Service Convention where it applies — although American judges have shown real flexibility, occasionally permitting service by email or even by token airdrop into the thief's own wallet. Personal jurisdiction over a foreign defendant must still be established, and it is contested territory. And even a judgment in hand may be worth little: a default judgment against an offshore shell with no American assets is a certificate of victory, not a cheque. Before spending serious money, ask the only question that ultimately matters: where is the asset a US court can actually reach? If the answer is an account at an exchange in a cooperative jurisdiction, your litigation has a target. If the answer is nowhere, the government track is probably the honest end of the road.

Practical triage: is suing worth it?

The arithmetic of crypto litigation is unforgiving. A contested federal case runs to tens of thousands of dollars before trial; tracing reports, freeze applications and foreign service all cost money up front; and the defendant class is disproportionately anonymous, offshore or insolvent. Triage honestly:

Small losses. Report to the FBI's Internet Crime Complaint Center (IC3), the Federal Trade Commission and your state attorney general; file claims in any bankruptcy or receivership that touches the scheme; check whether a class action is already running. Do not fund solo litigation.
Mid-sized losses against a live platform. A demand letter, then arbitration under the terms of service or a state-court claim. Contingency counsel become realistic where the trail ends at a compliant exchange holding identifiable assets.
Large losses with a fresh trail. Move immediately: tracing report, John Doe complaint, expedited discovery, freeze application — in that order and within days. Every hour of delay is measured in hops between wallets.

And in every case, at every size, document everything: transaction hashes, wallet addresses, screenshots of the platform and of every promise made to you, chat logs, emails, the version of the terms of service you accepted, dates and amounts of every deposit and attempted withdrawal. Fraud must be pleaded with particularity, bankruptcy claims must be proved, receivers demand evidence, and arbitrators are unmoved by recollection. Recovery in crypto cases belongs, disproportionately and almost unfairly, to the people with the best records.

This article is published by CommonBench for informational purposes only and does not constitute legal advice. If you are weighing fraud claims, a freeze application or a bankruptcy claim after a crypto loss in the United States, try CommonBench — AI-powered legal research with verified citations across five common law jurisdictions.