A New Path to Justice: Cryptocurrency Exchanges Can be Held Liable for Pig Butchering and Elder Financial Exploitation and Abuse

As a major update in the firm’s elder financial abuse cryptocurrency lawsuit, the District Court for the Northern District of California, in a groundbreaking order in the case of Lee v. Foris Dax, Inc. aka Crypto.com, ruled that private litigants can hold cryptocurrency exchanges liable for pig butchering scams and elder financial abuse under the theory that the companies have violated the Bank Secrecy Act by failing to police their platforms for money laundering and financial crime. The court's decision will provide a strong deterrent and shift the accountability and responsibility back onto the cryptocurrency exchanges—who are best positioned to prevent these fraud schemes from happening—to take action against a growing national crisis that especially affects elderly Americans.

This ruling is not just another procedural step — it provides precedent for a new path for justice for victims of fraud and abuse. This decision empowers consumers to take action against the explosion of cryptocurrency enabled money laundering, which has been fueling an ever-increasing volume of fraud and abuse against everyday Americans, estimated to be well over tens of billions of dollars annually. (Larger than the entire economies of many countries around the world.) Kronenberger Rosenfeld successfully pushed through and defeated multiple attempts to dismiss the case, delivering a powerful message to the cryptocurrency industry that the status quo is over.

Why This Matters

For too long, cryptocurrency exchanges that convert digital assets and process money transfers have been resistant to using their state-of-the-art technology to prevent these forms of fraud and abuse. The problem is competition—there is an industry race to the bottom to be fast and efficient to the detriment of legal compliance. Companies hesitate to implement their technology to fight fraud if it means falling behind those that do not. Cryptocurrency companies have for years also attempted to shield themselves from liability, hiding behind layers of legal protections and decades of legal decisions in cases involving the brick-and-mortar banking industry. Laws in this area mostly relate to wire transfers and analogue electronic funds technologies. None of those laws or cases involved blockchain technology’s revolutionary capacity for transparency and safety that is inherent to the yet-realized promise of cryptocurrency. Now, the law is finally catching up. By predicating antitrust and consumer protection claims on willful or even negligent violations of the Bank Secrecy Act, the courts have cleared a path for consumers to finally fight back. In a sweeping legal development, a federal court in Lee v. Foris Dax aka Crypto.com has issued a decision ruling that cryptocurrency exchanges can be held liable for facilitating pig butchering scams and elder financial abuse. If cryptocurrency exchanges enable fraudulent transactions by failing to prevent the money laundering on which criminals rely, victims—using violations of the Bank Secrecy Act—have the right to pursue those companies for unlawful business practices.

What is the Bank Secrecy Act?

The Bank Secrecy Act (BSA), passed in 1970, is a foundational U.S. law requiring financial institutions to detect, prevent, and report financial crime, money laundering, and fraud. This regulatory framework has applied to traditional financial institutions for years. It has also been adapted to apply to the changing times and technology, extending to cryptocurrency activities, persons, and businesses that act as “money transmitters.” Money transmitters are broadly defined as persons or entities that engage in the transfer of funds or value from one person or place to another and thus fall under the category of “Money Services Businesses” within the BSA framework. MSB activities are strictly regulated to combat money laundering and illicit activities, like fraud and elder financial exploitation.

As MSBs, the BSA compels cryptocurrency exchanges to implement an effective anti-money laundering program (AML) program, reasonably designed to prevent their financial systems from being used to facilitate money laundering. Cryptocurrency exchanges are required to actively monitor transactions for suspicious activity, to perform risk-based due diligence, perform record-keeping on senders and recipients, to train employees on how to detect and prevent crime, and to continually assess risk and take action to prevent fraud and abuse. The Financial Crimes Enforcement Network (“FinCEN), an office of the U.S. Department of Treasury, is active in enforcing the BSA, and has regularly warned cryptocurrency exchanges that they must identify pig butchering and elder financial exploitation.

It is widely believed that blockchain technology could revolutionize AML. We at Kronenberger Rosenfeld believe that cryptocurrency should make fraud and abuse harder to commit—not easier. Blockchain digital assets are maintained by a shared, immutable ledger where all transactions are openly verifiable, secure from tampering, and instantly traceable for monitoring and auditing in real time. Blockchain’s decentralized structure may also reduce fraud and human errors, automate regulatory and compliance processing, utilizing digital identity ownership and decentralized verification. These features should provide unprecedented safety and transparency for payments, but instead the promise of blockchain technology has not yet been fully realized.

Key Takeaways from the Order

• The court confirmed that our case can proceed, even when consumer protection claims are premised upon federal laws such as the Bank Secrecy Act. Our client and others can now force crypto companies to make restitution to their victims when they enable fraud through their compliance failures.
• Consumers now have a powerful tool to compel injunctive relief — requiring exchanges to put protective measures in place, submit to oversight, and prevent future harm.
• This ruling is not just a California win. It opens the door nationally for consumers to hold financial platforms accountable, pointing directly to their legal responsibilities under federal law.

Breaking New Legal Ground

Although regulatory actions and governmental enforcement is common, this order marked a first of its kind decision where a court has ruled that a private plaintiff (as a victim of financial crime) can seek redress against a regulated cryptocurrency business for Bank Secrecy Act violations. The order will clear a path for massive consequences for companies that shirk their responsibilities, including orders to compel them to commit to compliance overhauls, to make public warnings and better disclosures about the risk of fraud and abuse, improve public protections, submit to neutral oversight, and potentially pay attorney’s fees to their plaintiffs—setting a powerful precedent for accountability.

The courts are sending a clear message—victims and their families can fight back when crypto companies regulated under the Bank Secrecy Act enable scammers and fraudsters to prey on the public through their platforms. This opens the door for more consumers to seek relief and ensure companies step up to fulfill their public duty to prevent their payments systems from being hubs of illicit activity.

We at Kronenberger Rosenfeld are a tech-focused firm and have advocated for the use of blockchain and cryptocurrency from their very beginnings. We are major supporters of blockchain technology and digital assets, and we have helped many of our clients unlock new business potential in safe and compliant ways. But we also believe that fairness benefits everyone, including companies that are committed to competing the right way and not cutting corners. Blockchain technology has the promise to be the safest and most efficient payment technology ever devised, and we hope this decision brings us one step closer to realizing that potential.

If You’re Worried About Pig Butchering or Elder Financial Abuse

Legal safeguards exist, and our team is committed to guiding victims and their families through these complicated issues. If you or your loved one are victims of elder financial abuse or scam involving payments made in cryptocurrency, contact us today through our online submission form.