According to Unchained reports
The current system stipulates that victims can only receive compensation based on the “USD value at the time of asset theft or fraud.” For instance, when FTX filed for bankruptcy in November 2022, the price of Bitcoin was approximately $17,500, while by early 2025, it had risen to over $108,000. However, creditors can only be compensated in fiat currency based on the 2022 price and cannot benefit from the price increase.
The Department of Justice (DOJ) acknowledged in a memorandum that such a system “appears unfair to victims,” especially against the backdrop of a strong performance in the cryptocurrency market where asset prices have doubled. Nevertheless, the current rules were designed with deeper considerations in mind.
According to Section 28.9.8 of the Federal Forfeiture Regulations, the principle for the government to return forfeited assets is based on the “fair market value” at the time the loss occurred, excluding interest and additional costs. If there are multiple victims, the total assets are distributed proportionally rather than allocating based on each individual’s actual losses. This system was originally designed to prevent last-in victims in traditional fraud cases from unfairly benefiting from asset recovery efforts.
Calvin Koo, a partner at Kobre & Kim and a lawyer specializing in asset recovery and victim compensation, pointed out that adjusting compensation amounts based on current market prices would equate to the court “timing the market,” which would make the entire judicial process riskier and more uncertain. “A compensation process without a fixed timeline would be perceived as lacking procedural justice, potentially leading victims to deliberately intervene in the timing of compensation in hopes of profiting.”
Moreover, insiders from the DOJ revealed that the establishment of rules based on “the price at the time of loss” is primarily aimed at protecting victims from incurring greater losses, as in most cases, assets tend to depreciate or even disappear during the recovery process.
However, some FTX victims still believe that the only fair way to compensate them should be “in-kind return,” which means returning the original type and quantity of cryptocurrency held by the victims, rather than converting it into fiat currency. These victims emphasize that they are long-term investors who made their choices after careful consideration and should not be treated the same as high-risk traders.
Nonetheless, Calvin Koo also warned that an in-kind return system carries numerous risks and execution difficulties. For example, if assets are hacked or stolen after the exchange goes bankrupt, leading to insufficient assets, the government would need to utilize other resources to cover the gap. Additionally, managing and distributing multiple types of cryptocurrencies could significantly increase administrative and financial costs.
It is worth noting that the New York State Attorney General opted for an in-kind return in the case of Gemini Trust, indicating that there is still discretion at the state level. However, the DOJ memorandum only applies at the federal level and cannot interfere with practices of states or bankruptcy courts.
Although the memorandum did not specify reform proposals or timelines, it clearly signals a hope that Congress will pay attention to this issue. If Congress amends relevant regulations, the DOJ could adjust its enforcement rules accordingly. Kobre & Kim lawyer Sheehan pointed out: “This memorandum seems to be a call to Congress; if the legislature is willing to intervene, the DOJ will cooperate in adjusting policy.”
Overall, the DOJ’s attitude is open, but whether it can truly change the logic of compensation in cryptocurrency fraud cases still relies on further action from legislative bodies and the judicial system.
