When the Department of Justice (DOJ) published its memo laying out its strategy for conducting criminal investigations in the crypto space, this announcement has sent ripples of panic across the entire crypto industry. We agree that trying to provide clarity is a good thing, but unfortunately this results in the betrayal of the average retail investor. These Main Street people aren’t evil geniuses, they’re just trying to make sense of a confusing new world. Is the DOJ truly helping or hindering? Are they abandoning us?

Are Victims Now Second-Class Citizens?

Let's be blunt: the DOJ says it’s not a regulator, that it will defer to the "actual regulators." Fine. Or how about Ayesha from Ohio. She lost her life savings when she invested in an emerging crypto project after being exposed to and misled by sham promises made to her. Or take David from California, an honorably discharged veteran of Army service who had lost all of his retirement funds to a well-executed phishing scam. These are testimonials from actual individuals with actual experiences, whose lives have been irrevocably disrupted by crypto crime.

I spoke with Sarah, a single mother who lost nearly $10,000 to a "pump and dump" scheme she found on social media. Ten thousand dollars may not seem like a lot to a Wall Street executive, but for Sarah, that was life-changing money. It was her kids’ college fund, her emergency savings. And now, she’s got two jobs just to pay the bills. Where is the justice for Sarah?

The DOJ's memo creates a chilling effect. Or are we sending a message to fraudsters that the coast is clear by taking a softer stance on regulatory infractions? This is especially stark when we look at findings of “willfulness.” Are we putting bureaucratic niceties above the life and death pain of victims such as Sarah? This isn’t only a fiscal concern, though – it’s the rubber-meets-the-road impact on people’s actual lives.

When Red Tape Hurts Real People

Here's where the unexpected connection comes in: Imagine a thief robs a bank, but argues he didn't willfully break a specific banking regulation. Would we let him off the hook? Of course not! If he’d embezzled hundreds of thousands of dollars from taxpayers, we’d zero in on that. So why are we holding crypto crime to a different standard?

The claim that the heightened “willfulness” standard isn’t new is therefore a red herring. Although this may be true in fact, what is important is the perception. This short memo sends a powerful signal. The DOJ’s new disinterest in aggressively pursuing egregious regulatory violations in the crypto space, even where those violations lead to easily preventable investor losses, is alarming.

The memo does reference a carveout for organized crime and terrorism. Great! What about this huge grey area in between? What about the more advanced scams that use regulatory loopholes to target unsuspecting investors? Even if indirectly, most of these scams directly support organized crime. By limiting its catch to only those cases that can be undeniably traced back to terrorism or cartels, the DOJ is looking at a much too narrow target.

It’s the equivalent of preventing a flood by only blocking the largest breaches in a dam. Then there are the millions of smaller, but no less destructive leaks that you can’t shrug off.

Forgotten Voices and Unequal Justice

Consider who is the most vulnerable to these scams. Individuals who are less financially literate are at a disadvantage. They are the ones who suffer the hardest and are most often unfairly preyed upon by predatory scams. Are we really okay with a system that benefits the rich? They themselves can hire all the expert legal help they want to address difficult new crypto regulations, while average investors are still preyed upon by sophisticated and well-funded criminals.

Unfortunately, this policy shift holds great promise to fall most heavily on these marginalized communities, deepening the chasms of inequality that already divide us. In the process, are we amping the risk of a two-tiered system of justice?

The DOJ's memo lacks concrete guidance. Examples of the kind of conduct that would trigger criminal investigations. What specific regulations are considered less important? The lack of clarity only adds confusion and keeps companies and their attorneys in the dark. This lack of clarity helps no one, other than maybe the criminals who are good at finding loopholes to exploit.

The DOJ could still pursue the same kinds of charges that were just leveled against Binance, but that could isn’t a comfort. It’s a hollow pledge that does scant good to victims for whom every day is another day they may never know justice. Actions taken during the Trump administration, like the purported pardon of Ross Ulbricht, add to this confusion. They raise consistent and commitment as a legitimate question.

Whatever the outcome, we need the DOJ to recommit itself to protecting Main Street investors, not just defending crony corporations. We need to take the recovery of stolen money more seriously. It’s important that we send the clearest possible message that crypto crime is not going to be tolerated. We need them to remember the forgotten voices – the Ayeshas, Davids, and Sarahs who have been devastated by crypto scams.

This isn’t about stifling innovation, it’s about making sure that innovation is happening in a fair and just marketplace across the board. We know that the DOJ has the power, and we urge it to use that power to protect the most vulnerable. Otherwise, they risk becoming complicit in the crimes they are tasked with fighting against.

Is that really the legacy they want to leave?