Defending Against Cryptocurrency Charges in New York

As cryptocurrency continues to dominate financial markets and attract mainstream investors, law enforcement agencies and federal prosecutors have stepped up efforts to combat crypto-related crimes. The digital gold rush has reached a tipping point in New York. As of early 2026, the "Wild West" era of cryptocurrency is being met with a sophisticated and aggressive enforcement response from both federal and state prosecutors. If you are being investigatged for allegations related to digital assets, you are no longer just dealing with a regulatory headache; you are facing the possibility of a prosecution and prison sentence.

Crypto fraud encompasses a wide range of offenses involving deception or misrepresentation in cryptocurrency transactions or investments. Federal prosecutors often use traditional fraud statutes—such as wire fraud (18 U.S.C. § 1343), securities fraud (18 U.S.C. § 1348), or money laundering (18 U.S.C. § 1956)—to pursue alleged crypto-related crimes. State prosecutors are jumping aboard to charge similar case in state courts.

Common Charges in the Crypto Space

Criminal defense in this arena often involves defending against a complex "web" of charges, including:

• Grand Larceny & Wire Fraud: Often applied to "rug pulls" where developers vanish with investor funds.

• Money Laundering: Prosecutors are using advanced blockchain analytics to track "layering" tactics used to obfuscate illicit funds.

• Operating an Unlicensed Money Transmitter: A federal and increasingly state-level charge for those facilitating crypto-to-fiat exchanges without a BitLicense. Common allegations include:

• Promoting or selling fake coins or NFTs

• Running a Ponzi or pyramid scheme using digital assets

• Engaging in market manipulation (“pump-and-dump”)

• Misusing investor funds in blockchain projects

However, in many cases, individuals are wrongfully swept into investigations simply because they were investors, employees, or developers in a project that turned out to be fraudulent—without any intent to deceive anyone.

The Changing Tide of Crypto Enforcement in New York

2026 marks a fundamental shift in crypto enforcement in New York:

• The CRYPTO Act: Introduced as legislation in January 2026 by Manhattan DA Alvin Bragg. thjis proposed legislation seeks to criminalize unlicensed virtual currency operations. Under this proposed law, unlicensed activity exceeding $1 million in a year could be charged as a Class C felony, carrying a potential sentence of 5 to 15 years in state prison. This proposed New York State Senate bill, seeks to add severe penalties for those who operate unlicensed cryptocurrency businesses and violate due diligence requirements.

• Targeting Unlicensed Operations: DA Bragg emphasized that businesses transferring or trading crypto must be licensed, noting that illegal funds are frequently converted to crypto via unregulated ATMs, peer-to-peer exchanges, and mixers. Bragg stated that tackling crypto crime is a top priority for his second term, focusing on reducing "systemic" risks and returning stolen funds to victims.

• Cyber Crime Bureau (CCB): The DA's office is utilizing its specialized Cyber Crime Bureau to handle complex investigations, including the seizure of stolen cryptocurrency and the shutdown of scam websites. The initiatives come on the heels of the DA's office prosecuting multiple high-profile crypto scams, including dark web drug trafficking rings laundering millions in Bitcoin and Monero.

• Our office represented individuals charged with operating a dark web drug trafficking organization and laundering funds in crypto. After extensive litigation in New York County, we obtained very favorable results, with one client pleading guilty to a misdemeanor (and serving no time) and the other serving less than one year in custody. 

• Federal Focus on Prediction Markets: The The U.S. Attorney’s Office for the Southern District of New York (SDNY) is aggressively enforcing anti-fraud laws against crypto scams in 2026, focusing on prediction markets, market manipulation, and consumer fraud. The SDNY collaborates with federal agencies like the FBI and DOJ’s Scam Center Strike Force to trace and seize assets, having previously secured massive, multi-billion dollar forfeitures. Federal prosecutors are increasingly treating digital platforms with the same scrutiny as traditional securities fraud.

• Targeting "Pig Butchering": New York Attorney General Letitia James issued a high-priority alert in February 2026 regarding "pig butchering" scams, signaling a massive push to prosecute individuals and networks involved in these high-value investment frauds.

Defense Strategies for 2026

Defending a crypto case requires more than just legal knowledge; it requires a deep understanding of blockchain forensics.

1. Challenging Attribution: Just because a wallet is linked to a crime doesn't mean you were the one behind the keyboard. We challenge the "chain of custody" and the reliability of third-party analytics tools like Chainalysis or TRM Labs.

2. The "Security" Debate: Early motion practice can often resolve whether a digital asset actually constitutes a "security" under the Howey Test, potentially gutting the prosecution's case before it reaches trial. The Howey Test is a U.S. Supreme Court-established legal standard (from SEC v. W.J. Howey Co.) used to determine if a transaction qualifies as an "investment contract" and thus a security subject to regulation. It applies if there is an investment of money, in a common enterprise, with a reasonable expectation of profits solely from the efforts of others.

3. Good Faith & Compliance: Demonstrating that you maintained a robust internal compliance program can be a powerful defense against "intent" in fraud cases.

Take Action

If you have been contacted by the NYAG, the SDNY, or the District Attorney regarding cryptocurrency transactions, do not provide a statement without counsel. The technical nature of these cases means that even "innocent" explanations can be used to establish elements of a crime.

Levitt & Kaizer has over 40 years of courtroom experience, including extensive work defending clients in state and federal white-collar cases. We understand how state and federal prosecutors investigate and prosecute alleged crypto fraud—and how to dismantle weak or circumstantial evidence.

Our defense approach typically includes:

• Conducting an independent forensic analysis of all blockchain transactions

• Gathering documentation and communications that demonstrate good-faith actions

• Interviewing witnesses, developers, or investors to build a factual defense

• Filing pre-trial motions to suppress unlawfully obtained evidence

• Negotiating with prosecutors to seek dismissal or reduction of charges

When cases go to trial, we present a compelling narrative showing that you did not intend to defraud anyone and that the government’s blockchain evidence fails to prove otherwise.

The stakes have never been higher. Ensure your defense is as advanced as the technology involved.

Call Levitt & Kaizer and we can assist.