Data Privacy Risks in Crypto
Cryptocurrency has become a central part of modern investing, offering both unprecedented growth opportunity and significant risk. With billions of dollars traded daily across global markets, fraud has become one of the most pressing issues in the crypto space. In 2025, crypto fraud lawsuits are at the forefront of financial litigation, shaping how courts, regulators, and investors navigate the fast-changing digital asset environment.
From data privacy violations to large-scale exchange theft and market manipulation through pump-and-dump schemes, the legal landscape around cryptocurrency fraud is expanding rapidly. The Lyon Firm is investigating new areas of litigation and investor protections. Call our attorneys to learn more about emerging trends in crypto fraud lawsuits.
Understanding Crypto Fraud and Its Legal Definition
Cryptocurrencies, with their decentralized nature and cryptographic security, have ushered in a new era of financial innovation. However, they’ve also opened the door to a range of sophisticated cybercrimes, including hacking, scams, and insider misconduct. The past couple of years have seen the collapse of FTX and also a giant attack on Bybit that resulted in over a billion in losses. When you find yourself a victim of a crypto exchange theft, you need a legal advocate who understands the intricacies of this emerging industry and the legal landscape that surrounds it.
Crypto fraud refers to deceptive or unlawful practices in the cryptocurrency ecosystem that result in financial harm. While fraud in traditional markets is well defined under securities and consumer protection law, the decentralized and often unregulated nature of crypto markets makes enforcement more complex. In the United States, crypto fraud cases typically fall under the jurisdiction of the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Department of Justice (DOJ), and state regulators. Private lawsuits, including class actions, are also becoming more common as investors seek restitution for losses tied to fraudulent activity.
Courts generally evaluate crypto fraud under long-standing legal principles such as misrepresentation, market manipulation, insider trading, and breach of fiduciary duty. However, unique factors such as the anonymity of blockchain transactions and the international nature of exchanges create new challenges for both plaintiffs and regulators.
With Joe Lyon as your legal representative, you can rest assured that your interests are protected in the face of crypto exchange theft. Explore our resources, insights, and success stories to understand how we can help you navigate the challenging terrain of cryptocurrency theft and recovery.
Your financial security is our priority, and we are committed to seeking justice and restitution on your behalf.
Data Privacy Concerns in Cryptocurrency Fraud
One of the fastest-growing areas of crypto fraud litigation in 2025 involves data privacy. Crypto exchanges and digital wallet providers are required to collect sensitive customer information through Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance programs. This data often includes government-issued identification, bank account information, and biometric data.
When these companies fail to safeguard user data, they expose investors to identity theft, phishing scams, and financial fraud. In several high-profile lawsuits, plaintiffs have alleged that exchanges negligently stored personal information or failed to encrypt sensitive data, resulting in massive breaches. Courts are now grappling with whether crypto platforms should be held to the same standards as banks and traditional financial institutions under data privacy laws.
For example, cases involving GDPR violations in Europe and data breach class actions in the United States highlight the legal risks facing crypto companies. Plaintiffs argue that a single breach can have catastrophic consequences, especially when stolen information is used to access digital wallets directly. In response, regulators are considering new requirements for cybersecurity protocols and liability frameworks to protect consumers.
Crypto Exchange Theft
Cryptocurrency is traded in exchanges which hold funds in shared group addresses, creating a security gap for hackers. Crypto coins in an exchange account are essentially only as secure as the password strength. Cryptocurrency exchanges are written in different code than the blockchains they accommodate and thus, the exchanges are more susceptible to hacking than the coins themselves.
Coins are stored on computers in the crypto exchange, though the exchange operates on normal servers or a cloud. Exchanges can be potential for breaches and crypto theft events because they operate outside of normal crypto security protocols. Consumers are urged to trade only trusted currencies on trusted exchanges.
Exchange theft is one of the most visible and damaging forms of crypto fraud. Billions of dollars in assets have been stolen from exchanges due to hacking, internal misconduct, or inadequate security measures. Victims of these thefts often file lawsuits alleging negligence, breach of contract, and failure to implement industry-standard protections.
Courts are increasingly sympathetic to investors who lose funds due to poor security practices. In several ongoing lawsuits, plaintiffs claim that exchanges overstated their ability to safeguard customer funds or ignored red flags about system vulnerabilities. The collapse of certain high-profile exchanges has also sparked litigation against executives personally, with allegations of fraud, mismanagement, and misuse of customer deposits.
Legal issues around exchange theft extend beyond civil liability. In some cases, prosecutors pursue criminal charges against exchange operators for wire fraud, conspiracy, and money laundering. At the same time, international disputes complicate asset recovery, as stolen cryptocurrencies can be transferred across jurisdictions within minutes. This creates ongoing challenges for law enforcement and victims seeking restitution.
Cryptocurrency Security Standards
Crypto exchanges have a duty to adhere to Cryptocurrency Security standards to protect consumers and allow end-users to make smart choices and decisions for purchasing and investing. The CCSS standard is followed by most cryptocurrency exchanges, but not all. The following steps are used by most exchanges, blockchain companies and crypto organizations:
- Key/seed generation
- Wallet Creation
- Key Storage
- Key Usage
- Key Compromise policy
- Keyholder Grant/ Revoke Policy and Procedures
- Third-party audits
- Data Sanitization Policy
- Proof of Reserve
- Log Audits
Cybersecurity may take a backseat to company profit and growth, and instances of crypto theft are increasingly common.
How secure are crypto systems? Judging by the huge number of data breaches announced each year, it is safe to say online privacy and crypto security needs some improvement on several fronts.
Crypto Wallets at Risk
Consumers who own crypto often seek out various ways to protect their assets, and many own wallets sold by a variety of companies. Trezor Company and SatoshiLabs are two such companies that sell an offline hardware cryptocurrency wallet called the Trezor.
Cryptocurrency wallets ostensibly allow individuals to securely store cryptocurrency until they sell or transfer it. The Trezor is meant to provide an internet-based portal called the Trezor Suite, which allows users to access their own wallet to make transactions. According to plaintiffs, this wallet, and others, are not as secure as they are supposed to be.
In April 2022, users of the Trezor platform received a phishing email from hackers who gained access to Trezors’ customer email list, which contained a vast amount of personal information. The related crypto was compromised and in some cases, it has been stolen.
Class Action lawsuits claim that some Crypto companies have disregarded their consumer rights by negligently failing to take adequate and reasonable security measures. They have not ensured that their data systems are protected, and result in crypto theft and data breach incidents like the one seen at Bybit.
Investor Rights in Crypto Fraud Lawsuits
Investors harmed by crypto fraud have several potential legal remedies. Civil lawsuits may be filed individually or as class actions, allowing victims to pool resources and pursue restitution from exchanges, token issuers, or promoters. Claims may include securities fraud, common law fraud, breach of fiduciary duty, negligence, and unjust enrichment.
Successful plaintiffs may recover compensatory damages, rescission of token purchases, or in some cases punitive damages. However, challenges include proving jurisdiction, establishing liability across international borders, and locating defendants who may attempt to evade legal action. As the legal system adapts to crypto-specific issues, courts are beginning to develop precedent that strengthens investor protections.
Sensitive data, beyond currency, has been leaked and stolen in crypto data breach incidents, indicating the need for more robust IT security to protect consumer data from an industry rife with fraud and cyberattacks. If your personal data has been compromised, along with any money and cryptoassets, you may have a good case, Contact a crypto data breach lawyer to investigate your claim.
Crypto fraud can be the basis for class action lawsuits, and The Lyon Firm aims to protect consumer rights. If you have been the target of crypto theft, personal data misuse or data privacy violations, call for a free consultation. You may be eligible to join existing data privacy class actions and compensation may be available.
Pump-and-Dump Schemes and Market Manipulation
Pump-and-dump schemes are another major source of crypto fraud litigation. These schemes involve artificially inflating the price of a token through false marketing, misleading statements, or coordinated trading, followed by a rapid sell-off that leaves investors with worthless assets. While pump-and-dump practices are illegal in traditional securities markets, enforcement in the crypto sector has been inconsistent due to questions about whether certain tokens qualify as securities or commodities.
In 2025, class-action lawsuits against token promoters and influencers are on the rise. Investors are targeting individuals and companies that promoted questionable projects on social media, claiming that they misrepresented the value of tokens to enrich themselves at the expense of retail traders. Courts are increasingly receptive to these claims, especially when evidence shows intentional deception.
Pump-and-dump litigation also intersects with securities law. If a court determines that a token qualifies as a security under the Howey test, plaintiffs gain access to stronger remedies under securities fraud statutes. This classification issue remains one of the most hotly contested areas in crypto litigation, and outcomes vary widely depending on jurisdiction.
ABOUT THE LYON FIRM
Joseph Lyon has 17 years of experience representing individuals in complex litigation matters. He has represented individuals in every state against many of the largest companies in the world.
The Firm focuses on single-event civil cases and class actions involving corporate neglect & fraud, toxic exposure, product defects & recalls, medical malpractice, and invasion of privacy.
NO COST UNLESS WE WIN
The Firm offers contingency fees, advancing all costs of the litigation, and accepting the full financial risk, allowing our clients full access to the legal system while reducing the financial stress while they focus on their healthcare and financial needs.
The Future of Crypto Fraud Litigation
Looking ahead, crypto fraud lawsuits are likely to expand as digital assets become further integrated into mainstream finance. Courts will continue to grapple with unresolved issues such as token classification, data privacy liability, and the duty of care owed by exchanges to their customers. At the same time, new technologies such as decentralized finance (DeFi) and non-fungible tokens (NFTs) present additional fraud risks that may spark the next wave of litigation.
As regulatory frameworks evolve, both investors and crypto businesses should expect increased clarity in some areas but also stricter enforcement against fraud. Companies that fail to implement strong compliance and cybersecurity measures will face heightened litigation risk, while investors will gain stronger tools to seek compensation for fraudulent losses.
