Crypto Yield, Memecoin and Pig-Butchering Scams: What the FBI and Regulators Found

By Eric Ridley, attorney, Ridley Law. Updated September 2026.

Part of our money myths series, where we look at the money advice that spreads on Instagram, TikTok and YouTube and ask who gets paid when you follow it.

Californians reported more crypto losses than any other state in 2025

Californians reported more crypto losses to the FBI than residents of any other state in 2025: $2.10 billion of the $3.67 billion in losses they reported to its Internet Crime Complaint Center. They filed 116,414 complaints, and California came first among the states in all three counts. Across the country, Americans reported $11.4 billion in crypto-related losses to the FBI, including $7.2 billion to crypto investment fraud (FBI IC3, 2025).

Most of the investment fraud reported to IC3 in 2025 was crypto: $7.23 billion of the $8.65 billion, according to the table below. Investment fraud was the largest category in a year when total reported losses passed $20 billion, and its reported losses rose every year, from about $336 million in 2020.

Consumers reported $15.9 billion in fraud losses to the Federal Trade Commission in 2025, and investment scams were the top category at more than $7.9 billion. Investment scams that started on social media cost people $1.1 billion, the FTC reported. One version of the pitch is a new online friend with a trading app. Another is a platform that pays a high yield on the coins you park there.

The new online friend’s trading app takes your deposits and never lets you withdraw

The FBI and FinCEN call this a pig-butchering scam, and the part that matters to a target comes at the end, when the victim tries to withdraw and is told to pay “taxes and fees” first. The setup is a long-con investment fraud: a scammer builds a friendship or romance, steers the victim to a fake crypto trading platform, and shows fake profits. In the FBI’s 2025 report, scammers reach out by text, social media, ads or dating apps, then move to a messaging app, and victims are offered loans to invest more. The demand for taxes and fees is a final grab before the scammers disappear, and California’s Department of Financial Protection and Innovation (DFPI) says the victim is never able to withdraw.

In October 2025 the Justice Department indicted the chairman of Cambodia’s Prince Group on charges of running forced-labor scam compounds and filed a forfeiture complaint against about 127,271 bitcoin, worth about $15 billion, the largest forfeiture action in the department’s history. The charges are allegations, and an indictment isn’t a conviction. Treasury sanctioned 146 targets in the group and estimated that Americans lost at least $10 billion to Southeast Asia-based scam operations in 2024. The department’s Scam Center Strike Force had restrained more than $700 million in crypto by April 2026.

Shan Hanes, a Kansas bank CEO, was sentenced in 2024 to 293 months in prison after wiring $47.1 million of his bank’s money into a pig-butchering scam; the bank failed. CNBC reported he also took $40,000 from his church and $10,000 from an investment club.

A platform’s high yield comes from lending your coins to someone else

The other version tells you to park your crypto on a platform, earn a high rate, and rest easy because it’s safer than a bank. The 2022 lenders that advertised yields like that went bankrupt. Regulators found their “yield” products were unregistered securities offerings or misleading (SEC, FTC, CFTC).

Celsius shows what the high rate cost its customers. They deposited about $20 billion, and creditors received about 60.4% of their claims’ value in cash and liquid crypto, plus shares in a new company. Celsius had marketed itself as the “safest place for your crypto,” told customers to “unbank” themselves, and, according to the FTC, advertised Earn rewards as high as 18%. Founder Alex Mashinsky pleaded guilty to fraud and got 12 years. The FTC obtained a $4.7 billion judgment against the companies, suspended so assets could go to customers in bankruptcy, and the CFTC obtained permanent trading bans.

Voyager’s “FDIC insured” claim was false. Customers were told “YOUR USD IS FDIC INSURED,” the FDIC and the Federal Reserve demanded in July 2022 that Voyager stop, and Voyager itself wasn’t FDIC-insured. The FTC obtained a $1.65 billion suspended judgment, and former CEO Stephen Ehrlich later agreed to pay $2.8 million to the FTC and $750,000 to customers through the CFTC. Creditors had received 70% of allowed claims by September 2024.

Even BlockFi’s 100% came with a catch. Its estate paid 100% of claims, but only after a bankruptcy and a long wait, and valued in dollars on the November 2022 bankruptcy date, so customers got back the dollar value of their coins on that date, not the coins themselves. BlockFi had paid $100 million, $50 million to the SEC and $50 million to 32 states, over its unregistered interest accounts in February 2022, then filed for bankruptcy that November.

Earning yield on crypto is fine when you understand where the return comes from

The platform also has to be licensed, and you have to be able to lose the money without hurting your retirement.

Staking as a service has drawn SEC action. In 2023 Kraken paid $30 million to settle SEC charges over its staking-as-a-service program, which advertised returns as high as 21%. In May 2025 the SEC’s Division of Corporation Finance said that protocol staking, as it described it, doesn’t require registration. That statement excludes liquid staking and restaking, and the SEC staff says its statements have “no legal force or effect.” Staking your own coins on a network is one thing. Handing them to a platform that promises a fixed high rate is another.

The question to ask of any yield is the one the 2022 collapses answered: who is paying me this rate, and what are they doing with my coins?

Memecoins give buyers fewer protections, though fraud can still be prosecuted

Memecoins usually aren’t securities, the SEC staff said in February 2025, which means fewer protections for buyers. The SEC’s Division of Corporation Finance compared them to collectibles with “limited or no use or functionality,” and the same statement says fraud tied to memecoins may still be pursued by other federal or state agencies. One example: market-maker Gotbit admitted to manipulative trades to inflate the price and volume of tokens including Robo Inu and Saitama, and its founder was sentenced to eight months in prison in 2025. If the price of a memecoin is going up because someone is paid to make it go up, you’re the buyer they’re waiting for.

California now requires most crypto businesses serving residents to hold a license

A crypto business that wants to serve a California resident now needs a DFPI license, a pending application or an exemption. The Digital Financial Assets Law requires one of the three on or after July 1, 2026 (Fin. Code, § 3201), so a platform with none of them isn’t allowed to do business with you. Kiosks have their own limit: an operator can’t accept or dispense more than $1,000 a day from or to a customer (§ 3902), and fees are capped (§ 3904). The FBI counted $389 million in crypto ATM fraud losses in 2025.

The DFPI’s online Crypto Scam Tracker listed 604 reported scams when we checked. The DFPI notes it hasn’t verified the losses complainants report, and it warns consumers to be wary of anyone charging sudden fees to withdraw.

When the victim is 65 or older, California’s elder financial abuse law may also apply. People 60 and older reported $7.7 billion in total losses to the FBI in 2025, up 59%, and the FBI reports they lost more than $4.3 billion to crypto fraud alone. Our elder financial abuse guide explains what families can do, and the county-by-county data shows how common it is.

Checks to run before you send anything

1. Never let an online contact direct your investments

   The FTC’s rule of thumb: only scammers will guarantee profits or big returns. If someone you’ve never met in person brings up crypto, stop talking.

2. Check the license

   Look up the company with the California DFPI before you send anything, and search the DFPI Crypto Scam Tracker.

3. Stop when you’re asked for a fee to withdraw

   If you’re told to pay “taxes” or “fees” to get your money out, the money is already gone. Don’t send more.

If you’ve already sent money, report it and expect a second pitch

File at ic3.gov and with the DFPI, with wallet addresses and transaction hashes. Anyone who contacts you offering to recover the money for a fee is the recovery scam.

The IRS Chief Counsel concluded in 2025 that a pig-butchering victim who invested to make a profit can claim a theft loss, while romance and fake-kidnapping victims who weren’t investing can’t (CCA 202511015). The memo turns on 26 U.S.C. § 165: since 2018, personal casualty and theft losses are deductible only when they’re tied to a declared disaster, and the 2025 tax law made that limit permanent (§ 165(h)(5)). A loss in a transaction entered into for profit isn’t a personal loss, so the pig-butchering investor in the memo qualified. Get a tax professional involved and keep every record: wallet addresses, transaction hashes, messages. Crypto is property for federal tax purposes (IRS Notice 2014-21), and staking rewards are income when you gain control of them (Rev. Rul. 2023-14), so the IRS will expect the earlier gains reported too.

Plan for the crypto you do own

Your family has to be able to find the crypto you do own. See digital asset estate planning and the California crypto graveyard.

Frequently asked questions

How do I know if a crypto investment is a scam?

The FBI and DFPI warning signs: contact from a stranger, guaranteed or very high returns, an app or site you’ve never heard of, and fees or “taxes” demanded before you can withdraw.

Can I get my money back from a crypto scam?

Rarely. Federal agencies do seize scam proceeds, and the Scam Center Strike Force had restrained more than $700 million by April 2026. Anyone who promises recovery for an upfront fee is running a recovery scam.

What happened to Celsius customers?

Celsius went bankrupt in 2022. Creditors received about 60.4% of their claims’ value in cash and liquid crypto, plus shares in a new company. Founder Alex Mashinsky was sentenced to 12 years in 2025.

Is crypto staking legal in the U.S.?

Protocol staking, as the SEC’s corporate finance staff described it in May 2025, doesn’t require SEC registration in the staff’s view. That view has no legal force, excludes liquid staking and restaking, and doesn’t make any platform safe.

Are memecoins securities?

The SEC staff said in February 2025 that typical memecoins aren’t. That leaves buyers with fewer protections, while fraud and manipulation can still be prosecuted.

My parent sent money to an online “friend” for crypto. What now?

Stop all payments, report to ic3.gov and the DFPI, call the bank, and save every message. If your parent is 65 or older, talk to a lawyer about California’s elder financial abuse remedies and about putting a durable power of attorney and trust in place.