Founder
February 1, 2026
21 min read
The landscape of digital asset fraud has shifted from primitive technical exploits to a sophisticated era of psychological and social engineering. This article synthesises the latest trends, forensic methods, and recovery frameworks, including a dedicated section on Turkey’s legal framework, so that investors and professionals can better detect, prevent, and respond to crypto fraud and market manipulation.
Crypto fraud in 2025–2026 is defined by social credibility and algorithmic obfuscation rather than simple technical hacks; recognising this shift is the first step toward effective defence and recovery.
In early 2025, the $LIBRA case involving the Argentinian presidency emerged as a definitive case study in social capital exploitation. The architects of $LIBRA leveraged the reach of President Javier Milei to launch a token purportedly designed to fund small businesses and startups. After a surge to a $4 billion market capitalization, the project experienced a precipitous liquidity collapse. The NGO Observatorio del Derecho a la Ciudad filed a lawsuit alleging a total realized loss of over $4 billion affecting 40,000 investors.
Deceptive branding was paramount: the domain vivalalibertadproject.com nested the fraud within the cultural and political identity of a sitting world leader, creating a blinding effect that allowed the scam to scale before the inevitable “nose dive.”
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This specific type of crypto fraud progresses through four distinct stages, each designed to manipulate investor behavior:
The scam is launched with integration of seemingly legitimate developer names (e.g., KIP Protocol) and intensive promotion across high-profile social media channels.
This tactic manufactures a sense of institutional-grade trust, thereby enabling investors to bypass their standard due diligence processes.
The project sees a swift, aggressive influx of retail capital, often driven by political endorsements or alignment, pushing the market capitalization to artificial heights, such as $4 billion.
Rapid price action serves as perceived validation of the project's "legitimacy," overriding caution.
Social support is abruptly withdrawn, frequently accompanied by the swift deletion of prior promotional history across platforms.
This triggers a wave of panic-induced sell-offs, resulting in a dramatic erosion of public and institutional trust.
Public figures involved distance themselves from the project, and a "cleansing" of social media audit trails is performed to destroy evidence.
This deliberate confusion makes it significantly more challenging for victims to establish clear legal liability and pursue recovery.
As the market cycle moves into 2026, the Real-World Asset (RWA) sector has become the primary theatre for sophisticated exit coordination. The April 2025 collapse of the Mantra (OM) token—a 90% valuation decline in hours—highlights the “Attribution Paradox.” Forensic analysis from ChainArgos confirms that no Mantra team-labeled wallets directly sent tokens to exchanges on the day of the crash, suggesting the use of intermediary addresses and algorithmic coordination to mimic broad market sell-offs.
Critical indicators of algorithmic coordination:
Statistical volume matching: The sum of transfer amounts remained nearly identical (e.g., 54 million OM) across consecutive hours despite fluctuating transfer counts, suggesting joint control.
Algorithmic timing: Coordinated exit activity often initiates at a fixed time (notably 6:00 pm UTC) to overwhelm order books.
Concentrated intermediary flows: High-priority movements toward specific CEX deposit addresses—particularly Binance, OKX, and institutional brokers like FalconX—rather than DEXs.
Proving “insider” status remains legally difficult without subpoenaed exchange data, even when early-receiver footprints (e.g., “OM recv #2”) are visible on-chain.
In 2025, the North Korean hack of the exchange Bybit, resulting in a $1.5 billion loss in Ethereum, demonstrated how criminal entities leverage a global regulatory patchwork. The Bybit attackers utilised the sanctioned Russian exchange Garantex and the swap service eXch. Regulated VASPs exhibit significantly lower illicit activity rates; entities in regulatory shadows provide the “hops” necessary to break forensic linearity.
Laundering infrastructure of modern illicit actors:
Cross-chain bridges: Used to break the linear chain of custody and complicate automated audit trails.
Unlicensed OTC brokers: Selected to bypass the Travel Rule and the UK’s OFSI guidance (3–5 transaction “hops” to identify indirect exposure).
High-liquidity DEXs: Favoured for rapid, permissionless asset diversification that mimics legitimate market noise.
As compliant VASPs (representing over 75% of crypto volume) move toward real-time information sharing, criminal actors are forced into narrower and more expensive unregulated channels.
The transition from fragmented enforcement to coordinated frameworks is the defining shift of this cycle. Regulators are building systemic defences designed to provide the KYC and wallet data currently missing in the “Attribution Gap.”
The transition from fragmented enforcement to coordinated global frameworks is a defining shift in the 2025–2026 regulatory cycle, with systemic defenses being built across key jurisdictions:
United States: The GENIUS Act establishes a federal system for stablecoin issuance and auditing. This initiative is strategically designed to limit the use of unregulated "shadow" stablecoins as channels for illicit money movement.
European Union: The MiCA (Markets in Crypto Assets Regulation) aims for harmonized, bloc-wide rules for licensing and market abuse. Its direct consequence is to de-platform and suppress non-compliant crypto entities operating within the EU market.
Global (FATF): Through Recommendation 15, the Financial Action Task Force mandates the rigorous enforcement of the Travel Rule and its "hops" guidance for tracking transfers. This critically standardizes the required audit trail for all cross-border virtual asset transactions, making them more traceable.
United Kingdom: The FSMA Statutory Instrument serves to bring "qualifying crypto assets" firmly into the regulatory domain. This requires UK-linked service providers to implement mandatory, institutional-grade internal controls to secure their operations.
The Bank for International Settlements (BIS) has proposed AML compliance scores and wallet risk ratings. The Beacon Network—a real-time information-sharing platform supported by over 60 law enforcement agencies—and the anticipated US CLARITY Act in 2026 will further redefine market structure and narrow the window for large-scale, obfuscated manipulation.
Ensure your blockchain projects and operations in Turkey are fully compliant with the latest regulatory frameworks and licensing requirements.
Key Takeaway: X functions as the primary venue for sentiment-driven capital flow and FOMO without traditional gatekeepers, enabling rug pulls and coordinated dumps; forensic vigilance on social metadata and on-chain flows is essential.
Here are the modern fraud types driven by social media, presented without a table structure:
This scheme involves aggressively building a project's brand and hype to artificially inflate its market capitalization. Once the desired valuation is reached, the creators abruptly remove all pooled liquidity from the exchange.
The $LIBRA project, launched via vivalalibertadproject.com, serves as a primary example.
The result is a total loss and devaluation of the asset, affecting a large number of individual investors (e.g., over 40,000 retail holders).
Fraudsters engineer sharp, rapid increases in an asset's valuation by securing endorsements from highly influential social media accounts, often those belonging to political figures or major celebrities.
This is often referred to as the Presidential Endorsement Model.
This activity creates an artificial market peak (such as a $4 billion market cap) that is inevitably followed by a terminal collapse or "nose dive."
This involves automated or jointly-controlled large-scale transfers of tokens to Centralized Exchanges (CEXs) right before a catastrophic price crash. The goal is to liquidate large insider holdings quickly.
The Mantra (OM) token crash highlighted this, demonstrating automated volume movement.
A massive, rapid decline in price (e.g., a 90% drop within hours) as significant insider volume floods the market.
This is a direct attack using script-based threats, where malicious links are employed to trick users into granting permissions that allow the scammer to drain their held digital assets directly from their wallets.
The Crypto Inferno Drainer as analyzed by Check Point Research.
This leads to the direct, non-market theft of the user's funds, bypassing normal trading activity.
The $LIBRA investigation in Argentina illustrates how the prestige of a state office can be co-opted to grant unearned credibility to high-risk ventures. The forensic timeline:
Branding and deployment: The project launched via vivalalibertadproject.com, using the slogan “Long Live Liberty” to mirror the political identity of President Javier Milei.
Social amplification: President Milei used his personal X account to promote the token as funding “small businesses and startups.”
Valuation peak: Perceived executive backing propelled $LIBRA to a $4bn market capitalization.
The exit: Following the peak, the asset’s value entered a “nose dive.” Forensic observers noted post-hoc content scrubbing: the President’s office deleted promotional posts while the developer claimed a sudden withdrawal of support.
The “habitual promotion” defence advanced by the President’s office does not mitigate the legal and political liability when social media endorsements lead to the loss of savings for thousands of participants. The deletion of posts serves as a significant signal of coordinated exit.
The Mantra (OM) collapse on April 13, 2025 illustrates the power of blockchain forensics. Key indicators:
Coordinated whale activity: The “Sum of Transfer Amounts” versus “Number of Transfers” showed nearly identical total volumes (approximately 54 million tokens per hour) despite varying transaction counts—suggesting joint control or automated scripts.
Liquidity inflows to CEXs: 89.6 million tokens (valued at ~$530M) moved into centralized exchanges, primarily Binance and OKX. Forensics identified FalconX: one wallet moved 33.3 million tokens; a tagged FalconX customer deposit address moved another 10 million.
Early receiver (recv #2) tagging: Identifying wallets that were the second-ever to receive the token helps pinpoint early insiders or VCs regardless of current wallet naming conventions.
Objective data showing coordinated volume and concentration of transfers to CEXs/brokers suggest a planned exit, regardless of team denials.
Monitor the following to detect high-velocity fraud on X/Twitter:
Post-hoc content scrubbing: Sudden deletion of promotional posts by influencers or officials immediately after a valuation peak is a primary exit signal.
Statistically significant exchange inflows: Surges in transfers to CEXs (Binance, OKX) and brokers (FalconX) that correlate with social media hype.
Branding and slogan mimicry: Look-alike URLs (e.g., vivalalibertadproject.com) or political slogans as forensic indicators of deceptive intent.
Early receiver (recv #2) concentration: Use static markers to determine whether liquidity hitting the market originates from founding-era wallets.
Key Takeaway: Asset reclamation depends on judicial mandates plus blockchain forensics and institutional choke points, not tracing alone; combining legal leverage with on-chain attribution and regulated intermediaries maximises recovery probability.
Successful asset reclamation rarely begins with technical tracing alone. When fraud reaches systemic scale—such as the $LIBRA case affecting 40,000 victims—the appointment of a specialised judiciary becomes the catalyst for discovery. The Argentine Federal Court’s probe into the $LIBRA scandal, led by Federal Judge Maria Servini into potential “illicit association” and fraud, provided a formal structure for plaintiff lawyers and NGOs (e.g. Observatorio del Derecho a la Ciudad) to represent victims, aggregating private losses into a single, $4 billion collective legal action.
Beyond local courts, “Regulatory Cooperation Pacts” strengthen recovery—e.g. the 2025 agreement between the National Commission of Digital Assets (CNAD) in El Salvador and the Central Bank of Bolivia—facilitating cross-border evidence gathering and collaborative use of blockchain analytics to identify fraudulent entities and unlicensed OTC brokers.
On-chain truth supersedes off-chain declarations. Methodologies for identifying fraudulent setups focus on specific code patterns (e.g. “Inferno Drainer”): receiver contracts (“transferContracts”) that divert user assets to a central pool, and fake token contracts (“multiFunctionsContracts”) that trick users into granting spend permissions.
Forensic guide for wallet attribution (ChainArgos-style):
Identify early receivers: Label wallets by chronological rank (e.g. “OM recv #2”). Addresses among the first to receive a token typically link to the founding team, VCs, or early insiders.
Track forwarding addresses: Monitor wallets that exist solely to forward tokens to a cold wallet or broker; this identifies customer deposit addresses where tokens accumulate before being pushed to an exchange.
Analyse transfer amount vs. number of transfers: On April 13, 2025, at 8 PM and 9 PM UTC, two major spikes involved the exact same amounts (approx. 54 million OM) despite different transaction counts—a hallmark of coordinated bot or syndicate activity.
Technical tracing identifies where funds go; the “choke points” where funds can be halted are almost always regulated service providers.
Regulated VASPs are the primary sites for successful fund recovery. Key mechanisms:
Beacon Network: Connects over 60 law enforcement agencies and VASPs representing 75% of global crypto volume, enabling coordinated blacklisting of addresses across multiple exchanges when a hack or fraud is detected.
T3 Financial Crime Unit: A public–private collaboration that in its first year froze over $300 million in illicit stablecoin activity by working directly with issuers to block sanctioned or fraudulent addresses outside formal subpoena timelines.
Travel Rule (FATF Recommendation 15): By forcing VASPs to share originator and beneficiary information for cross-border transfers, it prevents regulatory arbitrage. Prioritise recovery in “Materially Important Jurisdictions” (67 per FATF) that have fully enacted these standards.
International sanctions isolate fraudulent exchanges from the global financial system. The disruption of the exchange Garantex in March 2025—with authorities from the US, Netherlands, Germany, and Finland—and the seizure of EUR 25 million (USD 30 million) by German authorities from the associated swap service “eXch” exemplify multi-jurisdictional action.
To avoid recovery efforts being thwarted by “transaction hopping,” adhere to the UK’s Office of Financial Sanctions Implementation (OFSI) guidance: trace a minimum of three to five transaction hops or until funds hit an attributed service, and escalate any suspected exposure to sanctioned or fraudulent entities immediately.
Beyond tracing, strategic legal and technical consultancy is crucial for successful asset reclamation. Get expert insights for your blockchain and DLT challenges.
Key Takeaway: A professional anti-scam stance combines regulatory, social, on-chain, and technical checklists before and after incidents; no single layer is sufficient.
Validate VASP credentials: Cross-reference platform registration with national registries (e.g. General Resolution 1058 in Argentina, FMA in Austria, BCB in Brazil; BCB capital requirements as of February 2026: BRL 10.8M–37.2M).
Evaluate stablecoin integrity: Adhere to the US GENIUS Act and EU MiCA standard—full reserve backing, redemption at par, custody with regulated entities.
Check Travel Rule compliance: Verify the platform uses real-time information-sharing tools such as the Beacon Network (75%+ of global crypto volume).
This approach is characterized by its flexibility and evolving standards. It allows for the voluntary acceptance of assets like Bitcoin (as of 2025).
The system for overseeing technology risks is still developing and is often guided by the influence of external lending institutions, such as the IMF. It presents a lower barrier to entry for businesses, which consequently brings a higher risk due to "light" supervision.
This framework is defined by its comprehensive and strictly enforced regulations. It mandates strict licensing for all Crypto-Asset Service Providers (CASPs), requiring non-compliant entities to cease operations.
The Digital Operational Resilience Act (DORA) is in place to enforce stringent testing of Information and Communication Technology (ICT) risks. It establishes a high bar for market participation and uses harmonized rules across the bloc to effectively prevent regulatory arbitrage.
Sudden social media deletions: Removal of promotional endorsements by key figures (as in $LIBRA) is a Tier-1 exit signal.
Slogan mimicry: Use of official government slogans (e.g. “Viva La Libertad”) or mimicking official domains (vivalalibertadproject.com) as forensic indicators of borrowed legitimacy.
Anonymous “insider” warnings: Reports suggesting a leader was “cheated” or that collapses are due to “political opponents” often mask fundamental project failures.
Analyse transfer ratios: High sum with low count = whale move; high sum with high count = coordinated dump by associated collaborators.
Identify early receivers: Use “recv #2” or early receiver tag; if these wallets move to exchanges, the “long-term growth” narrative is debunked.
Trace 3–5 hops: Per OFSI guidance, trace until funds hit an attributed service; critical for indirect exposure to sanctioned entities (e.g. Garantex, sanctioned February 2025).
When analyzing fund flows, the type of entity receiving the assets is a critical indicator of illicit intent and activity:
Centralized Exchanges (CEX): The movement of funds to a CEX is forensically significant as it suggests a direct intent to liquidate the assets, resulting in immediate sell pressure on the market.
Unlicensed OTC Brokers: These entities serve as a primary channel for money laundering, as demonstrated by their use in major incidents like the $1.5 billion Bybit hack.
Custodial Brokers (FalconX): These brokers are often utilized to mask insider activity, as funds are frequently routed through customer deposit addresses to obscure the original sender's identity.
Contract scrutiny: Verify the contract factory address; distinguish “fake token contracts” (broad permissions) from “receiver contracts” (asset transfer only).
Custody controls: Jurisdictions differ—e.g. Hong Kong enforces 98% onshore cold wallet for customer assets; Switzerland is technology-neutral with focus on business continuity.
Smart contract audits: Demand published annual security audits (e.g. Malaysian Securities Commission standards for compliant exchange listing).
Documentation: Preserve all social media posts, slogans, and whitepapers before deletion.
On-chain preservation: Tag fraudulent addresses with blockchain analytics to alert the Beacon Network and enable real-time sharing with VASPs and law enforcement to freeze stolen capital.
Legal filing: Report immediately to the US SEC, CFTC, or local regulators; the window to disrupt laundering (e.g. via sanctioned entities like Garantex) is narrow.
The legal framework of “illicit association”—as pursued by NGOs in the $LIBRA case—targets the coordinated nature of scams affecting thousands of victims. The anticipated CLARITY Act in 2026 is shifting the burden of proof from the investor to the provider; strong regulatory standing and forensic transparency remain the sustainable path to institutional partnership.
Key Takeaway: Turkey addresses crypto fraud and recovery through KVHS (kripto varlık hizmet sağlayıcı) licensing, MASAK AML obligations, and CMK 128/A freeze-and-restitution for qualified fraud, aligning with FATF and platform obligations.
Law No. 7518 (June 2024) amends the Turkish Capital Markets Law (SPK Law 6362) and introduces formal definitions and a licensing regime for crypto asset service providers. Under SPK Art. 3, cüzdan (wallet), kripto varlık (crypto asset), kripto varlık hizmet sağlayıcı (KVHS), and platform are defined. KVHS include platforms, custody service providers, and other entities determined by the Board for crypto asset services.
Under SPK Art. 35/B, KVHS may only be established and commence activity with Board (SPK) permission; they must comply with TÜBİTAK-determined criteria for information systems and technological infrastructure. SPK Art. 35/C governs contracts with clients (written or remote with identity verification), KYC under Law 5549 (AML), listing procedures for crypto assets, and market abuse: under SPK Art. 104, platforms must detect, prevent, and report “piyasa bozucu eylem ve işlemler” (market-disrupting acts and transactions) and may restrict, suspend, or close accounts. Client crypto and cash must be segregated from the provider’s own assets; custody of client crypto is subject to Board rules and, where applicable, banks or authorised custodians. Platform licensing does not imply a government guarantee of assets or transactions.
Law 5549 (Prevention of Laundering of Proceeds of Crime) applies to KVHS as obliged entities. MASAK Genel Tebliği (Sıra No: 29) and the MASAK Kripto Varlık Hizmet Sağlayıcılar Rehberi set out enhanced measures for KVHS: customer identification (including tax or equivalent ID), enhanced due diligence, and for platforms 48-hour (and for first withdrawals 72-hour) delays on crypto withdrawal transactions to mitigate laundering and fraud risk. Transfer records and originator/beneficiary information for crypto transfers must be kept and shared in line with FATF Recommendation 15 (Travel Rule); SPK Art. 35/C mandates compliance with Board and MASAK rules on transfer messages and sender/recipient data.
Ceza Muhakemesi Kanunu (CMK) Art. 128/A (Code of Criminal Procedure) introduces a rapid freeze and seizure mechanism for accounts held at banks, payment service providers, or kripto varlık hizmet sağlayıcıları (KVHS) when there is reasonable suspicion that certain offences have been committed, including nitelikli dolandırıcılık (aggravated fraud, TCK Art. 158(1)(f) and (l)) and bank or payment card misuse (TCK Art. 245). KVHS qualify as “malî kurum” (financial institution) for these purposes.
The bank, payment service provider, or KVHS may askıya almak (freeze) the relevant account for up to 48 hours and must notify the chief public prosecutor immediately; the account holder may request removal of the freeze from the prosecutor, who must decide within 24 hours.
Upon hâkim (judge) order—or, where delay would prejudice the outcome, upon prosecutor order—elkoyma (seizure) may be applied within the freeze period. Seizure does not require the report condition under CMK Art. 128.
Elkonulan (seized) proceeds identified as belonging to the victim may be sahibine iade edilir (returned to the owner) during the investigation or trial.
CMK 128/A thus enables rapid freeze and restitution in crypto fraud cases involving KVHS, supporting victim recovery when Turkish platforms or accounts are involved. For a detailed treatment, see Genesis Hukuk’s case study A New Era in Crypto Fraud: Rapid Remediation via CMK 128/A.
Under SPK Art. 35/C, platforms must ensure that trading is reliable, transparent, efficient, stable, fair, and competitive; establish and operate surveillance systems to detect piyasa bozucu eylem ve işlemler (market-disrupting acts and transactions); and take necessary measures (including account restriction, suspension, or closure) and report findings to the SPK. They must also maintain effective internal mechanisms for handling client complaints and objections. These obligations support both prevention and evidence-gathering in fraud and manipulation cases.
In Antalya 9th Heavy Criminal Court (April 2025), the court ruled on a case of Bilişim Sistemleri, Banka veya Kredi Kurumlarının Araç Olarak Kullanılması Suretiyle Dolandırıcılık (fraud by use of information systems, banks or credit institutions as a tool, TCK Art. 158/1-f). The typology is familiar from the global playbook: victims were reached via social media and Telegram with promises of tokens that would be “listed on an exchange” or deliver high returns; they sent crypto to cold wallet addresses and to a common transfer account; the tokens they received were fake (e.g. worthless or non-tradeable on the promised venue). The court had to decide who had participated in the fraud with the required intent.
The court acquitted three defendants (CMK Art. 223/2-e) for lack of proof beyond reasonable doubt. It found that the evidence did not establish that those defendants had coordinated with each other or with the fraud scheme: their accounts had received funds for reasons they had explained (e.g. advertising, third-party transfers), and the link between those flows and the victims’ losses was not proven to the criminal standard. By contrast, it convicted one defendant who had operated the common account through which victims’ funds had been channelled and who had induced victims to buy the fake tokens. The court held that his defence—that he was unaware of the origin of the funds—was inconsistent with the flow of value and the role of his account, and that his conduct met the elements of the offence.
The decision illustrates how Turkish courts apply the evidentiary bar in crypto fraud cases: mere receipt of funds or presence in a chain of transfers is not enough for conviction; the prosecution must prove intent and participation. It also shows how “common account” and fake-token patterns are treated under TCK 158/1-f and how CMK 128/A and KVHS obligations fit into a landscape where both victim recovery and defence rights depend on clear evidence. In this case, two of the acquitted defendants were represented by Genesis Hukuk.
Turkey’s KVHS regime and MASAK obligations align with FATF standards and the trend toward licensed VASPs and Travel Rule implementation. The Beacon Network and cross-border cooperation (e.g. OFSI-style “hops” tracing) remain relevant for flows touching Turkish platforms or counterparties. Turkey does not yet have a MiCA-style bloc-wide crypto regulation or a US GENIUS-style federal stablecoin regime; the TCMB (Central Bank) regulation of April 2021 prohibits the use of crypto assets in payments, which does not preclude regulated platform trading and custody under the SPK/MASAK framework. For a broader overview of crypto asset regulation and compliance in Turkey, see Crypto Asset Regulation and Compliance Guide in Türkiye.
A “social credibility” rug pull is a scheme where fraudsters use high-profile endorsements (e.g. political figures or celebrities) and trusted branding to attract retail investment and inflate a token’s market cap, then withdraw liquidity or remove promotional support so the asset collapses. The $LIBRA case—with presidential promotion, the domain vivalalibertadproject.com, and post-hoc deletion of posts—is a leading 2025 example affecting thousands of investors.
Investigators detect coordinated dumps by comparing the sum of transfer amounts to the number of transfers across time windows: nearly identical total volumes despite different transaction counts suggest joint control or bots. Other signals include concentrated flows to CEX deposit addresses (e.g. Binance, OKX, FalconX), fixed timing (e.g. 6 pm UTC spikes), and “early receiver” (e.g. recv #2) tagging to see if founding-era wallets are selling.
The Travel Rule (FATF Recommendation 15) requires VASPs to obtain and share originator and beneficiary information for cross-border virtual asset transfers. By standardising the audit trail and enabling identification of beneficiaries, the Travel Rule reduces regulatory arbitrage and supports law enforcement and recovery efforts in “Materially Important Jurisdictions” that have implemented it.
CMK 128/A is a provision of the Turkish Code of Criminal Procedure that allows banks, payment service providers, and KVHS (crypto asset service providers) to freeze accounts for up to 48 hours when there is reasonable suspicion of certain offences (including aggravated fraud). A judge or prosecutor may then order seizure of proceeds; seized assets identified as belonging to the victim may be returned during the investigation or trial. CMK 128/A thus enables rapid freeze and restitution for crypto fraud victims when Turkish KVHS or accounts are involved.
Genesis Hukuk is a Law + Tech studio specialising in blockchain, digital assets, and regulatory compliance. We combine legal architecture with technical depth to support projects, investors, and platforms in Turkey and across jurisdictions. This article is for informational purposes and does not constitute legal advice.
