Rising Crypto Crime Driven by Lack of Oversight and Retail FOMO
July 14, 2025 – Cointelegraph
The cryptocurrency ecosystem is currently grappling with what experts are calling a "crypto crime supercycle," fueled by slow-moving regulations, the fear of missing out (FOMO) among retail investors, and the ongoing surge in crypto adoption. According to recent data and cybersecurity professionals, criminal activity within the crypto space has reached unprecedented levels in the first half of 2025, surpassing the annual losses recorded in 2024 and nearly matching those of the previous record year, 2022. ### Record Crypto Crime Losses in 2025
The first six months of 2025 have already witnessed crypto crime losses that exceed the entirety of 2024’s figures. TRM Labs data illustrates this alarming trend, with losses setting new records as fraud, scams, and thefts continue to exploit vulnerabilities in the cryptocurrency market.
Experts Highlight Regulatory Gaps and Market Hype
Bill Callahan, a retired DEA agent and cryptocurrency investigator, shared insights with Cointelegraph, emphasizing that the combination of lax regulation and the hype-driven enthusiasm of retail investors helps criminals prosper. While he stops short of definitively labeling the phenomenon a "supercycle," Callahan notes, "The rapid proliferation of new crypto assets, particularly memecoins, combined with a surge in retail investors and limited regulatory oversight, creates opportunities for criminal activity, including theft, bogus investment schemes, scams and frauds."
Callahan also pointed to the favorable risk-versus-reward scenario for offenders. He explained, “The bad guys have time, money and resources on their side to perfect criminal activity, and they don’t need to get it right all the time to still make a handsome profit.” Anonymity and the ease of setting up fraudulent schemes within the crypto world make it an attractive environment for these actors.
High-Value Security Incidents and Sophisticated Scams
Blockchain security firm CertiK’s H1 Hack3d report, released July 1, revealed that in 2025, the average loss per security breach has been approximately $4.3 million, with median losses around $103,996. Natalie Newson, a senior blockchain investigator at CertiK, told Cointelegraph that a "convergence of conditions" has emboldened criminals. She highlighted the role of influencers and key opinion leaders in launching questionable tokens using tactics such as sniping, exposing retail investors to higher risks.
Adding to the concern, market surveillance group Solidus Labs reported in May that nearly 99% of tokens launched on the platform Pump.fun exhibit classic pump-and-dump characteristics, indicating widespread manipulation.
Law Enforcement Faces Mounting Challenges
Newson also noted the significant hurdles law enforcement agencies face globally. Limited resources, jurisdictional complexities, and the increasing technical sophistication of cybercriminals all hamper efforts to hold offenders accountable. A 2024 Chainalysis report further underscored the difficulties with money laundering techniques that complicate detection and prosecution.
“These factors lead to a widening gap between illicit activity and accountability, creating a hostile environment for legitimate users and builders,” Newson emphasized. She is cautiously optimistic that advancements in smart contract security and increased user education could help mitigate risks, though she admits there is no foolproof way to prevent criminal behavior entirely.
Calls for Balanced Regulation
Hank Huang, CEO of Kronos Research, criticized what he calls a regulatory pendulum swinging from overreach to underreaction. “While early enforcement was often harsh, we are now seeing too little accountability,” Huang observed. He believes that the current regulatory environment allows too much latitude, effectively fostering the frustrating appearance of a crypto crime supercycle.
Huang advocates not for more crackdowns but for "smart, targeted regulation" that finds a balance between protecting the ecosystem and encouraging mass adoption.
Zero Losses Remain Unattainable but Mitigation Is Key
Despite increasing enforcement actions, including global crackdowns on darknet marketplaces, Huang cautioned that completely eliminating losses is impossible due to the decentralized, anonymous nature of crypto markets. “These systems will always attract both good and bad actors,” he said. Instead, the focus should be on minimizing risks to users.
He added, “Crypto’s speed and global accessibility make it especially vulnerable. These attacks are less about targeting crypto and more about testing the limits of emerging systems.”
Conclusion
As the cryptocurrency space continues to evolve rapidly, the convergence of insufficient regulation, rapid asset proliferation, FOMO-driven retail participation, and sophisticated scams has led to record levels of crypto crime in 2025. Industry experts and law enforcement alike agree that while total prevention is unlikely, improvements in regulation, security measures, and education are vital to safeguarding investors and preserving the integrity of the ecosystem.
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