Sweeping DOJ memo signals turning point — and possible relief — for embattled crypto firms

A new U.S. Justice Department memo signals a potentially significant shift in policy, with implications for cryptocurrency cases as the Trump administration adopts a more favorable stance toward the industry than in previous years.

The Justice Department’s new approach, which moves away from the Biden administration’s more vigorous prosecutorial strategy, could reshape ongoing crypto enforcement efforts and alter the landscape for pending cases. While industry advocates welcome the reduced threat of criminal charges, critics warn that easing DOJ oversight may encourage misconduct among crypto platforms and complicate regulatory clarity.

The memo, released last week, declared that the agency would not go after litigation or charges that would superimpose “regulatory frameworks on digital assets while President Trump’s actual regulators do this work outside the punitive criminal justice framework.”

“The Department of Justice is not a digital assets regulator,” said Deputy Attorney General Todd Blanche in that memo. “However, the prior Administration used the Justice Department to pursue a reckless strategy of regulation by prosecution, which was ill-conceived and poorly executed.”

Instead, the DOJ will pursue cases involving harm done to investors or those using crypto in crimes, including terrorism and hacks, among others, the memo read. That also means the DOJ won’t pursue cases involving market intermediaries, and instead will go after bad actors using the platforms.

The DOJ subsequently got rid of its National Cryptocurrency Enforcement Team, a group of attorneys that worked to support the department’s cases involving the criminal use of digital assets, created in 2022.

‘Devil is in the details’

The memo could unravel ongoing crypto cases, said Samson Enzer, a partner at Cahill Gordon & Reindel LLP and former federal prosecutor, in an interview with The Block.

“I think there are a number of ongoing investigations and prosecutions that were brought by the Biden administration that would not be brought today if this guidance were followed,” Enzer said. “And as a result of that, I do expect that there will be investigation closures and potentially some dismissals of charges as a result of this guidance.”

Defense lawyers will likely be going to prosecutors and pushing them to close investigations or dismiss cases they believe are inconsistent with the memo, Enzer said.

In fact, Terraform Labs founder Do Kwon’s attorney said during a hearing last week that the DOJ’s memo “could potentially be the subject of some pre-trial motions,” according to multiple reports. Prosecutors said they had no plans to change the charges against Kwon. He faces multiple charges, including conspiracy to commit money laundering, and faces up to 130 years in prison.

Katherine Reilly, partner at Pryor Cashman, said she doesn’t think the memo will alter that case.

“I think it’s a good example of one where it was charged in the previous administration, but I don’t think there’s anything about that case that runs afoul of the structures put in place by the memo,” she said. Reilly was also a federal prosecutor in New York.

This week again, the memo was brought up. Two brothers who allegedly stole $25 million worth of crypto reportedly cited the memo and said their case should be dismissed.

Reilly said she viewed the memo as the DOJ not changing much about its approach to crypto cases and said it leaves room for prosecutors to continue bringing charges. “The devil is in the details,” she said, but noted the memo is consistent with the types of cases brought under the Biden administration.

The DOJ is now putting forth a “willfulness requirement,” which Reilly said was present in past cases. She pointed to a case the department brought and settled against OKX in February. In that case, OKX had to pay $500 million for not getting a proper license to do business as a money transmitter. Prosecutors also accused OKX of “flagrantly” violating U.S. laws and told people to give false information to avoid necessary procedures.

‘A more dramatic shift’ for civil agencies

Following the memo’s release, acting CFTC Chair Caroline Pham issued a supportive statement and said the agency would be directing its resources toward fraud and aiding victims.

“Acting Chair Pham basically said she’s going to follow this guidance,” Enzer said, later adding that he expects other agencies to fall in line with the memo.

The SEC could have a “dramatic shift,” Reilly said. Already over the past few months, the SEC has ended its legal pursuits of several crypto firms — including Coinbase, OpenSea, Kraken, Consensys and Uniswap, among others — as the agency has taken a significantly different approach to crypto than under its predecessor, Gary Gensler.

“It seems as though the administration doesn’t want to be a regulator of the crypto industry, and that’s really more of an SEC/CFTC function,” Reilly said.

Will the DOJ come knocking?

Some lawmakers raised concerns about the DOJ’s memo and Blanche’s assertion that the DOJ is “not a digital assets regulator.”

“Well, if they’re not, then who is, and what does that leave?” said Rep. Sylvia Garcia, D-Texas, during a hearing last week, later pointing to the Securities and Exchange Commission’s move to drop several crypto-related cases.

Better Markets accused the DOJ of “abandoning the laws meant to stop crypto trading platforms and other actors from facilitating and profiting off of money laundering.” Better Markets is a nonprofit, nonpartisan organization working on building a strong financial system and has been critical of crypto.

“The Department can say all it wants about continuing prosecutions of the individuals that engage in national security crimes, but without rigorous enforcement of the laws against the crypto firms that recklessly facilitate money laundering, it defies credibility,” said Better Markets COO Amanda Fischer, in a statement to The Block. “It’s like the police going after street-level drug dealers and not the networks of cartels funding them.”

Reilly said it should not be assumed that the DOJ or regulatory agencies are tapping out of pursuing enforcement actions in crypto.

“The statute of limitations is longer than a presidential term, so any crime that’s committed today could be prosecuted in the new administration years from now,” Reilly said. “I don’t think this is the kind of thing where people should feel like there’s no more enforcement in the crypto space.”