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Connecticut attorney general warns consumers off offshore DeFi crypto exchanges

William Tong issued a consumer alert Thursday naming several overseas "decentralized finance" platforms, saying they operate outside U.S. regulation and leave investors with little recourse. His office said one Connecticut resident lost $200,000.

Connecticut Attorney General William Tong warned residents Thursday against using unregulated offshore "decentralized finance" cryptocurrency exchanges, saying the platforms operate outside state and federal oversight and expose small investors to heavy losses.

The alert named GMX, Gains Network, dYdX, Aevo, Drift Protocol, Vertex Protocol and Hyperliquid. Tong's office said the platforms bypass consumer protections that apply to banks and registered U.S. exchanges, offer levels of borrowing barred for retail investors in this country, and give users little recourse when money disappears.

The office said it knows of at least one Connecticut resident who was persuaded to deposit $200,000 into an unregulated DeFi exchange by someone who claimed to know the person. The money has not been recovered, according to the attorney general's office.

Many of the largest DeFi platforms market themselves as software-run services with no middleman but are in fact centralized companies with opaque management, often registered in places such as Singapore and the Cayman Islands, the office said. Unlike U.S. exchanges, it said, they typically require only a digital wallet, allowing anonymous trading.

Tong's office said the platforms allow leverage of 50, 100 or even 250 times an investor's stake, and that customers buying "perpetual contracts" tied to shares in companies such as Apple, Tesla and Nvidia are often misled into believing they own actual stock rather than making leveraged bets on synthetic prices.

The office also said British and Singaporean regulators have flagged Hyperliquid as unauthorized, the United Kingdom's Financial Conduct Authority in May.

Banking Commissioner Jorge Perez urged consumers to verify that any crypto service is registered and regulated before using it.

Residents who believe they were scammed can report it to the attorney general's office.

This brief was drafted by AI from a public agency press release and published by The New England Signal. Why we use AI for stories like this one.

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