The NFT market collapse has exposed widespread fraud that cost investors billions. What were once million-dollar digital assets are now worthless, and many victims are discovering their losses resulted from deliberate scams rather than legitimate market forces. If you lost money in an NFT rug pull, pump and dump scheme, celebrity endorsement scam, or other fraudulent NFT project, you may have legal claims to recover your losses.
Varnavides Law represents investors who suffered losses from NFT fraud and cryptocurrency scams. Attorney Gary Varnavides brings ten years of experience defending broker-dealers in securities litigation, giving him unique insight into how financial fraud operates and how to hold wrongdoers accountable. That insider knowledge now works for victims seeking to recover their investment losses.
Key Takeaways
- Massive Losses: The FBI reported $9.3 billion in digital asset losses in 2024, a 66% increase from the previous year, with NFT fraud contributing significantly to these figures.
- Common Scams: NFT rug pulls now account for 14% of all rug pulls, with the average scam stealing $510,000 in 2025, up from $410,000 in 2023.
- Legal Remedies Exist: Victims can pursue claims for securities fraud, breach of contract, misrepresentation, and violations of consumer protection laws.
- SEC Enforcement: The SEC has charged NFT projects with selling unregistered securities, establishing legal precedent for fraud claims.
- Time Limits Apply: Statutes of limitations restrict how long you have to file claims, making prompt legal consultation critical.
The NFT Market Crash and Fraud Epidemic
The NFT market has experienced a catastrophic collapse, with assets that sold for millions now trading for pennies or not at all. While some losses result from legitimate market downturns, investigation has revealed that systemic fraud drove much of the NFT boom and subsequent crash.
According to data compiled by blockchain security firms, consumers worldwide lost $2.2 billion to crypto scams in 2024, representing a 21% increase from 2021. Of this amount, $85 million was drained through rug pulls in 2024 alone. The FBI’s IC3 2024 Annual Report documented nearly 150,000 complaints involving digital assets, with losses totaling $9.3 billion. FINRA research shows crypto investors are twice as likely to be targeted by fraud and to incur financial losses compared to non-crypto investors.
High-profile victims illustrate the scale of the problem. Justin Bieber purchased a Bored Ape NFT for over $1 million, only to watch its value decline by more than 90%. Michael Jordan recorded similar losses on his “6 Rings” NFT collection. These celebrity cases represent thousands of ordinary investors who lost retirement savings, college funds, and life savings to NFT scams.
Types of NFT Fraud and Scams
Understanding the type of fraud you experienced is the first step toward legal recovery. NFT scams typically fall into several categories, each with distinct legal implications and recovery strategies.
Rug Pull Scams
A rug pull occurs when developers promote an NFT project to attract investment, then disappear with investor funds before delivering on promises. In 2025, NFT rug pulls constitute 14% of all rug pulls, with soft rug pulls (where developers drain liquidity gradually) increasing by 33% between 2024 and 2025.
Research shows that 92% of successful rug pulls involve anonymous developers, and 45% of projects broke liquidity locking promises in the last 12 months. The average rug pull now steals $510,000, up from $410,000 in 2023.
Pump and Dump Schemes
Pump and dump schemes artificially inflate NFT or token prices through coordinated buying and misleading promotions, then sell at the peak, leaving later buyers with worthless assets. Analysis of the Solana platform found that up to 98% of new tokens showed warning signs of pump and dump schemes.
Data from Pump.fun reveals that 98.6% of tokens launched on the platform collapse into worthless pump and dump schemes shortly after launch. Of 7 million tokens deployed between January 2024 and March 2025, only 97,000 maintained liquidity above $1,000.
Celebrity Endorsement Fraud
Celebrities promote NFT projects to their millions of followers, often without disclosing compensation or conducting due diligence. When projects collapse, investors who relied on celebrity endorsements suffer massive losses.
In August 2024, a federal court ruled that basketball star Shaquille O’Neal could be held liable as a “seller” of Astrals and Galaxy NFTs that met the definition of securities. Other celebrities facing lawsuits include Jimmy Fallon, Gwyneth Paltrow, and Justin Bieber for promoting Bored Ape Yacht Club NFTs.
Fraudulent Sales and Fake Projects
Some scammers sell NFTs that don’t exist, aren’t authorized by claimed creators, or promise utility that never materializes. These fraudulent sales often involve fake websites mimicking legitimate projects, phishing attacks to steal wallet credentials, or entirely fabricated NFT collections.
Blockchain security firms identified over 150 scam collections on major NFT marketplaces like OpenSea and Magic Eden in 2024. These fake projects generated millions in fraudulent sales before being shut down.
How NFT Fraud Differs from Market Losses
Not every NFT investment loss constitutes fraud. Distinguishing between legitimate market downturns and fraudulent schemes is essential to determining whether you have a viable legal claim.
Legitimate Market Losses vs. Fraud
Legitimate market losses occur when disclosed risks materialize, such as general market downturns, changes in consumer preferences, or competition from newer projects. Creators who deliver on their promises but see their NFTs lose value due to market forces generally haven’t committed fraud.
NFT fraud involves intentional deception, broken promises, undisclosed conflicts of interest, or schemes designed to enrich creators at investors’ expense. Key fraud indicators include anonymous developers, locked liquidity that gets unlocked early, promises of utility that never materialize, fake team credentials, and coordinated promotional campaigns followed by sudden abandonment.
| Factor | Legitimate Loss | Potential Fraud |
|---|---|---|
| Developer Identity | Known, verifiable team | Anonymous or fake identities |
| Promises Made | Delivered on commitments | Broken promises, no delivery |
| Liquidity | Locked as promised | Unlocked early, funds drained |
| Communication | Regular updates, transparency | Disappeared, deleted social media |
| Securities Law | No investment promises | Promised profits from others’ efforts |
| Trading Patterns | Organic market activity | Wash trading, coordinated pumps |
Regulatory Enforcement and Legal Precedents
The Securities and Exchange Commission and FBI have established important legal precedent through enforcement actions against NFT fraud. These cases provide a roadmap for investors pursuing fraud claims.
SEC Enforcement Against NFT Projects
On August 28, 2023, the SEC brought its first NFT enforcement action against Impact Theory, LLC, a California-based media company. Impact Theory sold “Founder’s Keys” NFTs in three tiers (Legendary, Heroic, and Relentless), promoting them as investments that would profit if the company succeeded in its business efforts. The SEC found that Impact Theory violated federal securities laws by offering unregistered securities. The company settled by paying a $6.1 million penalty.
On September 13, 2023, the SEC charged Stoner Cats 2, LLC with conducting an unregistered offering of crypto asset securities. On July 27, 2021, Stoner Cats sold 10,320 NFTs to fund production of an animated web series, generating approximately $8.2 million in gross proceeds. The SEC determined that promises to investors about NFT value increases based on producers’ efforts made these tokens securities.
FBI and Federal Criminal Enforcement
The FBI’s Internet Crime Complaint Center (IC3) serves as the primary mechanism for reporting cryptocurrency and NFT fraud to federal authorities. The 2024 IC3 Annual Report documented nearly 150,000 complaints involving digital assets totaling $9.3 billion in losses. Cryptocurrency investment fraud alone generated $5.8 billion from 41,557 complaints, representing a 29% rise in cases and 47% jump in losses from 2023.
Federal prosecutors increasingly target cryptocurrency and NFT fraud under wire fraud statutes, money laundering laws, and securities fraud provisions. Criminal enforcement benefits civil plaintiffs by freezing assets, identifying co-conspirators, and gathering evidence through subpoenas that private litigants cannot obtain.
What These Cases Mean for Victims
SEC enforcement actions establish that many NFT projects sold unregistered securities in violation of federal law. This legal framework gives defrauded investors additional claims beyond common law fraud, including violations of the Securities Act of 1933 and state securities laws.
Important: Securities Law Implications
If the NFT project you invested in promised profits from the efforts of the development team, included royalty structures on secondary sales, or marketed tokens as investments, those NFTs likely qualify as securities under federal law. Selling unregistered securities violates the law and provides grounds for investor claims.
Celebrity NFT Scams and Lawsuits
Celebrity endorsements played a major role in the NFT boom, with stars promoting projects to millions of followers without adequate disclosure or due diligence. As these projects collapsed, celebrities faced legal accountability.
Major Celebrity NFT Cases in 2024
Jason Derulo – $JASON Token
Jason Derulo’s cryptocurrency $JASON faced allegations of being a pump and dump scheme after increasing by 6,000% on June 23, 2024, then rapidly collapsing.
Lionel Messi – WATER & TIME Tokens
Soccer star Lionel Messi promoted Solana-based meme coins WATER and TIME through Instagram stories in mid-2024. WATER’s price surged nearly 300-400% within hours before collapsing sharply.
Sean Kingston – $KING Token
Sean Kingston launched the Solana-based meme coin $KING in late 2024, which reached a $4 million market cap before crashing to around $400,000 within minutes.
Bored Ape Yacht Club Class Action
A proposed class action lawsuit accused Jimmy Fallon, Gwyneth Paltrow, Justin Bieber, Madonna, and other celebrities of misleading followers into buying Bored Ape Yacht Club NFTs. The complaint alleges celebrities pumped up BAYC NFT values through their endorsements, causing buyers to purchase losing investments at drastically inflated prices.
Shaquille O’Neal Astrals NFT Case
In a significant August 2024 ruling, a federal court found that token holders sufficiently alleged that Shaquille O’Neal was a “seller” of Astrals and Galaxy NFTs under securities law. The court’s decision that these tokens meet the definition of securities creates precedent for holding celebrity promoters liable when their endorsed projects collapse.
Legal Claims Available to NFT Fraud Victims
Victims of NFT fraud can pursue multiple legal theories to recover losses. The specific claims available depend on the facts of your case, but most fraud victims can assert several of these causes of action.
| Legal Claim | Description | Key Requirements |
|---|---|---|
| Securities Fraud | Violations of federal and state securities laws for selling unregistered securities or making material misrepresentations | NFTs qualify as securities; material misrepresentation or omission; reliance; damages |
| Common Law Fraud | Intentional misrepresentation of material facts to induce investment | False statement of fact; knowledge of falsity; intent to deceive; justifiable reliance; damages |
| Negligent Misrepresentation | Careless false statements that induce investment | False information; failure to exercise reasonable care; justifiable reliance; damages |
| Breach of Contract | Failure to deliver promised NFT utility, benefits, or services | Valid contract (smart contract or terms); breach of terms; damages |
| Breach of Fiduciary Duty | Violation of trust relationship between project creators and investors | Fiduciary relationship; breach of duty; causation; damages |
| Unjust Enrichment | Developers enriched at investors’ expense through fraud | Benefit conferred; knowledge of benefit; retention unjust; no adequate remedy at law |
| RICO Violations | Organized fraud schemes involving multiple defendants | Enterprise; pattern of racketeering activity; injury to business or property |
| Consumer Protection | Violations of state consumer fraud and unfair business practice laws | Unfair or deceptive act; public impact; causation; damages |
Evidence Needed for NFT Fraud Claims
Blockchain technology creates a permanent record of transactions, making NFT fraud cases more provable than traditional fraud. However, gathering and preserving the right evidence is critical to building a strong case.
Transaction Records
- Blockchain transaction hashes and timestamps
- Wallet addresses for all transfers
- Purchase confirmations and receipts
- Gas fees and transaction costs
- Secondary market sale records
- Smart contract code and audit reports
Marketing Materials
- Website content and archived versions
- White papers and roadmaps
- Social media posts and promotions
- Discord, Telegram, or Twitter Spaces recordings
- Celebrity endorsements and paid promotions
- Email communications from project team
Project Representations
- Promises about utility or benefits
- Revenue sharing or royalty promises
- Team credentials and backgrounds
- Partnership announcements
- Liquidity locking claims
- Audit or security certifications
Post-Fraud Evidence
- Deleted social media accounts
- Abandoned Discord servers
- Drained liquidity pools
- Unlocked tokens sold by developers
- Similar scams by same developers
- Blockchain analysis of fund flows
Preserve Evidence Immediately
Scammers routinely delete social media accounts, websites, and Discord servers after executing rug pulls. Screenshot all project communications, download white papers and roadmaps, archive website content using services like the Wayback Machine, and document all transaction records before evidence disappears.
Why NFT Fraud Cases Require Specialized Legal Expertise
NFT fraud litigation sits at the intersection of emerging technology, complex securities law, and traditional fraud claims. Successfully pursuing these cases requires attorneys who understand both the technical aspects of blockchain and cryptocurrency as well as the legal frameworks governing securities and investment fraud.
Technical Complexity
NFT fraud cases involve blockchain analysis, smart contract examination, and cryptocurrency tracing. Attorneys must understand how NFT marketplaces operate, how liquidity pools function, how wash trading manipulates prices, and how to trace digital assets across multiple blockchain platforms. This technical expertise is essential for proving fraud occurred and identifying where stolen funds went.
Securities Law Knowledge
As SEC enforcement actions demonstrate, many NFT projects sold unregistered securities. Determining whether an NFT qualifies as a security requires applying the Howey Test and analyzing factors like profit expectations, reliance on others’ efforts, and common enterprise structures. An NFT fraud attorney must understand federal and state securities laws to maximize recovery options.
Multi-Jurisdictional Issues
NFT fraud often involves developers in foreign countries, investors across multiple states, and transactions occurring on decentralized platforms. These cases raise complex jurisdictional questions about which courts have authority, which laws apply, and how to enforce judgments against international defendants.
Gary Varnavides’ Unique Background
Attorney Gary Varnavides spent ten years at Sichenzia Ross Ference LLP defending broker-dealers, financial advisors, and investment firms in securities litigation. This experience defending the financial industry provides unique insight into how fraud schemes operate, what evidence prosecutors and plaintiffs seek, and how to build the strongest possible case for victims.
Gary has been recognized as a Super Lawyers Rising Star from 2015-2023, placing him in the top 2.5% of attorneys in the New York Metro area. He is licensed to practice in California, New York, and New Jersey, allowing him to represent clients across multiple jurisdictions where NFT fraud claims arise.
Statute of Limitations for NFT Fraud Claims
Time limits for filing NFT fraud lawsuits vary depending on the legal claims asserted and the jurisdiction where you file. Missing these deadlines permanently bars recovery, making prompt legal consultation essential.
| Claim Type | Typical Time Limit | When Clock Starts |
|---|---|---|
| Federal Securities Fraud | 2-5 years | When fraud discovered or should have been discovered with reasonable diligence |
| California Securities Fraud | 2 years | Discovery of facts constituting the violation |
| Common Law Fraud | 3 years (CA) | Discovery of fraud |
| Breach of Contract | 4 years (CA) | Breach occurs |
| RICO Violations | 4 years | Discovery of injury |
| Consumer Protection | 3-4 years | Varies by state |
Discovery Rule Complications
Many fraud statutes begin running when you discover or reasonably should have discovered the fraud, not when the fraud occurred. Courts scrutinize whether victims exercised reasonable diligence in discovering fraud. If warning signs existed that you ignored, courts may find the statute of limitations expired earlier than you claim.
Working with an NFT Fraud Attorney
Fee Structure for NFT Fraud Cases
We handle most NFT fraud cases on a contingency fee basis, meaning you pay no upfront attorney fees. This arrangement aligns our interests with yours—we only recover fees if we successfully recover money for you.
What Contingency Representation Means
Under a contingency fee arrangement, attorney fees are calculated as a percentage of any recovery obtained through settlement or judgment. The specific percentage varies based on case complexity, risk level, and other factors, and is discussed during your free consultation.
You remain responsible for case costs, which may include filing fees, expert witness fees, deposition transcripts, blockchain forensic analysis, and other litigation expenses. We can discuss cost estimates and payment arrangements during your consultation.
Benefits of Contingency Representation
- No upfront payment: You don’t need thousands of dollars to hire an attorney
- Risk sharing: We only get paid if you recover money
- Motivation: Our fee depends on maximizing your recovery
- Access to justice: Victims who lost money can still afford quality legal representation
Schedule a free consultation to discuss your case and fee arrangement. We’ll explain exactly how contingency fees work, what costs to expect, and whether your case qualifies for this type of representation.
How NFT Fraud Cases Progress
Understanding the litigation timeline helps set realistic expectations about how long recovery may take and what stages your case will go through.
Phase 1: Investigation (1-3 months)
We investigate your case by analyzing blockchain transactions, reviewing project marketing materials, identifying defendants and their assets, determining applicable legal claims, and assessing collectability of any judgment.
Phase 2: Pre-Litigation (1-2 months)
Before filing suit, we typically send demand letters to defendants, attempt to negotiate settlement, seek asset freezes if flight risk exists, and coordinate with other victims for potential class action.
Phase 3: Filing and Discovery (6-12 months)
After filing the lawsuit, we engage in discovery by serving subpoenas to exchanges and platforms, deposing defendants and witnesses, retaining blockchain forensic experts, and compiling evidence of fraud and damages.
Phase 4: Resolution (Variable)
Cases resolve through settlement negotiations, summary judgment motions, trial, or arbitration. Most cases settle before trial once defendants face the strength of evidence against them.
Realistic Timeline Expectations
Simple cases with identified defendants and clear evidence may resolve in 6-12 months. Complex cases involving multiple defendants, international parties, or contested legal issues typically take 18-36 months or longer. Class actions and cases requiring extensive blockchain forensics may extend beyond three years.
Class Actions vs. Individual NFT Fraud Claims
Large-scale NFT fraud affecting hundreds or thousands of investors often proceeds as a class action lawsuit. Understanding the differences between class actions and individual claims helps you make informed decisions about your case.
| Factor | Class Action | Individual Claim |
|---|---|---|
| Cost to Join | Free to join existing class | You bear costs and fees |
| Control | Class representatives control strategy | You control all decisions |
| Recovery | Pro-rata share of settlement | Potentially larger individual recovery |
| Timeline | Often longer due to certification issues | Can be faster for individual cases |
| Requirements | Must meet class certification standards | No certification needed |
| Settlement | Must accept class settlement or opt out | Negotiate your own settlement |
Victims with substantial individual losses may benefit from pursuing individual claims rather than joining a class action. We can evaluate whether you qualify as a potential class representative, whether joining an existing class action makes sense, or whether an individual lawsuit better serves your interests.
What to Do If You Lost Money to NFT Fraud
Taking prompt action after discovering NFT fraud maximizes your chances of recovery. Follow these steps to protect your legal rights and preserve evidence.
Immediate Steps
- Stop further transactions: Don’t send more money or interact with scammers
- Secure your accounts: Change wallet passwords and enable two-factor authentication
- Document everything: Screenshot communications before scammers delete them
- Archive websites: Use Wayback Machine to preserve project websites
Reporting Requirements
- File IC3 complaint: Report to FBI at IC3.gov
- Report to exchange: Notify the NFT marketplace where you purchased
- Contact state regulators: File complaint with state securities regulators
- IRS reporting: Theft losses may qualify for tax deductions
Evidence Preservation
- Transaction records: Export all blockchain transaction data
- Communications: Save emails, Discord messages, social media posts
- Marketing materials: Download white papers, roadmaps, and promotional content
- Witness information: Identify other victims and potential witnesses
Legal Consultation
- Act quickly: Statutes of limitations may bar late claims
- Get expert review: Have an NFT fraud attorney evaluate your case
- Understand options: Learn about class actions vs. individual claims
- Assess collectability: Determine if defendants have recoverable assets
Taking Action After NFT Fraud
Red Flags That Should Have Warned of NFT Fraud
While scammers are sophisticated, most NFT fraud schemes display warning signs that investors miss or ignore in their excitement about potential profits. Recognizing these red flags can help you avoid future scams and may affect the statute of limitations in pending claims.
Anonymous Developers
Legitimate projects have known team members with verifiable backgrounds. Anonymous developers account for 92% of successful rug pulls.
Unrealistic Promises
Claims of guaranteed returns, “can’t lose” investments, or promises of 10x-100x returns within weeks indicate fraud rather than legitimate business plans.
Pressure Tactics
Creating artificial urgency through limited-time offers, countdown timers, or “FOMO” marketing manipulates investors into skipping due diligence.
No Product or Utility
Projects promising future utility without any working product or clear development roadmap often never deliver anything of value.
Celebrity Endorsements Only
Projects relying solely on celebrity endorsements without technical merit or real utility are often pump and dump schemes.
Suspicious Trading Patterns
Wash trading, coordinated buying, and artificial volume inflation indicate market manipulation rather than organic interest.
Other red flags include poor communication (projects that avoid questions or provide vague answers), unlocked liquidity that can be drained at any time, and copy-paste white papers indicating no real development.
Why Choose Varnavides Law for NFT Fraud Cases
NFT fraud litigation requires both technical expertise in blockchain technology and deep knowledge of securities law and investment fraud. Varnavides Law brings this unique combination to every case.
Securities Litigation Experience: Attorney Gary Varnavides spent a decade defending broker-dealers, financial advisors, and investment firms in securities litigation. This experience provides insight into how financial fraud operates, what evidence is most compelling, and how to build cases that maximize recovery for victims.
Understanding of Crypto and Blockchain: Successfully prosecuting NFT fraud requires understanding blockchain technology, how NFT marketplaces operate, smart contract functionality, and cryptocurrency tracing. We work with blockchain forensic experts to analyze transactions, identify fund flows, and prove fraud occurred.
Multi-Jurisdictional Practice: Gary Varnavides is licensed to practice in California, New York, and New Jersey, three states where substantial NFT fraud occurs. This allows us to represent clients across jurisdictions and pursue defendants wherever they’re located.
Contingency Fee Representation: We handle most NFT fraud cases on contingency, allowing victims who lost money to pursue recovery without paying thousands of dollars in upfront legal fees. This arrangement aligns our interests with yours—we only get paid if we recover money for you.
Free Consultation for NFT Fraud Victims
If you lost money to an NFT rug pull, pump and dump scheme, celebrity endorsement scam, or other fraudulent NFT project, contact Varnavides Law for a free case evaluation. We’ll review your situation, explain your legal options, and help you understand whether you have viable claims to recover your losses.
Time limits apply to fraud claims, so don’t wait. Schedule your free consultation today.
Frequently Asked Questions About NFT Fraud Claims
Can I sue for losses from an NFT rug pull?
Yes, if you can identify the developers and prove they engaged in fraudulent conduct. Rug pulls typically involve intentional misrepresentation, breach of contract, and potentially securities fraud if the NFTs were promoted as investments. The key challenges are identifying anonymous developers, proving fraud rather than mere business failure, locating recoverable assets, and satisfying jurisdictional requirements for filing suit.
Success depends heavily on evidence preservation. If developers deleted social media accounts, websites, and Discord servers, gathering proof becomes more difficult. Blockchain records provide permanent transaction evidence, but you still need to connect wallet addresses to real-world identities and prove fraudulent intent rather than legitimate business failure.
How long do I have to file an NFT fraud lawsuit?
Statutes of limitations vary by claim type and jurisdiction, but generally range from 2-5 years. Federal securities fraud claims typically allow 2 years from discovery of fraud or 5 years from the fraudulent conduct, whichever comes first. California common law fraud claims must be filed within 3 years of discovering the fraud. Breach of contract claims in California have a 4-year limit.
The “discovery rule” means the clock starts when you discovered or reasonably should have discovered the fraud, not when the fraud occurred. However, courts may find you should have discovered fraud earlier if obvious warning signs existed that you ignored. Don’t wait—consult an attorney as soon as you suspect fraud to preserve your legal rights.
What if the NFT developers are anonymous or located overseas?
Anonymous or international defendants complicate recovery but don’t make it impossible. Blockchain forensic analysis can sometimes identify developers by tracing cryptocurrency flows to known exchanges where identity verification occurred. Subpoenas to cryptocurrency exchanges and platforms may reveal real identities behind wallet addresses. International defendants may have assets in the United States subject to seizure.
If developers cannot be identified or have no recoverable assets, focus may shift to other potentially liable parties such as celebrity endorsers who promoted the project, exchanges or platforms that facilitated fraudulent sales, auditing firms that falsely certified the project, or partners and investors who knowingly participated in the scheme. An experienced attorney can identify alternative defendants and recovery sources.
Should I join a class action or file an individual NFT fraud lawsuit?
The decision depends on your individual loss amount, whether a class action has been filed, and your desire for control over the litigation. Class actions benefit victims with smaller losses who cannot afford individual litigation, but settlements are divided among all class members, reducing individual recovery. Individual lawsuits allow complete control over strategy and settlement negotiations, may result in larger individual recovery, and can proceed faster than class certification.
If you lost substantial amounts (typically $50,000 or more), an individual lawsuit may make economic sense. If your losses are smaller, joining an existing class action or waiting for class certification may be the most practical option. You can also serve as a class representative, combining benefits of class actions with some individual control over the case.
Can I recover money if the NFT project failed but wasn’t fraud?
Generally no. Not every investment loss constitutes fraud. If developers made good faith efforts to deliver on promises, disclosed material risks, and the project failed due to market conditions or business challenges, you typically cannot recover losses. Fraud requires proof of intentional deception, material misrepresentation, or deliberate schemes to steal investor funds.
However, even projects that attempted to deliver may still involve fraud if developers made false statements about credentials or partnerships, concealed conflicts of interest, engaged in self-dealing or insider trading, sold unregistered securities without proper disclosures, or violated other legal obligations. An attorney can evaluate whether the project’s failure resulted from fraud or legitimate business risks.
What damages can I recover in an NFT fraud lawsuit?
Recoverable damages typically include the amount you invested in the NFT project, lost profits if you can prove them with reasonable certainty, interest on your losses from the date of fraud, and potentially punitive damages in cases of egregious fraud. In securities fraud cases, you may recover the difference between what you paid and the true value at purchase, plus interest.
California law allows punitive damages when defendants acted with fraud, oppression, or malice. These damages punish wrongdoers and deter future fraud, potentially multiplying your recovery. However, punitive damages require clear and convincing evidence of intentional wrongdoing. Attorney fees may be recoverable in some cases, particularly securities fraud or consumer protection claims that include fee-shifting provisions.
How do contingency fees work for NFT fraud cases?
Under contingency fee arrangements, you pay no upfront attorney fees. Instead, the attorney receives a percentage of any money recovered through settlement or judgment. The specific percentage varies based on case complexity, risk level, and stage of resolution, and is agreed upon before representation begins.
You remain responsible for case costs such as filing fees, deposition transcripts, expert witness fees, and investigation expenses. Some attorneys advance these costs and deduct them from any recovery, while others require clients to pay costs as incurred. The fee percentage discussed during your free consultation will clarify exactly how fees and costs are handled in your specific case.
What evidence do I need to prove NFT fraud?
Strong NFT fraud cases include blockchain transaction records showing your purchases, marketing materials and promises made by developers, white papers, roadmaps, and project documentation, social media posts, Discord messages, and other communications, evidence that promises were broken or were false from the beginning, proof of developer identities or their attempts to remain anonymous, and evidence that developers profited while investors lost money.
Blockchain records provide powerful evidence because they’re permanent and tamper-proof. Transaction hashes, wallet addresses, and smart contract code can prove when you purchased NFTs, where funds went after you paid, whether developers drained liquidity, and whether wash trading manipulated prices. Preserve all evidence immediately, as scammers routinely delete social media accounts, websites, and Discord servers after executing rug pulls.
