Crypto Theft, Tax Losses and Recovery
Litigation attorney Andrew Balthazor was featured in a Tax Notes article recapping his session at the 2026 OffshoreAlert Miami conference, where he focused on the crypto fraud recovery process. Andrew and panelists began by reviewing what makes investigating crypto fraud difficult, from blockchain bridges and mixers to comingled funds to multiple platforms where bad actors can operate. They then talked through the tools investigators use to uncover fraudulent schemes and recover stolen crypto assets, such as bulk tracing algorithms and social media tracking. Andrew also touched on the tension between centralized and decentralized platforms, saying decentralized finance (DeFi) protocols could ask validators to stop processing transactions from specific other protocols to halt the flow of funds to certain blockchains, but he cautioned against doing so as a long-term solution. The nature of DeFi operations, he explained, makes regulation and enforcement tricky.
"You want to be able to turn to someone to remedy something when something has gone wrong or when there is a court order to comply with. But that's really contrary to the decentralized ethos," he commented.