Connecticut has issued a warning about unregulated offshore DeFi exchanges after a resident lost access to $200,000 deposited following a deceptive solicitation.
- A Connecticut resident cannot recover $200,000 sent to an unnamed unregulated DeFi exchange.
- State officials listed seven offshore platforms but did not connect any of them to the loss.
- Some offshore exchanges offer leverage as high as 250x and synthetic exposure to U.S. stocks.
- The CFTC advises Americans to use registered exchanges when trading crypto perpetual contracts.
The Connecticut Attorney General’s Office said on Sept. 3 that a person claiming to know the resident persuaded them to deposit $200,000 into an unregulated decentralized finance exchange. The office did not identify the person, the platform used, or when the transfer occurred.
Unable to recover the money, the resident became the main example in a consumer alert issued by Attorney General William Tong and state Banking Commissioner Jorge Perez. Officials warned that users of offshore platforms may have few practical options for recovering funds after fraud, a security breach, a platform failure, or a dispute.
Tong said platforms may attract customers with simple access and promises of higher returns while giving them little protection when problems arise.
“This isn’t innovation, it’s exploitation. Do research before handing over any money and know what protections are in place if things go wrong.”
Connecticut DeFi alert names seven offshore platforms
The state alert identified GMX, Gains Network, dYdX, Aevo, Drift Protocol, Vertex Protocol, and Hyperliquid as examples of offshore DeFi platforms that officials said operate outside U.S. regulatory safeguards.
Connecticut did not accuse any of the seven platforms of receiving the resident’s $200,000. Naming them in the alert does not establish that one of them handled the transfer or participated in the alleged deception.
According to the state, some services describe themselves as decentralized because traders interact through digital wallets and software-based systems. Officials argued that parts of their operations may still depend on corporate entities, private management teams, administrators, or other centralized controls.
The alert said several offshore exchanges require only a connected crypto wallet rather than the identity checks used by registered U.S. financial companies. State officials linked limited identity verification to risks involving money laundering, sanctions evasion, and transfers associated with state-backed hacking groups.
Perez advised residents to confirm whether a service is registered before sending funds. He said platforms operating beyond U.S. oversight do not provide the safeguards required of regulated financial institutions.
High leverage can erase collateral after a small move
Perpetual contracts formed a major part of the warning because many offshore DeFi exchanges let traders take leveraged positions without purchasing the referenced asset. Unlike standard futures, perpetual contracts have no fixed expiry date and use recurring funding payments to keep their prices near the underlying market.
Connecticut officials said some offshore platforms offer leverage of 50x, 100x, or as much as 250x. At 100x leverage, a price move of roughly 1% against a position can consume the trader’s starting margin before fees and differences in a platform’s liquidation process are considered.
Leverage, however, is not a required feature of perpetual contracts. A May CFTC briefing on perpetuals said the contracts may be offered on CFTC-regulated exchanges under federal oversight, with leverage limits governed by each venue’s risk-management framework.
The CFTC advises traders to use registered exchanges, examine contract rules and pricing methods, and understand how margin requirements affect liquidation. Its guidance also says offshore venues with high leverage are largely developed outside the agency’s jurisdiction.
A July crypto.news report explained how HIP-3 works, including the role of independent market deployers and their chosen price oracles. The report noted that oracle quality may differ between markets and that leveraged perpetual positions can be liquidated within minutes.
Synthetic stock contracts do not provide ownership rights
Connecticut’s warning also covered perpetual products that track Apple, Tesla, Nvidia, SpaceX, foreign currencies, and commodities. According to the alert, customers may mistake such contracts for purchases of the referenced shares even though they receive only synthetic price exposure.
A perpetual contract tied to a company does not normally grant stockholder rights, dividends, voting power, or a legal claim on the company’s assets. Traders instead gain profit or loss exposure through the contract’s price, funding payments, collateral rules, and liquidation terms.
Earlier reporting on blockchain-based equity perpetuals found that such products can offer around-the-clock trading, short exposure without borrowing shares, and high leverage. The same report noted that users depend on the venue’s solvency and the integrity of its oracle because no actual shares change hands.
The Connecticut alert went further, alleging that operators with centralized control may alter pricing systems, remove products, suspend trading, or stop withdrawals. Officials advised investors to review who controls a platform and what remedies are available before connecting a wallet or depositing collateral.
U.S. access also remains a regulatory concern. The state said offshore platforms often claim to block Americans, but that some users bypass restrictions through virtual private networks or public application programming interfaces. Citing web-traffic data, the alert estimated that 22.6% of Hyperliquid’s traffic comes from the United States.
Regulators warn users about limited recovery options
Outside the United States, the U.K. Financial Conduct Authority listed Hyperliquid as unauthorized in May 2026 and said the platform may be targeting people in Britain. The FCA advised consumers to avoid dealing with the firm.
British users who transact through an unauthorized company cannot take complaints to the Financial Ombudsman Service, according to the FCA. They also lack protection from the Financial Services Compensation Scheme if the firm fails, making recovery unlikely in that situation.
Connecticut’s alert also cited the Monetary Authority of Singapore’s decision to add Hyperliquid to its Investor Alert List over unauthorized derivatives activity. Neither the British nor the Singapore warning connects Hyperliquid to the Connecticut resident’s loss.
At the state level, Connecticut has already imposed protections on cryptocurrency kiosks, another channel used in digital-asset fraud. A recent review of state crypto kiosk rules found that Connecticut has prohibited the machines since January 2026, while federal rules still require operators to register with the Financial Crimes Enforcement Network and maintain anti-money-laundering controls.
The FBI’s 2025 Internet Crime Report recorded $7.2 billion in reported U.S. losses from cryptocurrency investment fraud, making it the country’s largest source of financial loss within that fraud category. The bureau said scammers commonly contact victims through social media, text messages, advertisements, or dating apps before directing them to fake investment platforms.
After an initial loss, victims may face a second approach from people claiming they can retrieve the money. In a July warning, the FBI said scammers impersonating its Internet Crime Complaint Center had contacted previous victims and falsely claimed to have recovered their funds or offered recovery help.
Connecticut advised residents not to pay supposed recovery specialists or people posing as attorneys, especially when they demand fees in advance. The state also asked users to preserve wallet records, transaction details, messages, emails, and other communications before reporting suspected fraud to the Attorney General’s Office.
