Tong Sounds Alarm on Unregulated Offshore DeFi Exchanges Bypassing US Oversight

Connecticut Attorney General William Tong has issued a consumer alert warning residents about unregulated offshore 'decentralized finance' (DeFi) cryptocurrency exchanges, after at least one state consumer lost $200,000. The September 3 alert names GMX, Gains Network, dYdX, Aevo, Drift Protocol, Vertex Protocol, and Hyperliquid as platforms operating outside state and federal safeguards.

Tong said these platforms 'are built to lure investors in with promises of easy access and bigger returns,' but leave consumers stranded when they run into trouble. Perez added that unregulated offshore platforms operate outside the safeguards that legitimate regulated financial institutions are required to follow, leaving consumers vulnerable.

The alert points out that DeFi markets itself as open-access finance run by software and smart contracts, but many of the largest platforms are centralized corporate operations with opaque management, often registered in offshore jurisdictions such as Singapore and the Cayman Islands. Unlike registered U.S. exchanges, these platforms typically require only a digital wallet, allowing users to trade anonymously and creating openings for money laundering, sanctions evasion, and activity by state-backed actors.