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GMX Connecticut Attorney General issues consumer warning: Be wary of unregulated offshore decentralized financial (DeFi) exchanges
Connecticut Attorney General William Tong recently issued a consumer warning to residents, reminding the public to pay attention to unregulated offshore "decentralized financial"(DeFi) cryptocurrency exchanges. Previously, at least one consumer in the state was deceived into depositing $200,000 on such platforms, and the funds are now unrecoverable.
In a September 3, 2026 warning statement jointly issued with Banking Commissioner Jorge Perez, platforms such as GMX, Gains Network, dYdX, Aevo, Drift Protocol, Vertex Protocol and Hyperliquid were explicitly named, pointing out that these platforms operate outside state and federal regulatory protection.
The core content of consumer warnings
Tong said that these platforms are "designed to lure investors by promising convenient access and high returns" and that once investors get into trouble,"they will face almost impossible recourse," and the platforms continue to retain profits. He added: "It's not innovation, it's exploitation."
Perez pointed out that unregulated offshore platforms "operate outside of the protections that legally regulated financial institutions must comply with," which leads consumers to often mistakenly believe that they do not have any protection when platforms evade U.S. regulation.
How offshore DeFi bypasses protection mechanisms
The DeFi market sells on open-access finance run by software and smart contracts, but many of the largest platforms are actually centralized corporate operations with opaque management, often registered in offshore jurisdictions such as Singapore and the Cayman Islands.
Unlike U.S. registered exchanges that require strict "Know Your Customer"(KYC) authentication, offshore platforms typically only require users to provide digital wallets, allowing users to conduct anonymous transactions. This practice leaves open for money laundering, sanctions evasion and the activities of state-supported actors such as North Korean hackers.
Global regulators intervene
The warning points to growing international scrutiny. In May 2026, the UK Financial Conduct Authority (FCA) issued a public warning designating Hyperliquid and its foundation as unauthorized; Singapore's Monetary Authority also placed the platform on its investor alert list as one of the first DeFi agreements to be flagged for unauthorized derivatives activity.
The focus on Hyperliquid is in line with broader trends: from warnings that U.S. regulation is the exchange's biggest long-term risk, to Chainalysis's recent expansion of its compliance monitoring into the HyperEVM chain.
Measures Connecticut consumers should take
Connecticut has strengthened protections for digital asset consumers, including new safeguards for cryptocurrency ATMs. However, Tong warned that cryptocurrencies and decentralized transactions are often irreversible.
If consumers suspect that they have been targeted by unregulated overseas exchanges, it is recommended to report the matter to the Attorney General's Office immediately.
