Americans are circumventing bans intended to stop U.S. customers from accessing overseas cryptocurrency exchanges, new research suggests.

A report released Friday found that hundreds of Americans are trading risky crypto derivatives on offshore exchanges such as FTX and Binance. The report sheds light on an open secret in the industry: U.S. crypto enthusiasts can easily bypass measures that seek to block them from offshore exchanges.

Crypto derivatives allow traders to place leveraged bets on whether bitcoin, dogecoin or other digital currencies will rise or fall. In the U.S., such products are regulated by the Commodity Futures Trading Commission. By operating outside of the U.S. and not serving American clients, exchanges can avoid numerous CFTC rules, including investor-protection requirements and safeguards against money laundering and market manipulation.

“U.S. customers will likely have little or no protection if they trade with unregistered firms that operate outside the U.S.,” the CFTC said in an emailed statement.

The report was written by Inca Digital, a data firm whose technology is used by the CFTC for investigations and market surveillance.

Inca reached its conclusions by scouring Twitter for activity by crypto traders, including those boasting about successful trades. In such tweets, the traders often share screenshot-like images generated by exchanges to certify the authenticity of customers’ trades. In other cases, traders tweet ID numbers for exchange referral programs that let them earn rewards if their social-media followers sign up for that exchange. Such digital fingerprints allowed Inca to link a Twitter account to a trader on one of seven offshore exchanges: Binance, Bitfinex, BitMEX, Bybit, FTX, Huobi and OKEx.

In all, Inca found more than 2,000 Twitter accounts used by crypto derivatives traders, including 372 belonging to Americans. The firm used several techniques to identify which country a trader was from, including analyzing tweets for geographical clues. Other common countries of origin included Turkey, Indonesia, India and the U.K.

The listing of Coinbase, the largest bitcoin exchange in the U.S., introduces a new way to invest in cryptocurrencies. WSJ explains how Coinbase is trying to distance itself from the risks of bitcoin to succeed on Wall Street. Photo illustration: George Downs The Wall Street Journal Interactive Edition

The U.S. traders identified by Inca represent a tiny portion of the millions of users on offshore crypto exchanges. Inca may not have found all U.S. traders active on such exchanges, though, since traders don’t necessarily broadcast their activity on Twitter.

Of the Americans identified by Inca, 240 were users of FTX, far more than on the other six exchanges. FTX, whose main office is in Hong Kong, recently raised $900 million from investors including SoftBank Group Corp. and Silicon Valley venture firm Sequoia Capital.

After being contacted by The Wall Street Journal for this article, FTX said it was tightening its procedures to block U.S. users.

FTX reviewed a portion of the Twitter accounts identified by Inca and took steps to remove suspected U.S. users from its exchange, FTX Chief Executive Sam Bankman-Fried said in an email. Those users accounted for just 0.01% of the exchange’s trading volume, and some of the users identified as Americans by Inca were “mistagged,” he added.

Still, FTX entered into a deal with Inca to use the firm’s technology to detect future cases in which U.S. customers try to bypass its controls, Mr. Bankman-Fried said. Inca CEO Adam Zarazinski confirmed the arrangement. The deal was agreed in late June, after the Journal first asked FTX to comment on Inca’s findings.

Americans can access offshore crypto exchanges by using virtual private networks, tools that can be used to mask the country where an internet user is based. Many crypto websites and online forums feature information on using VPNs to access non-U.S. exchanges.

SHARE YOUR THOUGHTS

Should the U.S. more strictly regulate cryptocurrency? Why or why not? Join the conversation below.

U.S. traders can also slip past user-identity checks that aim to filter out Americans, sometimes by lying about where they are from. At FTX, for instance, until this week users signing up for the lowest level of trading access only needed to provide their names, emails and country of residence, with no requirement to provide documents to confirm their identity. Such “level one” access gives users a daily withdrawal limit of $9,000. Customers seeking greater withdrawal limits must provide FTX with government ID and proof of address.

Following the Journal’s inquiries, FTX added a step where users seeking level-one access must also give a phone number, whose country code must match the country where the users claim to be from.

Four of the other exchanges featured in Inca’s report—Binance, Bitfinex, Bybit and OKEx—said in statements that they blocked U.S. customers. A BitMEX spokesperson said the exchange’s user-verification program, implemented in December, was “designed to meet the highest international standards and to set the benchmark for the crypto industry.” Huobi declined to comment.

Recently, U.S. regulators have stepped up their efforts to police offshore crypto exchanges. The largest such exchanges handle tens of billions of dollars of trades daily, mostly in derivatives.

Last year, federal prosecutors filed criminal anti-money-laundering charges against executives of BitMEX, which is incorporated in the Seychelles. In parallel, the CFTC sued the exchange’s parent company for multiple regulatory violations, including running an unregistered trading platform. The CFTC said in its lawsuit that BitMEX took bitcoin deposits worth more than $11 billion from at least 85,000 user accounts linked to the U.S.

BitMEX’s spokesperson said the firm has always sought to comply with applicable U.S. laws.

Write to Alexander Osipovich at alexander.osipovich@dowjones.com