Crimes

Can crypto mixers adapt to survive US authority prosecution?

Cryptocurrency mixers face a dilemma between preserving financial privacy freedom or embracing increased compliance measures to avoid U.S. scrutiny.

Tornado Cash — a cryptocurrency mixer service that can hide the origin of crypto transactions — hit the headlines after being sanctioned by the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) in August 2022. 

The mixer opened Pandora’s box, igniting an open debate about the role of mixers in ensuring personal financial privacy when using cryptocurrencies.

U.S. authorities have continued sanctions against these services, with Sinbad.io being the most recent big player under OFAC sanction. Tornado Cash and Sinbad have been taken down by the FBI, with the U.S. Treasury accusing them of facilitating billions of dollars in illicit transactions, particularly those of North Korea-based hacking group Lazarus.

Read more

IRS lists 4 crypto crimes among its top cases in 2023

The cases included investigations into the Silk Road marketplace, OneCoin, Oyster Protocol founder “Bruno Block,” and a money laundering scheme using Bitcoin kiosks.

The criminal investigation unit of the United States Internal Revenue Service (IRS) has listed four crypto-related cases among the top ten of its “most prominent and high-profile investigations” in 2023.

In a Dec. 11 notice, the IRS unit said there were four significant cases in 2023 involving the seizure of cryptocurrency, fraudulent practices, money laundering and other schemes. Coming in at its third most high-profile investigation in the past year was OneCoin co-founder Karl Sebastian Greenwood, who was sentenced to 20 years in prison in September for his role in marketing and selling a fraudulent crypto asset.

Other cases included Ian Freeman, a New Hampshire resident sentenced to 8 years in prison for operating a money laundering scheme using Bitcoin (BTC) kiosks and failing to pay taxes from 2016 to 2019. The government body was also behind an investigation of Oyster Protocol founder Amir Elmaani, also known as “Bruno Block,” for tax evasion related to minting and selling Pearl tokens.

Read more

Terra co-founder Do Kwon will stay in Montenegro until February: Report

The Terraform Labs co-founder had been awaiting extradition to either the U.S. or South Korea after serving a prison sentence in Montenegro for using falsified travel documents.

Terraform Labs co-founder Do Kwon, expected to be extradited to the United States to face criminal charges, will reportedly stay in Montenegrin custody until February.

According to a Dec. 12 Bloomberg report, authorities with the U.S. and South Korea requested Montenegrin officials hold Kwon for an additional two months following the conclusion of his prison sentence. The Terraform Labs co-founder was arrested in Montenegro in March for using falsified travel documents and sentenced to four months behind bars.

Kwon, a South Korean national formerly based in Singapore, has been charged in the U.S. and South Korea for his alleged role in the collapse of Terra. The Wall Street Journal reported on Dec. 7 that the U.S. would be taking custody of Kwon before South Korea. Both countries have extradition requests pending at the time of publication.

Read more

Montenegrin official plans to extradite Do Kwon to the United States: Report

The Terraform Labs co-founder had been awaiting extradition to either the U.S. or South Korea after being arrested and charged in Montenegro.

Terraform Labs co-founder Do Kwon will reportedly be extradited to the United States rather than South Korea to face criminal charges.

According to a Dec. 7 Wall Street Journal report citing people familiar with the matter, Justice Minister Andrej Milović in Montenegro plans to grant U.S. officials’ request for extradition. Kwon was arrested in Montenegro in March and sentenced to four months in prison for using falsified travel documents. He has also been charged in the U.S. and South Korea for his alleged role in the collapse of Terraform Labs.

Milović reportedly said the announcement would be made public “in a timely manner.” If extradited to the U.S., Kwon faces eight charges, including commodities fraud, securities fraud, wire fraud and conspiracy to defraud and engage in market manipulation related to his time at Terra. The U.S. Securities and Exchange Commission also charged Kwon with “defrauding investors in crypto schemes” in February.

Read more

Hong Kong regulator blocks access to two crypto entities, warning of fraud

According to the securities regulator, misleading information online could encourage individuals to invest in the HKD token issued by HongKongDAO.

The Securities and Futures Commission (SFC) of Hong Kong has issued a warning related to suspected fraud involving crypto entities Hong Kong Digital Research Institute and BitCuped.

In a Dec. 6 notice, the SFC said the Hong Kong Police Force had blocked access to the websites of BitCuped and Hong Kong Digital Research Institute — also known as HongKongDAO — claiming users could be fooled into making illegitimate investments. The regulator also issued cease-and-desist letters to the firms’ website operators.

“The SFC suspects HongKongDAO may be disseminating false and misleading information about itself and its business through online channels,” said the Dec. 6 notice. “The SFC notes that BitCuped claims on its website that ‘Laura Cha’ and ‘Nicolas Aguzin’ serve as its Chairman and Chief Executive Officer respectively, when in fact none of them has any affiliations with BitCuped.”

Read more

Sam Bankman-Fried will not file any post-trial motions, say lawyers

The former FTX CEO was found guilty of seven felony charges on Nov. 2, for which he could face up to 115 years in prison.

Following his conviction on federal fraud charges on Nov. 2, former FTX CEO Sam “SBF” Bankman-Fried will not pursue any post-trial motions.

In a Dec. 1 letter to Judge Lewis Kaplan in United States District Court for the Southern District of New York, lawyers representing Bankman-Fried said they had “decided not to file any post-trial motions” but reserved their rights to pursue claims on appeal. The filing was the latest following SBF’s conviction on Nov. 2 as he awaits sentencing on March 28.

Source: Courtlistener

It’s unclear whether prosecutors plan to move forward with Bankman-Fried’s second trial in March.

Related: What’s next for the ‘crypto king’ Sam Bankman-Fried?

After the jury verdict was handed down, Bankman-Fried returned to the Brooklyn Metropolitan Detention Center, where he is expected to remain until sentencing. 30, crypto blogger Tiffany Fong interviewed a former mob enforcer, Gene Borrello, who reported on some of SBF’s experiences in jail.

Read more

Individual behind $3.4B Silk Road Bitcoin theft sentenced to one year in prison

James Zhong pleaded guilty to the wire fraud charges in November 2022 and has been awaiting sentencing for his role in the “unlawfully obtained” Bitcoin scheme.

The United States Attorney’s Office for the Southern District of New York has announced the sentencing of an individual who pleaded guilty to wire fraud charges connected to “unlawfully obtained” Bitcoin from the Silk Road marketplace in 2012.

In an April 14 announcement, the U.S. Justice Department said James Zhong was sentenced to one year and one day in prison for charges related to executing a scheme to steal more than 51,680 Bitcoin (BTC). Zhong pleaded guilty to the charges in November 2022 and has been awaiting sentencing.

“Cyber-criminals should heed this message: we will follow the money and hold you accountable, no matter how sophisticated your scheme and no matter how long it takes,” said U.S. Attorney Damian Williams.

According to Williams, Zhong stole the BTC in 2012 and managed to conceal his crime for roughly 10 years before facing charges. U.S. authorities seized the Bitcoin holdings from Zhong’s home in the state of Georgia in November 2021, finding the bulk of the crypto in a floor safe and a computer concealed in a popcorn tin. The coins were worth roughly $3.4 billion at the time.

Related: US government plans to sell 41K Bitcoin connected to Silk Road

The Silk Road marketplace, defunct for roughly 10 years, allowed users to buy and sell illicit goods such as weapons and stolen credit card information, drawing the attention of U.S. authorities. The creator of the platform, Ross Ulbricht, was arrested in 2013 and is currently serving two life sentences without the possibility of parole.

Magazine: US enforcement agencies are turning up the heat on crypto-related crime

San Francisco authorities make arrest in stabbing of Cash App creator Bob Lee

Police chief Bill Scott said there was evidence that the suspect and Bob Lee knew each other but did not comment on the possible motive of the attack.

The San Francisco Police Department has arrested a tech executive named Nima Momeni in connection with the April 4 stabbing of Cash App creator Bob Lee.

In an April 13 press conference, the SFPD announced that Momeni was in custody following the execution of search and arrest warrants in San Francisco and Emeryville, a city across the bay. Police chief Bill Scott said that “the evidence shows that [Momeni and Lee] knew each other” but did not comment on the motive of the stabbing, adding that the case was not yet closed.

SFPD Chief Bill Scott addresses reporters on April 13. Source: Facebook

The death of Lee, known by many in the tech world for creating the mobile payment service Cash App, sent shockwaves through the crypto space. The news that Lee knew Momeni suggested the attack was not random, despite some media outlets pointing to San Francisco as a “crime-ridden” city.

“We knew nothing about the facts of this case immediately after it happened — none of us did,” said San Francisco district attorney Brooke Jenkins. “My urging, through Twitter, through the news, was to really press upon not just the media but the residents of San Francisco and everyone else not to draw conclusions about what happened in this case.”

Related: Bitcoin-friendly Cash App integrates TaxBit amid tax-filing season

It’s unclear at the time of publication what charges, if any, Momeni could face in connection to Lee’s death, but San Francisco Mayor London Breed referred to the case as a murder. In addition to developing Cash App, Lee had formally been the chief technology officer of Square — later rebranded as Block — the chief product officer of MobileCoin, and a father of two.

Magazine: US enforcement agencies are turning up the heat on crypto-related crime

North Korea and criminals are using DeFi services for money laundering — US Treasury

Despite the warnings on DeFi, the Treasury noted that “most money laundering, terrorist financing, and proliferation financing” occurred using fiat or outside the crypto ecosystem.

A new report from the United States Treasury Department analyzing decentralized finance concluded that actors from the Democratic People’s Republic of Korea, as well as other scammers, are able to exploit vulnerabilities to facilitate money laundering.

In its “Illicit Finance Risk Assessment of Decentralized Finance” report released on April 6, the U.S. Treasury said many groups engaged in illicit activity from North Korea benefited from some DeFi platforms’ non-compliance with certain Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) regulations. According to the report, insufficient AML/CFT controls and other shortcomings in DeFi services “enable the theft of funds.”

“Illicit actors, including criminals, scammers, and North Korean cyber actors are using DeFi services in the process of laundering illicit funds,” said Brian Nelson, under secretary of the Treasury for Terrorism and Financial Intelligence. “Capturing the potential benefits associated with DeFi services requires addressing these risks.”

The report noted that some projects had “affirmatively touted a lack of AML/CFT controls as one of the primary goals of decentralization,” noting that actors were often able to circumvent sanctions from the U.S. and United Nations. However, the Treasury reiterated that “most money laundering, terrorist financing, and proliferation financing” occurred using fiat currency or was otherwise outside the digital asset ecosystem.

Officials recommended an increase in the regulatory supervision of AML/CFT for platforms offering DeFi services, guidance to DeFi platforms with respect to AML/CFT, and addressing any regulatory gaps.

“DeFi services at present often do not implement AML/CFT controls or other processes to identify customers, allowing layering of proceeds to take place instantaneously and pseudonymously, using long strings of alphanumeric characters rather than names or other personally identifying information.”

Related: In crypto winter, DeFi needs an overhaul to mature and grow

The assessment was in accordance with the executive order on digital assets signed by President Joe Biden in March 2022. Since the implementation of the executive order, many U.S. government agencies have begun investigating the potential impact of aspects of the digital asset space on the country’s financial system and existing payment infrastructure. In September 2022, the Treasury released a report that included countering illicit finance risks from crypto assets.

Magazine: DeFi abandons Ponzi farms for ‘real yield’

SEC reaches ‘agreement in principle’ to resolve insider trading case of Coinbase product manager

Both Ishan and Nikhil Wahi pleaded guilty to criminal insider trading charges after being arrested by U.S. authorities in July.

The United States Securities and Exchange Commission is moving forward with a resolution to the case against a former product manager at Coinbase Global accused of insider trading.

In an April 3 filing in U.S. District Court for the Western District of Washington, the SEC said it had reached “an agreement in principle” with Ishan Wahi. The former Coinbase employee — along with his brother Nikhil Wahi and associate Sameer Ramani — allegedly used confidential information he obtained from the crypto exchange in order to profit off new listings of tokens, totaling more than $1 million.

“Any settlement recommended by SEC staff must be reviewed within the SEC and approved by the SEC’s Commissioners before it may be submitted to the Court for approval, a process than can take a number of weeks,” said the filing.

Authorities arrested Ishan and Nikhil in July — reportedly while they were attempting to fly to India — and both brothers subsequently pleaded guilty to parallel criminal insider trading charges. According to the April 3 filing, the SEC had been engaging in “good faith discussions” with Nikhil, who was sentenced to 10 months in prison in January.

The case against the Wahi brothers was one of the first involving insider trading of a major U.S. crypto exchange before platforms including FTX and Celsius declared bankruptcy. The original complaint alleged Ishan had had access to information on listing cryptocurrencies on exchanges controlled by Coinbase in his position as a product manager from August 2021 to May 2022. He then passed on that information to his brother or Ramami to invest in the tokens before the Coinbase listing was expected to cause a price jump.

Related: Coinbase files brief in SEC Wahi case, says it doesn’t sell securities but would like to

Notable in the context of the SEC cracking down on crypto, the case saw the regulator label nine of the tokens as “crypto asset securities” falling under its purview. The SEC later issued a Wells notice — warning of potential enforcement action — to Coinbase itself in March. The exchange’s chief legal officer, Paul Grewal, said the notice came despite many discussions with SEC representatives.

Magazine: Powers On… Insider trading with crypto is targeted