Crimes

South Korean authorities seize $160M in assets tied to Terra employees: Report

Prosecutors reportedly took control of houses and properties in an attempt to prevent former Terra employees from disposing of assets potentially connected to criminal proceedings.

The Seoul Southern District Prosecutor’s Office has reportedly confiscated roughly $160 million worth of assets from eight people connected to the collapse of Terraform Labs, including co-founder Daniel Shin.

According to an April 3 report from South Korean news outlet KBS, authorities seized roughly 210 billion won — $160 million at the time of publication — worth of property connected to former Terra employees, mainly in the form of real estate. Prosecutors reportedly took control of houses and properties owned by former Terra Vice President Kim Mo and an unnamed executive worth roughly $60 million and $31 million, respectively.

“We are still investigating the property ownership status of the suspects, and we plan to carry out collection preservation for the confirmed property in the future in order to recover the proceeds of crime and recover damages,” said a spokesperson for the prosecution team.

The prosecutors’ actions were reportedly aimed at preventing former Terra employees from disposing of assets in an attempt to ensure they were part of potential criminal proceedings. In November, authorities took similar measures by seizing Shin’s home in Seoul, but are reportedly still investigating other assets allegedly connected to the Terra co-founder.

At the time of publication, no South Korean court had authorized an arrest warrant for Shin. The report also did not mention any crypto assets seized as part of the investigation.

After months without definitive public knowledge of his whereabouts following the collapse of the platform, Terra co-founder Do Kwon was arrested in Montenegro in March. Montenegrin Justice Minister Marko Kovač announced on March 29 that the local government had received requests from both the United States and South Korea regarding taking Kwon into custody.

Magazine: Terra collapsed because it used hubris for collateral — Knifefight

UK government announces ‘robust’ crypto regulation as part of economic crime plan

The focus on crypto regulation was part of the U.K. government’s plan to fight economic crime, which also included addressing law enforcement’s ability to seize and store assets.

The government of the United Kingdom has laid out plans to step up regulation of crypto assets in its efforts to respond to economic crime in the country.

In a policy paper released on March 30, the U.K. Treasury and Home Office said it planned to “robustly” regulate crypto to fight illicit use of digital assets. The focus on regulation was part of the government’s economic crime plan from 2023 to 2026, which also included pooling “the knowledge and abilities of law enforcement agencies” to review and strengthen how crypto assets involved in legal proceedings may be seized and stored.

“These steps will be in keeping with our ambition to make the U.K. an attractive destination for cryptoassets and cryptoasset innovation in the world,” said the plan. “Challenging as it is, effective cryptoasset regulation benefits everyone, including consumers and firms.”

We’re coming for the corrupt elites and criminals that abuse our financial system.

New measures announced today to tackle economic crime https://t.co/I4S4lYlwyx pic.twitter.com/zQU4VV6g6D

— Home Office (@ukhomeoffice) March 30, 2023

According to the policy paper, the U.K. government said it expected criminals to shift their crypto transactions to “less regulated exchanges and services” in other jurisdictions. The country’s Financial Conduct Authority, or FCA — one of the bodies behind the enforcement of crypto asset regulation — will be working with its international counterparts to exchange information related to its response on the regulation and supervision of crypto. According to the paper:

“The [National Crime Agency]’s National Assessment Centre assesses that based on estimates of UK transaction volumes, illicit cryptoasset transactions linked to the UK in 2021 likely equated to at least £1.24 billion (~1% of total transaction value) with a realistic possibility they were significantly higher.”

As part of its plan of action, the government said it planned to coordinate with various agencies to implement the Financial Action Task Force’s Travel Rule as well as pass the Economic Crime and Corporate Transparency Bill by the end of the fourth quarter of 2023. Other goals included improving communications between the FCA and crypto firms in the second quarter of 2024.

While the U.K. seems to be pursuing a response to crypto on multiple fronts — from law enforcement to regulation — taxpayers in the country face their own reporting obligations. On March 15, the U.K. Treasury released a report announcing it would amend the self-assessment forms for crypto assets starting for the 2024–25 tax year.

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

Terra co-founder Do Kwon’s jail time in Montenegro will be harsh: Report

Now in custody in Montenegro, Do Kwon could be facing “at least a year” behind bars as the country considers extradition requests, according to one criminal defense lawyer.

Do Kwon, currently in custody in Montenegro and potentially awaiting extradition to the United States or South Korea, will reportedly face harsh conditions in the country’s penal system.

According to a March 29 Protos report, an unnamed criminal defense lawyer said conditions at Montenegro’s jails and prisons “haven’t changed” from those described in a 2020 human rights report by the United States State Department. The report cited a case in which prison officers had been convicted of torturing and “inflicting grievous bodily harm” on 11 inmates in 2015, as well as other “poor” conditions in some of Montenegro’s prisons due to overcrowding and lack of medical care.

Citing reports from the Council of Europe’s Committee for the Prevention of Torture, the State Department said many prisoners had been confined to overcrowded cells for roughly 23 hours a day, with some reports of violence between inmates. Kwon could be facing “at least a year” in such conditions as Montenegro considers extradition requests, depending on the outcome of his criminal case over allegedly forged travel documents.

“Rooms are 8 meters squared and very crowded,” the lawyer reportedly said. “There’s about 10 to 11 people in a room — there’s usually not even a bed.“

Kwon, whose whereabouts had largely been unknown following the collapse of Terra in May 2022, was detained at the Podgorica airport in Montenegro on March 23, after which time authorities confirmed his identity. The country’s Ministry of Justice announced on March 29 that both the United States and South Korean had made extradition requests for the Terra co-founder, but he could first face criminal charges in Montenegro.

*Kwon’s last tweet* *before his arrest in Montenegro,* *posted on Feb. 1.*

At the time of publication, it’s unclear whether South Korea or the U.S. will be able to gain custody of Kwon, a South Korean national. The situation echoes that of former FTX CEO Sam Bankman-Fried, who was in the Bahamas at the time of the exchange’s collapse and held in a detention facility with reported cases of physical abuse against prisoners and harsh conditions. Bankman-Fried is currently on bail in the U.S. while he awaits trial.

Magazine: The ‘godfather of crypto’ risked lifetime in jail, laying foundation for Bitcoin

Sam Bankman-Fried pleads not guilty to bribery, charges from superseding indictment

The former FTX CEO’s legal team argued that, although SBF had entered a not-guilty plea, he did not acknowledge the new charges, which included bribing a Chinese government official.

Lawyers for former FTX CEO Sam Bankman-Fried have entered a not-guilty plea for five additional charges since his December 2022 arraignment, including allegations of bribery.

According to multiple reports, Bankman-Fried pleaded not guilty in United States District Court for the Southern District of New York to four charges added as part of a superseding indictment in February, and one charge added on March 28 related to the former CEO allegedly bribing a Chinese government official. Other charges include conspiracy counts related to fraud as well as those for wire fraud and securities fraud during his time at FTX.

Mark Cohen, the attorney representing Bankman-Fried in the criminal case, reportedly argued that though SBF had entered a not guilty plea, there was no acknowledgement that the court had the authority to bring the charges against him. The latest charge alleged that SBF was involved in transferring “at least approximately $40 million in cryptocurrency intended for the benefit of one or more Chinese government officials” intended to facilitate transactions tied to Alameda Research.

SBF arriving to court to be arraigned on 5 new charges since his original indictment. Hearing starts at 11a pic.twitter.com/x8HBsWVbFv

— Dawn Giel (@DawnGiel) March 30, 2023

Bankman-Fried has been free on bail since being turned over to U.S. custody from the Bahamas in December, largely confined to his parents’ California home. A federal judge recently amended his bail conditions to prohibit the use of any smartphone with internet access. Bankruptcy proceedings for FTX are also currently underway in the District of Delaware.

Magazine: SBF legal fees, BTC market cap flips Meta and USDC climbs back to $1: Hodler’s Digest, March 12-18

Sam Bankman-Fried charged with bribing Chinese officials: Court docs

The former FTX CEO is in hot waters once again, as he is facing a new 13-count indictment from authorities in the United States.

FTX cryptocurrency exchange founder and former CEO Sam Bankman-Fried, or “SBF,” is facing a new 13-count indictment from authorities in the United States.

According to a court filing by United States attorney Damian Williams, one of the new SBF’s charges includes an alleged $40million bribe to a Chinese government official in a new superseding indictment.

In section 105 of the filing, the complaint claims that SBF and other related parties “directed and caused the transfer of at least approximately $40 million in cryptocurrency intended for the benefit of one or more Chinese government officials.” According to the allegations, the transaction was made in order to influence and induce Chinese officials to unfreeze cryptocurrency accounts at FTX’s affiliate firm, Alameda Research. The accounts reportedly held more than $1 billion worth of cryptocurrency.

According to the filing, Chinese law enforcement authorities froze certain Alameda accounts on “two of China’s largest crypto exchanges” in or around early 2021. The FTX founder was aware of the freeze and tried numerous methods to unfreeze the accounts, including attempting to transfer cryptocurrency to fraudulent accounts in an effort to circumvent China’s freeze orders.

“After months of failed attempts to unfreeze the accounts, Samuel Bankman-Fried discussed with others and ultimately agreed to and directed a multi-million-dollar bribe to seek to unfreeze the accounts,” the court filing notes. After the accounts were unfrozen at the direction of SBF, Alameda used unfrozen cryptocurrency to fund additional Alameda trading activity, the U.S. government found.

It appears to be unclear what Chinese cryptocurrency exchanges Alameda was using in early 2021 as China officially banned crypto exchanges from providing services in the country back in 2017. As previously reported, China enforced a blanket ban on crypto in September 2021.

FTX founder Bankman-Fried faces a trial set for Oct. 2, 2023, on criminal charges of stealing billions of dollars in FTX customer funds facilitated through Alameda Research. He is also alleged to have made large illegal political donations. He pleaded not guilty to eight criminal counts, which could result in 115 years in prison should he be convicted.

Magazine: Best and worst countries for crypto taxes — Plus crypto tax tips

South Korea saw over $4B unregistered crypto transactions in 2022

The money was primarily aimed at buying foreign crypto assets to sell on the domestic market.

In 2022, the citizens of South Korea transacted 5.6 trillion Korean won ($4.3 billion) through “illegal” crypto exchanges, according to local sources. The country’s government has been especially attentive toward such money movement amid the tightening regime of licensing.

On March 7, local media published the numbers the Korea Customs Service provided. According to customs, the overall amount of funds caught in economic crimes increased significantly from 3.2 trillion won ($2.5 billion) in 2021 to 8.2 trillion won ($6.2 billion) last year.

Crypto transactions comprised almost 70% of all the illicit money traffic captured by the officers. However, the total amount of intercepted digital assets ($4.3 billion) accrues for only 15 transactions. The transactions were aimed at purchasing foreign virtual assets with the intention to sell them in the country later, as the South Korean regulatory regime isolates the local market and makes the prices of foreign crypto higher for the customers.

In August 2022, Korean customs reported detaining 16 individuals involved in illegal foreign exchange transactions connected to crypto assets worth roughly $2 billion. Starting in 2017, Korea’s Foreign Exchange Transactions Act requires entities involved in crypto transactions to get regulatory approval from the Financial Services Commission. Hence, the attempts to participate in the global crypto trade, from foreign players coming to the Korean market or domestic investors seeking a better exchange course abroad, are labeled “illegal.“

The same month, the Korea Financial Intelligence Unit took action against 16 foreign-based crypto firms, including KuCoin, Poloniex and Phemex. All 16 exchanges have purportedly engaged in business activities targeting domestic consumers by offering Korean-language websites, running promotional events targeting Korean consumers and providing credit card payment options for cryptocurrency purchases. These activities all fall under the Financial Transactions Report Act.

Sam Bankman-Fried’s lawyers request extension for bail condition proposal

According to the legal team representing Sam Bankman-Fried, prosecutors had no objections to continuing his bail conditions until the firm could choose a suitable technical expert.

Lawyers representing former FTX CEO Sam Bankman-Fried in federal court have requested an extension to file a proposal related to his bail conditions.

In a Feb. 24 filing with the United States District Court for the Southern District of New York, Mark Cohen of Cohen & Gressler said the legal team wanted until March 3 to file a proposal for additional bail conditions for Bankman-Fried and find a suitable candidate to act as a technical expert in the case. The lawyers agreed to hire an expert following a Feb. 16 hearing discussing the former FTX CEO’s use of a virtual private network, or VPN.

“The parties have been diligently vetting candidates to serve as the Court’s technical consultant but have not yet identified a suitable candidate,” said the filing. “Similarly, the parties have been engaged in productive discussions about additional bail conditions for Mr. Bankman-Fried but would like more time to complete those discussions.”

Cohen added:

“The Government has no objection to this request. The parties also have no objection to continuing Mr. Bankman-Fried’s current bail conditions for whatever period the Court deems appropriate while these discussions are taking place.“

Judge Lewis Kaplan suggested that he could add additional restrictions to Bankman-Fried’s $250 million bail conditions following a report SBF used a VPN on Jan. 29 and Feb. 12. Lawyers representing the former CEO claimed he used the technology to watch football games but still agreed to have Bankman-Fried stop using VPNs until the court could decide on the matter.

SBF has largely been confined to his parent’s California home since being arraigned in December 2022, but has been brought back to court a few times to face proceedings related to his bail conditions. Court documents stated that the former FTX CEO attempted to contact former FTX employees using encrypted messaging apps. Judge Kaplan has also hinted at revoking SBF’s bail entirely, likely leaving him in federal custody until his October criminal trial.

The court unsealed a superseding indictment against Bankman-Fried on Feb. 22 containing 12 criminal counts, not the eight charges he originally faced on Dec. 13. The indictment included conspiracy to commit bank fraud and details on his alleged unlawful political contributions — using straw donors to make contributions totaling “tens of millions of dollars.”

Sam Bankman-Fried’s lawyers request extension for bail condition proposal

According to the legal team representing Sam Bankman-Fried, prosecutors had no objections to continuing his bail conditions until the firm could choose a suitable technical expert.

Lawyers representing former FTX CEO Sam Bankman-Fried in federal court have requested an extension to file a proposal related to his bail conditions.

In a Feb. 24 filing with the United States District Court for the Southern District of New York, Mark Cohen of Cohen & Gressler said the legal team wanted until March 3 to file a proposal for additional bail conditions for Bankman-Fried as well as find a suitable candidate to act as a technical expert in the case. The lawyers agreed to hire an expert following a Feb. 16 hearing discussing the former FTX CEO’s use of a virtual private network, or VPN.

Cohen added:

“The Government has no objection to this request. The parties also have no objection to continuing Mr. Bankman-Fried’s current bail conditions for whatever period the Court deems appropriate while these discussions are taking place.”

Judge Lewis Kaplan suggested that he could add additional restrictions to Bankman-Fried’s $250-million bail conditions following a report SBF used a VPN on Jan. 29 and Feb. 12. Lawyers representing the former CEO claimed he used the technology to watch football games, but still agreed to have Bankman-Fried stop using VPNs until the court could reach a decision on the matter.

The court unsealed a superseding indictment against Bankman-Fried on Feb. 22 containing 12 criminal counts, and not the 8 charges he originally faced on Dec. 13. The indictment included a charge for conspiracy to commit bank fraud and details on his alleged unlawful political contributions — using straw donors to make contributions totaling “tens of millions of dollars.”

Unsealed superseding indictment against Sam Bankman-Fried includes 12 criminal charges

The indictment against the former FTX CEO included an additional charge for conspiracy to commit bank fraud and details on his alleged unlawful political contributions.

The federal judge presiding over the case for former FTX CEO Sam “SBF” Bankman-Fried has ordered a superseding indictment unsealed containing 12 criminal counts.

In the indictment filed with the United States District Court for the Southern District of New York on Feb. 22, U.S. Attorney Damian Williams alleges Bankman-Fried’s actions in the matter involving FTX and Alameda warranted 12 charges. According to the indictment, these included eight conspiracy charges related to fraud as well as four charges for wire fraud and securities fraud.

The original indictment against Bankman-Fried, announced on Dec. 13, included eight similar charges, while the superseding indictment mentions an additional charge for conspiracy to commit bank fraud and breaks down individual wire fraud charges related to his alleged actions at FTX and Alameda. At the time, prosecutors also listed conspiracy to commit commodities fraud in its charges, which was seemingly included in the superseding indictment related to the “purchase and sales of derivatives” at FTX.

According to the indictment, Bankman-Fried committed fraud in opening a bank account and attempting to obtain user deposits:

“[Bankman-Fried and others] falsely represented to a financial institution that the account would be used for trading and market making, even though [he] knew that the account would be used to receive and transmit customer funds in the operation of a cryptocurrency exchange, and thereafter, in connection with using the account for the receipt and transmission of customer funds, omitted material facts in a manner that made what was communicated misleading.”

A new superseding indictment against FTX cryptocurrency exchange founder Sam Bankman-Fried containing 12 charges was unsealed in Manhattan federal court https://t.co/MKmmgW7W01 pic.twitter.com/r9JVKNljDt

— Reuters Legal (@ReutersLegal) February 23, 2023

In regard to the allegations involving unlawful political contributions, the filing said SBF and others used “straw donors” or corporate funds to make more than 300 contributions totaling “tens of millions of dollars.” Using straw donors, the U.S. attorney alleged, allowed Bankman-Fried to “evade contribution limits on individual donations” as enforced by the Federal Election Commission — usually $100.

“While employees at Alameda generally tracked loans to executives, the transfers to Bankman-Fried [and two other FTX executives] in the months before the 2022 midterm elections were not recorded on internal Alameda tracking spreadsheets,” said the filing. “Instead, an internal Alameda spreadsheet noted over $100 million in political contributions, even though FEC records reflect no political contributions by Alameda for the 2022 midterm elections to candidates or PACs.”

The former FTX CEO has largely been confined to his parents’ California home since a December bail hearing, in which his mother and father agreed to put up the equity from their house as part of Bankman-Fried’s $250-million bond. Two employees of Stanford University — research scientist Andreas Paepcke and former law school dean Larry Kramer — also signed on as sureties for Bankman-Fried’s bail for $200,000 and $500,000, respectively.

Bankman-Fried’s criminal trial in federal court is scheduled to begin in October, while FTX’s bankruptcy case is ongoing in U.S. Bankruptcy Court for the District of Delaware. Former Alameda Research CEO Caroline Ellison and FTX co-founder Gary Wang pled guilty to similar charges as SBF in a plea deal, with many experts speculating they may offer testimony in his case.

Do Kwon removed 10K Bitcoin from Terra after collapse — Takeaways from SEC complaint

The SEC complaint included allegations around claims of TerraUSD’s peg, Terra’s relationship to Chai, and co-founder Do Kwon cashing out for millions.

A complaint filed by the United States Securities and Exchange Commission said Terra co-founder Do Kwon and Terraform Labs laundered more than $100 million worth of Bitcoin from the platform following its collapse in May 2022.

According to the SEC complaint filed in the U.S. District Court for the Southern District of New York on Feb. 16, Kwon and Terraform have transferred more than 10,000 Bitcoin (BTC) from the platform and the Luna Foundation Guard to a cold wallet, then to a Swiss bank account to convert to fiat. The financial regulator said that the Terra co-founder and his company might have access to more than $100 million in cash since withdrawals started in June 2022.

In addition to identifying the stockpile of Bitcoin, the SEC said Kwon and Terra artificially restored TerraUSD’s (UST) dollar peg — the stablecoin had been one of the largest by market capitalization at the time the platform collapsed. According to the complaint, the platform solicited a third party to purchase “massive amounts of UST to restore the $1.00 peg” when it dropped below $1 in May 2021, misleading investors as to its stability and reliability:

“UST’s price falling below its $1.00 ‘peg’ and not quickly being restored by the algorithm would spell doom for the entire Terraform ecosystem, given that UST and LUNA had no reserve of assets or any other backing.”

The SEC also claimed several of the tokens involved in the collapse of Terra were “crypto asset securities” falling under its regulatory purview. According to the SEC, these tokens included UST, LUNA and wrapped LUNA, as well as MIR tokens and mAssets developed under Terra’s Mirror Protocol.

“Defendants solicited investors for these crypto assets by touting their profit potential,” said the SEC. “Defendants repeatedly stated that the crypto assets would increase in value based on Terraform’s development, maintenance, and promotion of its blockchain, protocols, and the entire Terraform ecosystem.”

Terra’s business connections were also a target of the financial regulator, as the SEC reported Chai — a South Korean payment app linked to Terra at the time — “did not process or settle transactions on the Terraform blockchain.” Rather, Terra allegedly reported transactions “that had already happened in the real world using Korean Won” while claiming to the public that Chai transacted on the blockchain.

“In at least five instances between October 2021 and March 2022, there were one or more days when no transactions whatsoever were confirmed on the Terraform blockchain,” said the SEC. “Yet, there is no evidence that the Chai payment application was not functioning during those periods.”

The SEC has charged Do Kwon with fraud – and their charges include how he lied about the Terra-Chai relationship.

In October, I grilled him on faking the Chai transaction data as well.

Full interview here: https://t.co/xZyRGFBYnh pic.twitter.com/iQ4XT8q7X7

— Laura Shin (@laurashin) February 17, 2023

Kwon has continued to be active on his Twitter account following the collapse of Terra despite many crypto users blaming him for their loss of funds and the seeming “ripple event” leading to multiple bankruptcies amid the crypto crash of 2022. South Korean authorities reportedly sent two officials to Serbia in an attempt to track down the Terra co-founder. At the time of publication, Kwon’s location i unknown.