united states

US Treasury sanctions Iran-based ransomware group and associated Bitcoin addresses

The Office of Foreign Asset Control sanctioned 7 Bitcoin addresses allegedly connected to Iranian nationals Ahmad Khatibi Aghada and Amir Hossein Nikaeed Ravar.

The United States Treasury Department’s Office of Foreign Asset Control has added 10 individuals, 2 entities, and several crypto addresses allegedly tied to an Iranian ransomware group to its list of Specially Designated Nationals, effectively making it illegal for U.S. persons and companies to engage with them.

In a Wednesday announcement, the U.S. Treasury said the individuals and companies in the ransomware group were affiliated with Iran’s Islamic Revolutionary Guard Corps, a branch of the country’s military. The group allegedly “conducted a varied range of malicious cyber-enabled activities,” including compromising the systems of a U.S.-based children’s hospital in June 2021 and targeting “U.S. and Middle Eastern defense, diplomatic, and government personnel.”

OFAC listed 7 Bitcoin (BTC) addresses allegedly connected to 2 of the Iranian nationals — Ahmad Khatibi Aghada and Amir Hossein Nikaeed Ravar — as part of its secondary sanctions. According to the Treasury Department, Khatibi has been associated with technology and computer services firm Afkar System — one of two entities sanctioned in the same announcement — since 2007. The governmental department alleged Nikaeed “leased and registered network infrastructure” to assist the ransomware group.

“Ransomware actors and other cybercriminals, regardless of their national origin or base of operations, have targeted businesses and critical infrastructure across the board — directly threatening the physical security and economy of the United States and other nations,” said Brian Nelson, undersecretary of the Treasury for Terrorism and Financial Intelligence. “We will continue to take coordination action with our global partners to combat and deter ransomware threats.”

The notice came as the Justice Department announced an indictment against Khatibi, Nikaeed and Mansour Ahmadi — also one of the individuals listed in OFAC’s sanctions — for allegedly “orchestrating a scheme to hack into the computer networks” of entities and individuals in the United States, including the attacks cited by the Treasury. According to the Justice Department, the Iranian ransomware group targeted a New Jersey-based accounting firm in February 2022, having Khatibi demand $50,000 in cryptocurrency in exchange for not selling the company’s data on the black market.

Related: Monero’s crypto of choice as ransomware ‘double extortion’ attacks increase 500%

On Aug. 8, OFAC added more than 40 cryptocurrency addresses connected to controversial mixer Tornado Cash to its list of Specially Designated Nationals, prompting criticism from many figures in and out of the space. Treasury clarified on Tuesday that U.S. persons and entities were not prohibited from sharing Tornado Cash’s code, but also required a special license to complete transactions initiated before the sanctions were imposed or make withdrawals.

US Treasury clarifies publishing Tornado Cash’s code does not violate sanctions

Residents would not be violating sanctions by visiting Tornado Cash’s website, copying the mixer’s open-source code, nor making the code available online or in print.

The United States Department of the Treasury said “interacting” with cryptocurrency mixer Tornado Cash’s open-source code, with certain provisions, would not be in violation of sanctions imposed by the Office of Foreign Assets Control, or OFAC.

In the guidance posted to its frequently asked questions pages on Tuesday, the Treasury Department clarified some concerns previously voiced by many U.S.-based crypto users regarding the controversial mixer Tornado Cash. According to the government department, U.S. residents would not be violating sanctions by copying the mixer’s code, nor making it available online or publishing it through another medium.

“U.S. persons would not be prohibited by U.S. sanctions regulations from visiting the Internet archives for the Tornado Cash historical website, nor would they be prohibited from visiting the Tornado Cash website if it again becomes active on the Internet,” said the Treasury Department.

The Treasury specified that users could generally interact with the Tornado Cash code provided it didn’t involve a prohibited transaction. Those who initiated transactions using the mixer prior to sanctions being imposed on Aug. 8 can apply for an OFAC license to complete the transaction or to make a withdrawal:

“OFAC would have a favorable licensing policy towards such applications, provided that the transaction did not involve other sanctionable conduct.”

The seeming uncertainty around the U.S. sanctions and how companies were expected to be in compliance came amid many platforms removing or restricting the activity of individuals associated with Tornado Cash. One of the mixer’s co-founders, Roman Semenov, reported on Aug. 8 that his account at developer platform GitHub had been suspended. He suggested at the time that his interactions with Tornado Cash’s code might have been part of the reason, questioning “is writing an open source code illegal now?”

Related: Tornado Cash ban could spell disaster for other privacy protocols — Manta co-founder

Others have attempted to use the U.S. legal system to push back against the Treasury Department’s actions. On Sept. 8, Coinbase announced it would be supporting a lawsuit brought by Tornado Cash users against the Treasury Department, alleging it illegally sanctioned the crypto mixer’s smart contract addresses.

Abra announces plans for US bank supporting digital assets

Abra announced its international venture and the U.S. bank would work with officials to ensure regulatory and legal compliance and planned to launch in 2022 and 2023, respectively.

Cryptocurrency trading platform Abra said it was “in the process of” establishing a United States-based state-chartered bank allowing clients to deposit digital assets.

In a Monday announcement, Abra said the bank, named Abra Bank, would be regulated to operate within the U.S. and give customers the ability to use digital assets in seemingly the same way as fiat at traditional banks. The company also planned to launch Abra International, a digital asset-focused business based outside the United States.

“The best way to become the default Web3 wallet and crypto bank for everyone is by embracing a global regulatory framework that provides for transparency, oversight, security, and agency,” said Abra.

The two ventures were expected to launch in 2023 and 2022, respectively. Abra announced both institutions would work with officials to ensure regulatory and legal compliance, providing “on-ramps, off-ramps, and transactional services” for cryptocurrencies. Founder and CEO Bill Barhydt added on Twitter that the U.S.-based bank planned to include services for nonfungible tokens and custody, launching no later than the first quarter of 2023.

Related: Propy partners with Abra to provide crypto-backed real estate loans

In September 2021, Abra raised $55 million in a funding round led by Amex Ventures and others to grow its product offerings in wealth management. The company reported it had more than $1.5 billion in assets under management at the time of publication.

Law Decoded, Sept. 5–12: The pressure is growing in the US

Last week regulators worried about the “de-integration” of financial sector and global energy consumption — all because of crypto.

While last week brought no troubles from the market side of the crypto industry — no operations frozen, no bankruptcies filed — the United States regulators made some explicitly negative statements. 

Recently appointed U.S. Federal Reserve Board vice chair for supervision Michael Barr pledged to “ensure that crypto activity inside banks is well regulated, based on the principle of the same risk, same activity, same regulation, regardless of the technology used for the activity.” In Barr’s opinion, people “may come to believe that they understand new products only to learn that they don’t.”

Michael Hsu, an acting comptroller of the currency at the annual conference of the Clearing House and Bank Policy Institute, mentioned stablecoins and the collapse of Terra (LUNA) — now renamed Terra Classic (LUNC) — as an example of crypto’s disruptive potential. He also noted that the relationship between banks and fintech companies is evolving rapidly and causing “de-integration” in the financial sector.

The White House Office of Science and Technology Policy has weighed in on the environmental and energy impact of crypto assets, focusing on their contribution to energy usage and greenhouse gas emissions. Among the broadly written recommendations are assessment and enforcement of energy reliability in light of crypto mining projects, setting energy efficiency standards, and research and monitoring.

Enforcers participated in the collective push as well. Gurbir Grewal, the enforcement director for the Securities and Exchange Commission, promised the financial regulator will continue to investigate and bring enforcement actions against crypto firms, despite the narrative of “picking winners and losers” and “stifling innovation.” He pushed back against criticism that the Securities and Exchange Commission “somehow unfairly targeted crypto” in its enforcement actions.

Zuckerberg is called to address the ‘breeding ground’ of crypto scams on Facebook

In the United States, a group of Democratic senators has reportedly asked Meta CEO Mark Zuckerberg to provide details on the social media giant’s policies regarding cryptocurrency fraud. Six senators — Elizabeth Warren and Sharrod Brown, among them — called on Zuckerberg to explain actions the company may take to detect crypto scams, coordinate with law enforcement and assist victims of fraud. The senators are concerned that “Meta provides a breeding ground for cryptocurrency fraud that causes significant harm to consumers.”

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‘False and misleading claims’ by Celsius and its CEO 

The ​​Vermont Department of Financial Regulation accused crypto lending platform Celsius Network and CEO Alex Mashinsky of misleading state regulators regarding the firm’s financial health and its compliance with securities laws. According to a filing with the United States Bankruptcy Court in the Southern District of New York, the company and its CEO “made false and misleading claims to investors,” which allegedly downplayed concerns about volatility in the crypto market and encouraged retail investors to leave their funds on the platform or make new investments. 

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Crypto assets are no longer niche, according to IMF

In a new report from the International Monetary Fund (IMF), experts noted that crypto assets have firmly shifted away from being “niche products” to assets used for speculative investments, hedges against weak currencies and payment instruments. Along with the recent failures of crypto issuers, exchanges and hedge funds, it has “added impetus to the push to regulate,” according to the IMF. However, regulators are still “struggling to acquire the talent and learn the skills to keep pace.” 

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Florida govt warns against auto warranty scammers asking crypto payments

Regardless of the methods used by scammers to contact potential victims, the FDACS newsletter highlighted five red flags that can help citizens identify and evade possible scams.

The Florida Department of Agriculture and Consumer Services (FDACS) issued a warning sharing insights into identifying robocall scam marketing auto warranties, which includes being asked to pay for the services via gift cards and cryptocurrencies. 

Consumer complaints against increasing robocall scams — wherein scammers use prerecorded calls to market and sell fraudulent services — led the Enforcement Bureau to order phone companies to avoid carrying robocall traffic.

Regardless of the methods used by scammers to contact potential victims, the FDACS newsletter highlighted five red flags that indicate scams.

Five red flags for identifying scams. Source: fdacs.gov

Stressing on some of the go-to payment methods often being recommended by the scammers, the announcement read:

“Payment Type: If you are asked to pay with a gift card or cryptocurrency, it’s a scam.”

In addition to asking Florida residents to refrain from making crypto payments, the FDACS reiterated that no government officials would ask for personal information, such as their Social Security or credit card numbers, adding that “Only scammers will require one of those kinds of payment, and once you send the money, you probably won’t get it back.”

Although the newsletter mentioned the impossibility of tracking down crypto funds from hackers, numerous corporations, including Velodrome and Curve Finance, have successfully recovered stolen funds — thanks to the immutable nature of blockchain technology.

Related: US lawmakers call on Mark Zuckerberg to address ‘breeding ground’ for crypto scams: Report

On Sept. 5, United States congressman Brad Sherman — a well-known crypto skeptic — acknowledged the rapid growth of the crypto ecosystem, claiming that banning cryptocurrencies was no longer an option.

Sherman stated that political donations and crypto lobbying make blanket banning cryptocurrencies impossible, adding that:

“We didn’t ban it at the beginning because we didn’t realize it was important, and we didn’t ban it now because there’s too much money and power behind it.”

Most lawmakers, including Sherman, favor implementing strict regulatory policies on crypto.

SEC to address growing crypto issuer filings with specialized offices

The upcoming Office of Crypto Assets will review crypto filings, allowing DRP to refocus on filing review issues related to crypto assets.

In light of the influx of filings from cryptocurrency issuers in the United States, the Securities and Exchange Commission (SEC) decided to set up two new offices this fall to provide specialized support to the seven offices currently responsible for reviewing issuer filings. 

Under the Division of Corporation Finance’s Disclosure Review Program (DRP), the SEC announced plans to add two offices — an Office of Crypto Assets and an Office of Industrial Applications and Services — purely focused on dealing with crypto assets and industrial applications and services, respectively.

Sharing insights into the move, Renee Jones, director of the Division of Corporation Finance, stated:

“The creation of these new offices will enable the DRP to enhance its focus in the areas of crypto assets, financial institutions, life sciences, and industrial applications and services and facilitate our ability to meet our mission.”

According to the announcement, the Office of Crypto Assets will take over DRP’s effort to review crypto filings, allowing the department to refocus its resources “to address the unique and evolving filing review issues related to crypto assets.”

The Office of Industrial Applications and Services, on the other hand, will be set up to take over non-pharma, non-biotech, and non-medicinal products from the Office of Life Sciences.

Related: Brazilian SEC seeks to change its role in cryptocurrency regulation

A recent SEC filing revealed MicroStrategy’s intent to sell class A stocks worth $500,000,000 and reinvest the capital “for general corporate purposes, including the acquisition of Bitcoin.”

Snippet from MicroStrategy’s SEC filing. Source: SEC.gov

MicroStrategy holds approximately 129,699 Bitcoin (BTC), which was amassed over several years at an aggregate purchase price of $3.977 billion. With crypto prices failing to recover, the company’s BTC reserves stand as a loss of over $1 billion, as shown by Bitcoin Treasuries data.

‘We’re not giving crypto a pass’ on enforcement action, says SEC’s Gurbir Grewal

The SEC enforcement director said the commission “will continue to bring actions regardless of what label is used or technology is involved,” including cryptocurrencies.

Gurbir Grewal, the enforcement director for the United States Securities and Exchange Commission, said the financial regulator will continue to investigate and bring enforcement actions against crypto firms, despite the narrative of “picking winners and losers” and “stifling innovation.”

In written remarks for a Friday program hosted by the Practising Law Institute, Grewal pushed back against criticism that the SEC “somehow unfairly targeted crypto” in its enforcement actions when compared with those against financial products or traditional markets. He also hinted that the SEC had a responsibility to many “non-White and lower-income investors” drawn to crypto projects, who may feel as though the financial system and its regulators “failed, or simply ignored, them.”

“It often seems critics are upset because we’re not giving crypto a pass from the application of well-established regulations and precedents,” said Grewal. “Were we not to investigate and bring appropriate cases just as we always have simply to duck criticism or difficult questions, we’d be acting with both fear and favor.”

The SEC enforcement director added:

“Non-enforcement of the most fundamental rules underlying our regulatory structure would be a betrayal of trust and not an option for us […] We will continue to bring actions regardless of what label is used or technology is involved (or not). Failure to do so would constitute an abdication of our responsibilities.”

Officials appointed Grewal as the SEC’s enforcement chief in July. Representative Brad Sherman later criticized the regulatory body, saying before the House Financial Services Committee that Grewal needed to show “fortitude and courage” by going after major crypto exchanges in his role as enforcement director and not “small fish.” The SEC subsequently filed a complaint against a former Coinbase employee, labeling nine tokens as “crypto asset securities” in a seeming effort to regulate digital assets through enforcement actions.

Related: Cleaning up crypto: How much enforcement is too much?

SEC chair Gary Gensler spoke at the same Practising Law Institute event on Thursday, suggesting that he welcomed legislation aimed at expanding the authority of the Commodity Futures Trading Commission, provided it didn’t “inadvertently undermine securities laws.”

Republican lawmakers call for answers on digital dollar from Fed vice chair

The House members asked for clarification on whether the Fed may be considering an “intermediated model” for a digital dollar that could require authorization from Congress.

Members of the House Committee on Financial Services have called for Federal Reserve vice chair Lael Brainard to clarify her position on a central bank digital currency ahead of deadlines set by United States President Joe Biden’s executive order on digital assets. 

In a Wednesday letter addressed to Brainard, 24 Republican lawmakers including ranking member Patrick McHenry requested the Fed vice chair provide answers as to whether the central bank sought to “curtail the use of digital assets and other private sector innovative payment methods” by releasing a digital dollar. They also inquired as to what Congress’ role might be in passing legislation in support of a U.S. central bank digital currency, or CBDC.

Brainard addressed the committee in May on the benefits and risks of a digital dollar, suggesting at the time that placing limits on CBDC holdings and not offering interest on accounts with digital dollars could help preserve the role of credit unions and maintain some aspects of traditional banking. The Republican House members asked for clarification on whether the Fed may be considering an “intermediated model” for a digital dollar that could require “direct authorization from Congress” to establish, as well as what role the White House could play:

“Please describe what ‘strong support’ from the executive branch looks like? Is it in the form of a letter or Executive Order?”

Related: CBDCs require governments to put a special focus on security

Lawmakers and regulators from both sides of the aisle have expressed concerns about the Fed introducing a CBDC. Fed chair Jerome Powell previously suggested there was no rush in the U.S. to release a digital dollar despite countries like China moving forward with their own. Connecticut Representative Jim Himes also released a white paper in June proposing Congress “begin the process of considering and ultimately passing authorizing legislation for the issuance of a U.S. CBDC.”

SEC chair suggests openness to crypto bills that don’t ‘inadvertently undermine securities laws’

“I look forward to working with crypto projects and intermediaries looking to come into compliance with the laws,” said Gary Gensler.

United States Securities and Exchange Commission chair Gary Gensler supports legislation that gives the Commodity Futures Trading Commission greater authority over crypto — seemingly if it doesn’t step on the SEC’s toes.

In written remarks for a Thursday program hosted by the Practising Law Institute, Gensler encouraged intermediaries in the crypto space as well as crypto security token projects and potentially stablecoins to register with the SEC, reiterating his “come in and talk to us” approach. According to the SEC chair, the “vast majority” of the roughly 10,000 tokens on the cryptocurrency market were securities subject to the agency’s regulatory purview and likely needed legislation to ensure investor protection.

“I look forward to working with crypto projects and intermediaries looking to come into compliance with the laws,” said Gensler. “I also look forward to working with Congress on various legislative initiatives while maintaining the robust authorities we currently have. Let’s ensure that we don’t inadvertently undermine securities laws underlying $100 trillion capital markets.”

Gensler suggested that crypto intermediaries may need to register each of their functions with both the SEC and CFTC, depending on whether services were offered as an exchange, broker-dealer or a custodian:

“The commingling of the various functions within crypto intermediaries creates inherent conflicts of interest and risks for investors […] Disaggregating their functions into separate legal entities [could] mitigate conflicts of interest and enhance investor protection.”

Related: Gensler appeals for ‘one rule book’ in negotiations with CFTC over crypto regulation

Members of Congress are currently pursuing different legislative paths aimed at regulating the crypto industry. In August, leading members of the Senate Agriculture Committee introduced the Digital Commodities Consumer Protection Act, which if passed would likely expand the CFTC’s authority to regulate Bitcoin (BTC) and Ether (ETH). Senators Cynthia Lummis and Kirsten Gillibrand also in June proposed a bill aimed at clarifying the role both the SEC and CFTC have with crypto projects.

Cato Institute CEO says his daughter married the ‘Bitcoin Sign Guy’ from 2017 hearing

Jerome Powell said that he also had “close family members” who argued that crypto was still in the development phase, suggesting Bitcoin proponents may be close to home.

Peter Goettler, the CEO of United States-based think tank Cato Institute, has provided an update to the crypto community on the man who photobombed former Federal Reserve Chair Janet Yellen during a 2017 congressional hearing — and he’s in the family.

In a Monday online conference hosted by the Cato Institute on the state of U.S. monetary policy, Goettler told Fed Chair Jerome Powell that the “Bitcoin Sign Guy” became his son-in-law in 2022. The man, whose image while asking viewers to buy Bitcoin (BTC) as Yellen was testifying on the state of the U.S. economy went viral in 2017, was later identified to be Christian Langalis.

“The gentleman who photobombed Janet Yellen five years ago by holding up a “Buy Bitcoin” sign behind her during her Humphrey-Hawkins Testimony earlier this year became my son-in-law,” said Goettler, prompting chuckles from Powell and himself.

In response to Goettler’s questioning on whether “regulators might ultimately strangle crypto,” Powell added that he also had “close family members” who argued that the technology was still in the development phase, suggesting Bitcoin proponents may be close to home. The Fed chair reiterated his views that unbacked crypto was largely a speculative asset and seemingly did not have support from the public for payments.

Langalis, who was 22 years old when he held up the Bitcoin sign at the congressional hearing, raised thousands of dollars in the aftermath of the image going viral. Five years later, many in the crypto space still reference the “Buy Bitcoin” act for parody and to illustrate how the landscape has changed. The BTC price was in the $2,000s when Langalis appeared on camera, but has since risen to $19,218 at the time of publication.

Related: Rising global adoption positions crypto perfectly for use in retail

According to one wedding registry through Zola, Abigail Goettler married Langalis on April 30. It does not appear that the couple requested Bitcoin as a gift.