WWW.BLOCKCAST.CCFTX co-founder Gary Wang and former Alameda Research CEO Caroline Ellison have both pleaded guilty to several charges related to their role in the eventual collapse of cryptocurrency exchange FTX. The pair are reportedly cooperating with authorities as an investigation into the exchange’s implosion picks pace, US Attorney Damian Williams revealed late Wednesday. Are you […]
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US Department of Justice charged three computer programmers who apparently belong to the infamous North Korea-affiliated hacker group known as Lazarus for attempting to steal and extort over $1.3 billion in fiat and cryptocurrency from financial institutions. The charges also accused the trio of deploying “multiple malicious cryptocurrency applications” and “fraudulently market a blockchain platform.”
Federal Bureau of Investigation (FBI), among other agencies, investigated the cryptocurrencies stolen by the Lazarus Group. At the same time, the Department of Justice had filed a complaint to forfeit 280 crypto-accounts last year, which were connected to the laundering of approximately $28.7 million worth of crypto. Investigators were able to keep up with the Lazarus Group, despite the fact that they tried to cover their tracks by attempting to liquidate the stolen funds via “chain hopping.”
Federal prosecutors claimed that the accused targeted hundreds of crypto firms and stole tens of millions of dollars’ worth of crypto. This included $75 million from a Slovenian crypto company in December 2017, $24.9 million from an Indonesian company in September 2018, and $11.8 million from a financial services company in New York in August 2020.
The criminal schemes also include a cyberattack on Sony Pictures Entertainment in November 2014 “in retaliation” for the film “The Interview,” which depicted a fictional assassination of the North Korean leader.
The alleged perpetrators of the crimes, Jon Chang, Kim Il, and Park Jin Hyo, who are from North Korea, could face a prison sentence between 5 and 30 years if convicted. At the same time, DoJ charged one Ghaleb Alaumary, from Ontario, Canada, for money laundering for the North Korean conspiracy. Alaumary agreed to plead guilty to the charge, which carries a maximum prison sentence of 20 years.
The U.S. Department of Justice sees a victory in a major fintech acquisition case that could set the stage for a host of antitrust enforcements.
On Jan. 12, the DoJ announced that Visa and Plaid had called it quits on their planned merger. Originally announced almost exactly a year ago, Visa was planning to pay $5.3 billion for the upstart tech firm.
Plaid’s ubiquitous software is designed to connect disparate systems of financial data securely. In its November complaint, the DoJ alleged that Visa was using the acquisition to snuff out competition. Today, Makan Delrahim, of the DoJ’s antitrust division, said:
“Visa — which has immense power in online debit in the United States — has extracted billions of dollars from those transactions. Now that Visa has abandoned its anticompetitive merger, Plaid and other future fintech innovators are free to develop potential alternatives to Visa’s online debit services. With more competition, consumers can expect lower prices and better services.”
Tech in general has been at the center of turbulent debates over antitrust violations. Shortly before its case against Visa, the DoJ filed an antitrust suit against Google. Meanwhile, the Federal Trade Commission is suing Facebook.
In both cases, the governing bodies argue that the platforms used their access to competitor data and ability to direct buyer traffic to corner the market. But U.S. antitrust mostly derives from the 1890 Sherman Act, which hardly anticipated data becoming the new oil, when oil had not even become the new oil. Meanwhile, for the past two decades, major tech platforms have been the wunderkinder of the American economy, leaving most public officials hesitant to slow their roll.
That special status has come under fire of late, especially since 2016. What we’re witnessing now is a major rearmament of the U.S. antitrust apparatus for a new age.
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Author: Refer to Source Cointelegraph By Kollen Post
United States Department of Justice (DoJ) and the Southern District of New York (SDNY) extradited a member of an alleged AirBit Club ponzi scheme for “internationally coordinated fraud and money laundering ring” and being allegedly involved in defrauding individuals “through investments in AirBit Club.”
In a release published on Monday, 30 November DoJ identified one Gutemberg Dos Santos, a citizen of Brazil and the United States as one of six operators of AirBit Club. Dos Santos, who was arrested on 18 August 2020, in Panama City faced trial before the SDNY and now remains in US custody. Acting United States Attorney Audrey Strauss spoke on the matter and said:
As alleged, Gutemberg Dos Santos played a key role in an international investment scam that promised extraordinary rates of return on phantom investments in cryptocurrencies, defrauding victims of tens of millions of dollars.
DoJ alleged Dos Santos and another five operators hosted lavish events aimed at convincing victims to purchase AirBit Club memberships that promised guaranteed returns. According to the DoJ, after a victim invested, a Promoter provided them with access to an online AirBit Club portal to view the purported returns on memberships. The DoJ also alleged that while victims saw “profits” accumulate on their Online Portal, those representations were false:
No Bitcoin mining or trading on behalf of Victims in fact took place. Instead, Rodriguez, DOS SANTOS [and others] enriched themselves, and spent Victim money on cars, jewelry, and luxury homes, and financed more extravagant expos to recruit more victims.
The AirBit Club’s still-active website indicated some of the aforementioned events with the most recent taking place in Sao Paulo, Brazil, last year. In addition, among the six indicted was Scott Hughes, a California attorney who, the DoJ alleged, helped to “remove negative information about AirBit Club and Vizinova from the internet.”
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Author: Refer to Source Alisha Roy
Every Friday, Law Decoded delivers analysis on the week’s critical stories in the realms of policy, regulation and law.
Are you over the election? I’m over the election. But you can bet that as soon as I finish writing this week’s Law Decoded, I will compulsively check up on what’s happening in Georgia and Pennsylvania. And it seems that I’m not alone.
Despite the election highjacking the entire news cycle, crypto has not been completely left in the corner. Likely most notable, Bitcoin is hitting highs it hasn’t seen since January 2018. Given that BTC price typically reacts positively to fears of political instability, that’s not entirely surprising.
More specific to regulators’ interactions with crypto are continued enforcement measures. Taking the lead on this internationally has been the United States Department of Justice. Law Decoded has talked extensively about the DoJ over the past month, and for good reason. They’ve taken huge steps to get out in front of what they perceive as illegal crypto usage ever since releasing a framework for enforcement in virtual currencies at the beginning of October.
While we may be looking at some legal tantrums and recounts, Biden looks to have won the White House. The DoJ is run by the Attorney General — currently Trump appointee Bill Barr. While the regulator is hardly going to back-pedal its new capacities to monitor crypto, Barr has been at the forefront of that fight, as well as other anti-tech measures to ban end-to-end encryption and Section 230. The attitudes of any Biden nominee who will replace Barr will, consequently, be critical.
The Department of Justice filed to seize a massive stockpile of tokens that had originated with the Silk Road, following an investigation by the IRS and Chainalysis.
The hoard of cryptocurrencies are worth a total of $1 billion and were in the control of an unnamed hacker, who the DoJ’s filing enigmatically refers to as “Individual X.” Mr. X had apparently signed those tokens over to the DoJ as of Nov. 3, which was the same day that they moved.
Per the complaint, back in 2013 Individual X stole at least 69,471 Bitcoin from Ross Ulbricht, the founder of Silk Road currently serving a double-life sentence. Since then, apart from a 101 BTC transfer to defunct exchange BTC-e, those coins have mostly sat untouched, going through a series of splits and skyrocketing in value.
Some speculation suggests that the hacker in question just made a huge deal to stay out of jail. The complaint specifies that Ross Ulbricht knew their online identity, which may mean that Ulbricht turned over their info in order to get some leniency for his own sentence. $1 billion can probably persuade the justice system to get mighty merciful.
Last week, Cointelegraph reported on news that the DoJ was looking into Visa’s $5.3 billion acquisition of Plaid, initially announced back in January. This week, the agency filed a formal complaint, kicking off an antitrust lawsuit that, if successful, would cancel that acquisition.
Antitrust considerations have picked up in a big way lately over concerns that data usage has constituted a new means of illegal market domination, one that the Sherman Act of 1890 could hardly have prepared for. Major tech firms are having to answer questions about how they prioritize content and share consumer information.
Plaid is a widespread mediator, enabling interoperation between digital systems that handle financial information — the sort of personal knowledge that people are sort of touchy about keeping private. The DoJ alleges that Visa is trying to gobble up a potential competitor. But, independently, Plaid is facing a rash of class action lawsuits over its own misuse of client data, which is particularly egregious because most people sending their data through Plaid never even know they’re doing so. Which may be part of what Visa had its eyes on.
New legislation on the Cayman Islands has begun to tighten anti-money laundering controls in the country’s crypto market, and especially heighten registration of local crypto exchanges.
The Cayman Islands’ legislative body initially began considering a comprehensive crypto overhaul back in April, but the first provisions are just now rolling out.
Like many other British Overseas Territories and Crown dependencies, the Cayman Islands has a long history as a hotbed of tax evasion, offshoring and money laundering. It looks to be trying to rehabilitate that image, at least somewhat. The European Union only took the country off their blacklist in October, though it has yet to be added to the white list. The U.S. still identifies the jurisdiction as “higher risk.”
The issue is, most of these offshore havens make a lot of their revenues by hosting financial services that the U.K. proper, EU or U.S. wouldn’t allow. So how much motivation with the Cayman Islands actually have to clean up their act?
Chris Giancarlo and Daniel Gorfine of the Digital Dollar Project opine on a cashless future for MarketWatch.
The Volkov Law Group finishes their analysis of the DoJ’s crypto enforcement framework from last month.
Brookings’ Techstream runs down misinformation seen during the week of the presidential election.
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Author: Refer to Source Cointelegraph By Kollen Post
US Department of Justice announced on 5 November that it has filed a complaint to seize $1 billion worth of cryptocurrencies, in connection with the underground online marketplace Silk Road. In the document, DoJ revealed the seized funds included over 69,370 Bitcoin (BTC) and nearly equivalent amounts of Bitcoin Gold (BTG), BSV, and Bitcoin Cash (BCH).
US DoJ asked to seize these cryptocurrencies which were said to be obtained from an unnamed hacker referred to as individual X in the document. According to the DoJ, the unnamed individual tried to hack Silk Road and steal the crypto from it. However, this person has now agreed to hand over the funds as of Monday. The document went on to reveal the wallet address pertaining to the hacker which read: 1HQ3Go3ggs8pFnXuHVHRytPCq5fGG8Hbh.
Elaborating on the hacker’s involvement, a part of the DoJ’s document stated:
Individual X, whose identity is known to the government […] According to an investigation conducted by the Criminal Investigation Division of the Internal Revenue Service and the U.S. Attorney’s Office for the Northern District of California, Individual X…moved the cryptocurrency from Silk Road.
According to the investigation, Individual X was able to hack into Silk Road and gain unauthorized and illegal access to Silk Road and thereby steal the illicit cryptocurrency from Silk Road and move it into wallets that
Since 2014, US Marshals Service has auctioned about 175,000 bitcoins confiscated from Silk Road, whose creator Ross Ulbricht is serving a double life imprisonment sentence after being found guilty of money laundering, computer hacking, and conspiracy to traffic narcotics.
It remains unclear whether the government will now auction the existing seized funds. However, this development does add clarity to the earlier report that found that $1 billion worth of bitcoin, believed to have originated from Silk Road, moving out of a bitcoin wallet connected to the aforementioned address.
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Author: Refer to Source Alisha Roy
The United States Attorney General’s Cyber-Digital Task Force recently unveiled the result of its months-long effort to evaluate emerging cryptocurrency-related threats and articulate law enforcement strategies for countering them. The resulting guidance leaves the reader with an impression that its authors have a sound understanding of how the focal asset class works as well as a certain fixation on the ways it can be misused, as some observers contend.
In the highly charged atmosphere of the final weeks before the presidential election, with high-profile enforcement actions against the people behind crypto derivatives exchange BitMEX and the U.S. government’s sweeping anti-monopoly push against Silicon Valley looming in the background, the Cryptocurrency Enforcement Framework seems like part of some larger political and regulatory dynamic. How does the release of the document fit into the grand scheme of things, and what message is it meant to convey?
One reason why even a modest uptick in enforcement activity in the digital asset space can feel like a full-blown clampdown is that U.S. government agencies have so far been rather selective when deciding whether or not to go after unscrupulous crypto actors.
The lack of specific regulations, as well as the infamous confusion as to which regulatory body is taking point, has left a general strategy of stepping in only to prosecute the most egregious cases, as opposed to blanket enforcement. The DoJ’s introduction of the Crypto Enforcement Framework could suggest that the tide is turning.
Andrew Hinkes, co-founder of consultancy Athena Blockchain and an attorney at law firm Carlton Fields, sees the report as mainly a recap of law enforcement efforts in the blockchain space over the past six years, however, one that indicates a clear upward trend:
“Different federal agencies mentioned in the report, such as the SEC, CFTC, and FinCEN, have all been steadily increasing their regulatory and enforcement activity in the cryptocurrency space as that space has grown. Much of the report collects and describes the different agencies’ actions over the past few years.”
Barry Boss, co-chair of the commercial litigation department at law firm Cozen O’Connor, noted that the DoJ has so far been treading “fairly lightly” in terms of enforcing everyday regulatory requirements, perhaps taking its time to understand the market as it develops.
It seems unlikely that the release of the present enforcement guidelines has been timed to any particular developments in the cryptocurrency market, as the comprehensive 83-page report has been many months in the making.
Speaking about the general political moment, Arlo Devlin-Brown, partner at Covington & Burling in white-collar law and investigations, observed that cryptocurrency enforcement is far from being among the hot-button issues of the 2020 presidential election:
“I suspect that this task force, like other DOJ task forces, is seeking to complete outstanding reports prior to a potential change of administration in January. That said, I don’t think this issue is particularly relevant to electoral politics, and I don’t foresee significant changes in cryptocurrency enforcement priorities at the DOJ should Biden win the Presidential election.”
The guidance document details the DoJ’s priorities and strategies with regard to the maturing cryptocurrency industry, aiming to inform the law enforcement community, market participants and the general public both at home and abroad. Apart from this, parts of the report can be read as a signal of what certain subsets of crypto stakeholders can expect for the future.
Boss told Cointelegraph that the new guidelines hint at the DoJ’s willingness to ramp up enforcement. In his opinion, the report serves to “put the cryptocurrency community on notice.” This time, it won’t be just for the most brazen criminals:
“There have been several studies that have shown that significant volumes of terrorist financing, money laundering, and other illicit proceeds are funneled through major, established exchanges. DOJ made clear in its framework that it is aware of this problem and that enforcement of federal criminal laws, including KYC and AML requirements, is part of its framework for addressing it.”
Hinkes of Athena Blockchain called the report a message “to persuadable participants in the cryptocurrency marketplace and industry” to remind them that “they should stay on the right side of the regulatory line because the federal government is committing substantial resources to combating criminal activity associated with, facilitated by, or targeted against cryptocurrencies.”
Generally, most experts who spoke to Cointelegraph on this matter agree that the framework’s publication illustrates the government’s resolve to significantly boost its enforcement efforts on the digital assets front. While this could spell more regulatory certainty and safer adoption for the crypto industry at large, certain sectors such as blockchain analytics, which specializes in transaction tracing and works closely with law enforcement, will be benefited directly.
Amanda Wick, chief of legal affairs at blockchain analytics firm Chainalysis, spoke enthusiastically about the U.S. government’s commitment to lowering financial risks for crypto users. She reiterated that blockchain intelligence has already won law enforcement some important battles:
“With the help of blockchain analysis, DOJ has successfully investigated and prosecuted cases involving cryptocurrency, including charges of money laundering, drug trafficking, fraud, and more.”
Wick is convinced that the urgency of crypto-related threats will prompt authorities to allocate additional resources in order to address them.
Above all else, the Department of Justice has laid out a comprehensive vision of response strategies for noncompliance and general illicit crypto-asset activity, notes Liat Shetret, senior advisor for crypto policy and regulation at crypto analytics and compliance firm Elliptic. He added:
“The key message boils down to the ‘how.’ How will the DoJ accomplish this? In that regard the plan is specific and clear-cut.”
Shetret then laid out the five prongs of the new law enforcement strategy: coordinating parallel enforcement actions and interagency partnerships, promoting law enforcement awareness and expertise, cooperation between federal and state authorities, increased international cooperation, and private-sector education and outreach.
Some experts also think that the DoJ’s framework can inform lawmakers’ thinking on how to go about certain novel challenges.
Dean Steinbeck, chief operating officer at blockchain company Horizen Labs, commented to Cointelegraph:
“The report will clearly be used by US policy makers when enacting laws involving cryptocurrency. In particular, the report spends a lot of time examining privacy coins, or what it calls ‘Anonymity Enhanced Cryptocurrencies’ or ‘AECs.’ I wouldn’t be surprised to see Congress quoting this report in laws aimed at curtailing the use of AECs.”
Clarifying how exactly existing laws should be applied in practice, enforcement guidance normally follows legislation, but it seems that in the bizarre world of crypto, the opposite can be the case as well. At any rate, it would be a good idea for privacy coins and the crypto industry at large to start bracing themselves for both more pointed legislation and tighter enforcement in the near future.
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Author: Refer to Source Cointelegraph By Kirill Bryanov
The U.S. Department of Justice has released an international statement claiming that end-to-end encryption “poses significant challenges to public safety,” including sexually exploited children.
In an Oct. 11 statement from the DoJ, the agency called on technology companies to work with the government to find a solution for strong data encryption with the means to allow the investigation of illegal activity and content. The department stated end-to-end encryption that hindered law enforcement from accessing certain content creates “severe risks to public safety.”
The statement was signed by the DoJ, the Home Department of the United Kingdom, the Australian Minister for Home Affairs, India, Japan, a New Zealand Member of Parliament and the Minister of Public Safety and Emergency Preparedness of Canada.
In particular, the DoJ stated such encryption — in which only the senders and receivers can access the data being sent — undermined law enforcement from “investigating serious crimes” and “protecting national security.” In addition, a tech company’s ability to identify and respond to child sexual exploitation and abuse, violent crime, and terrorist propaganda may be compromised, claimed the department.
Citing a 2019 report from the National Center for Missing and Exploited Children (NCMEC), the government agency implied end-to-end encryption needed to be implemented with a solution to safeguard children, or it would undermine the current system of reporting such exploitation.
“In 2018, Facebook Messenger was responsible for nearly 12 million of the 18.4 million worldwide reports of CSAM [child sexual abuse material to the NCMEC],” the DoJ said, citing a 2019 statement from the WePROTECT Global Alliance. “These reports risk disappearing if end-to-end encryption is implemented by default, since current tools used to detect CSAM do not work in end-to-end encrypted environments.”
Elected officials in the United States have already acted to seek a legislative solution to investigating the illicit activities to which the DoJ referred.
In June, three Republican senators put forth a bill that would outlaw end-to-end encryption for technology companies, requiring device manufacturers and service providers to assist law enforcement by providing access to encrypted data. The bill, named The Lawful Access to Encrypted Data Act, is currently under review in the Committee on the Judiciary. There is also the EARN IT Act, a proposed bill that would require digital messages to first pass through government-approved scanning software in order to monitor for malicious criminal activity.
Proponents of both bills have claimed their purpose would include protecting children from sexual abuse. However, many privacy advocates have heavily criticized the bills’ sponsors for what they perceive as the government encroaching on personal freedoms.
Though its statement focused on end-to-end encryption, the DoJ stated it would extend its efforts to “device encryption, custom encrypted applications and encryption across integrated platforms.” The government agency claimed it would hold a “respect for privacy” at the forefront of any legal framework.
“We challenge the assertion that public safety cannot be protected without compromising privacy or cyber security,” the DoJ stated.
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Author: Refer to Source Cointelegraph By Turner Wright
The Cryptocurrency Enforcement Framework issued by the U.S. Department of Justice stipulates a number of cases where it will exert its authority over foreign actors: “where virtual asset transactions touch financial, data storage, or other computer systems within the United States”, if they use cryptocurrency to import illegal products into the U.S. and if they “provide illicit services to defraud or steal from U.S. residents”. This also applies to foreign entities that engage in money transmission in the country even if they are incorporated abroad.
Additionally, the Department claims to have the authority to prosecute any foreign actors who use cryptocurrency to support terrorist activities:
“Finally, it bears emphasizing that if conduct involving virtual currency were to violate the U.S. statutes regarding material support of terrorism, the U.S. government could appropriately assert jurisdiction over such offenses anywhere in the world, consistent with due process, under the principle of protective jurisdiction.”
The report also cites Zcash, Monero, and DASH usage as “indicative of possible criminal behavior.”
As a motivation for the framework, the report purports that “rogue states’ like Russia, Iran and North Korea may use cryptocurrency to fund cyberattacks intended to undermine the U.S. national security. In addition, it alleges that “certain terrorist groups have solicited cryptocurrency donations running into the millions of dollars via online social media campaigns.”
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Author: Refer to Source Cointelegraph By Michael Kapilkov
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