On the evening of Jan. 7, Anatoly Legkodymov, founder of the cryptocurrency exchange Bitzlato, was arrested in Miami. The following day,
On the evening of Jan. 7, Anatoly Legkodymov, founder of the cryptocurrency exchange Bitzlato, was arrested in Miami. The following day, the United States Department of Justice (DOJ) unsealed a complaint in federal court charging him with “conducting a money transmitting business that transported and transmitted illicit funds.” According to the DOJ, Bitzlato failed to meet U.S. regulatory safeguards, including Anti-Money Laundering requirements.
Less than a month earlier, former FTX CEO Samuel Bankman-Fried was arrested in the Bahamas. In a statement, U.S. Attorney General Merrick Garland said, “The Justice Department has filed charges alleging that Samuel Bankman-Fried perpetrated a range of offenses in a global scheme to deceive and defraud customers and lenders of FTX and Alameda, as well as a conspiracy to defraud the United States government.”
Garland stated, “The U.S. Department of Justice will aggressively investigate and prosecute alleged criminal wrongdoing in the financial system and violations of federal elections laws.” But is it really a new day? Will U.S. law enforcement be able to go after alleged crypto criminals at home and abroad?
According to Oberheiden PC attorney Alina Veneziano, who represents executive clients under criminal investigation against U.S. Securities and Exchange Commission subpoenas and DOJ fraud allegations, the answer is yes.
“Attempts to reign in this new, unrestrained industry were inevitable,” Veneziano tells Magazine. She believes that federal government agencies are increasing their investigative efforts toward crypto crime and will utilize all the tools at their disposal — subpoenas, summons and inter-governmental sharing of information.
“For example, only last year, the SEC increased the size of its Crypto Assets and Cyber Unit in an effort to investigate more fraudulent crypto asset schemes and better protect investors in the crypto markets.” Veneziano also believes the Internal Revenue Service will further enforce U.S. tax laws for cryptocurrencies.
Former federal prosecutor Grant Fondo also sees an increase in activity. Now a trial attorney and founder of the Digital Currency and Blockchain Technology practice at Goodwin, Fondo believes that this is the result of the current bear market, widespread acceptance of cryptocurrency and the government’s obligatory focus on crime.
“I think anytime there is a course correction and/or an economic event like a crypto winter, that can also increase activity […] When assets go down, people get hurt, and if people are mixing funds and things, it can create problems,” Fondo tells Magazine. Add to that the prolific global adoption of crypto, more people involved and the DOJ’s concern about any asset used for illicit activity, and Fondo sees beefed up enforcement as an inevitability.
In 2021, the DOJ created the National Cryptocurrency Enforcement Team (NCET) to handle investigation and prosecution of criminal misuse of cryptocurrency. NCET would combine the expertise of the agency’s Money Laundering and Asset Recovery Section and the Computer Crime and Intellectual Property Section. In 2022, the DOJ also created the Digital Asset Coordinator (DAC) Network. Under the leadership of NCET, designated federal prosecutors from U.S. attorney’s offices around the country would be assigned to the DAC Network. Each office’s DAC will be the digital asset subject matter expert and the first, investigative source of information.
What types of crimes аre they going after?
According to a DOJ report submitted to the presidential administration in September, the agency believes that cryptocurrency is the preferred payment method for ransomware and other digital extortion activities. As an example, the DOJ referred to a ransomware attack in May 2021 on the Colonial Pipeline. According to the report, the attack forced the company to shut down a gasoline and jet fuel pipeline for days. This resulted in fuel shortages around the country, including several airports. The attackers demanded and received a ransom paid in Bitcoin.
The report also says, “Cryptocurrency is used to raise funds for terrorist organizations and other nation state threat actors.” The DOJ states that its largest cryptocurrency seizure disrupted the funding campaigns of ISIS and other terrorist groups. The agency took down a fraudulent ISIS website operation that purported to sell N95 masks and other protective equipment during the height of the COVID-19 pandemic.
cointelegraph.com