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Crypto Quandary: DOJ’s Vigorous Pursuit of Bankman-Fried

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In a significant development in the crypto sphere, the U.S. Department of Justice (DOJ) has taken a firm stance on the absence of a clear legal framework for cryptocurrencies. Bankman-Fried, the founder of FTX, faces fraud charges related to allegations of misappropriating customer funds from the leading cryptocurrency exchange.

The trial, which commenced on Tuesday, has seen Bankman-Fried pleading not guilty to the charges against him. However, the legal battle is far from over, as lawyers from both sides continue to debate the admissibility of evidence that the jury will consider. Of particular interest is the relevance of the regulatory status of crypto exchanges in this case.

The DOJ, in a filing published early Wednesday morning, asserted that the lack of a specific legal framework for crypto does not preclude pressing fraud charges against Bankman-Fried. They argue that existing criminal laws are sufficient to address misappropriation of customer assets, emphasizing that “the absence of regulation is not relevant to whether money was entrusted to the defendant’s care by his victims.”

Furthermore, the prosecutors dismissed Bankman-Fried’s claims that the practice of pooling and reallocating customer funds was common in the crypto industry at the time. They contend that this argument holds only if he believed such actions were legal.

Bankman-Fried’s defense strategy also includes highlighting his philanthropy and charity work. However, the DOJ has indicated that this can be presented to the jury only after court approval, ensuring that it doesn’t create a biased portrayal of his character.

Government’s Crypto Donations Clarification

This case highlights the ongoing struggle within the digital asset industry due to the absence of comprehensive regulatory guidelines. With Congress yet to formulate specific regulations, federal regulators have likened crypto to conventional securities trading, a stance that has faced opposition from major players in the industry.

Additionally, the government clarified its position on allegations of Bankman-Fried’s involvement in illegitimate donations to political candidates. While not charging him for this, the government aims to establish that these actions were inconsistent with his representations to customers and that he took steps to conceal the disposition of these funds.

As the trial unfolds, it serves as a reminder of the urgent need for a clear and comprehensive legal framework for cryptocurrencies, which remains a contentious issue in the rapidly evolving world of digital finance.

Over an Alleged $1M NFT Scheme, the Department of Justice Sued Two 20-Year-Olds

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For their roles in a $1.1 million NFT scam, the Department of Justice charged two 20-year-olds with fraud and money laundering. It is one of the first steps taken by federal authorities to rein in the burgeoning asset class.

The project was dubbed “Frosties” by Ethan Nguyen and Andrew Llacuna, both of Los Angeles, and promised investors future giveaways, more tokens, and a metaverse game based on the brand.

Prosecutors claim the duo engaged in a “rug pull” in January, in which they advertised Frosties on social media and then vanished with the money they earned.

“Wherever there’s money to be earned, fraudsters will find a way to get it,” said Damian Williams, a US attorney in New York.

Frosties- the cute NFT scam

Ethan Nguyen and Andre Llacuna are accused of making $1.1 million selling non-fungible tokens (or NFTs) based on the cartoon character “Frosties.”

They shut down the initiative and shifted its cash to a variety of different crypto wallets after selling the NFTs, leaving Frosties owners without the promised benefits.

The Internal Revenue Service, Criminal Investigation (IRS-CI), and Homeland Security Investigations (HSI), according to the criminal complaint, began investigating Frosties in January, immediately after receiving complaints about the fraud.

Frosties was a popular initiative, with 8,888 NFTs (equal to $130 in Ethereum) selling out within an hour of its public introduction.

It was quickly abandoned by the creators. When buyers sought to resell their NFTs, they only received a few bucks, and they gave up all prospects of seeing future promised benefits, such as 3D copies of their avatars and a Frosties video game.

(However, some con artists in the community sought to resuscitate the Frosties as a different NFT lineup.) Frosties’ two perpetrators have since been apprehended in Los Angeles, California.

“Hello, Garry. This project is coming to a close, which I realize is startling. I had no intention of continuing the project, and I have no plans for the future. As a result, the project is drawing to a close. You were a fantastic moderator with a big heart” – An alleged message from Ethan Nguyen to a Frosties community moderator.

FBI plans to form a new team dedicated to cryptocurrency

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According to the Department of Justice, the FBI is developing a new squad dedicated to cryptocurrencies (DOJ). The Department of Justice stated Thursday that the new squad would collaborate closely with the National Cryptocurrency Enforcement Team.

The National Cryptocurrency Enforcement Team’s first director will be prosecutor Eun Young Choi, who has a history in cyber-related offenses.

“The department has been at the forefront of investigating and prosecuting crimes involving digital currencies since their inception,” said Director Choi. “The NCET will play a pivotal role in ensuring that as the technology surrounding digital assets grows and evolves, the department in turn accelerates and expands its efforts to combat their illicit abuse by criminals of all kinds. I am excited to lead the NCET’s incredible and talented team of attorneys and to get to work on this critical priority for the department.

Choi will resume her full-time duties on Thursday.

FBI’s decision to control rising crypto crimes

Assistant Attorney General Kenneth A. Polite Jr. of the Justice Department’s Criminal Division stated that criminals had increased their illicit use with the rapid innovation of digital assets and distributed ledger technologies. They use them to fund cyberattacks, ransomware, and extortion operations, as well as to trade in drugs, hacking tools, and illicit items online, perpetrate thefts and frauds, and launder the proceeds of their crimes, according to him.

He mentioned that NCET would be the focal point for the department’s efforts to combat the rise in technology-related crime.

The enforcement team will concentrate on the problems that arise from the illicit usage of cryptocurrencies and digital assets. The group will also include prosecutors with expertise in cryptocurrencies, cybercrime, money laundering, and forfeiture from throughout the agency.

The squad will collaborate with others throughout the department, along with the FBI’s new cryptocurrency task force.

The FBI’s new unit will be comprised of crypto professionals who will aid the bureau with analysis, support, and training. According to the department, the team will also reinvent its cryptocurrency technologies to remain ahead of new threats.

With the growing popularity of crypto, crimes are also on the rise. A dedicated team to investigate cryptocurrency crimes ensure that the culprits will be caught on time and also it will help to reduce the crimes from happening.

Bitcoin is once again in the spotlight of the US government as a $1 billion crypto gets seized from the “Silk Road”

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Bitcoin has been associated with multiple underground networks since its inception and has become the pariah of law enforcement agencies. The Silk Road, an illegal marketplace dealing with multiple substances, is one of the biggest scandals associated with Bitcoin.

Since the arrest of Silk Road founder Ross Ulbricht in 2013, the dealings on the network has been very low-key. All that changed on November 5, when the United States Justice Department seized over $1 billion worth of Bitcoin via Silk Road connections. 

According to the latest reports, the Justice Department was filing documents to seek forfeiture of the seized Bitcoin. The Department revealed that the capital was found in the possession of an unnamed hacker who had stolen the cryptocurrency from a dark web address. This Bitcoin capture came at a time when the world’s largest cryptocurrency was heading towards its all-time high at a rapid pace.

This was not the first time that the government has seized large quantities of cryptocurrencies as the database shows a repertoire of different cases. In earlier scenarios, the government had auctioned off all the cryptocurrencies involved in seizures. Officials from the Department of Justice stated that they would first need to prove in court that the Bitcoin worth $1 billion is subject to forfeiture.

The Justice Department made the case transparent via a statement that addressed the 70,000 stolen Bitcoin. The other cryptocurrencies involved in the transfer included Bitcoin Gold, Bitcoin SV and Bitcoin Cash. The proceedings involved US Attorney David Anderson who gave his two cents on the situation. In his words:

“Silk Road was the most notorious online criminal marketplace of its day. The successful prosecution of Silk Road’s founder in 2015 left open a billion-dollar question. Where did the money go? Today’s forfeiture complaint answers this open question at least in part. $1 billion of these criminal proceeds are now in the United States’ possession.”

As of now, the public only knows the hacker as Individual X with future proceedings expected to yield more information. Information about cryptocurrencies and blockchain technology has now become widespread with government agencies learning every day. Only time will tell how well the mainstream world and the virtual asset world will integrate with one another.

 

 

BitMEX Officials Get Slapped with Criminal Charges as US DoJ Investigates Money Laundering Activities

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The cryptocurrency market has again been mired in controversies, this time involving one of the most high profile companies in the industry. Recent reports revealed that prosecutors in the United States have filed criminal charges against crypto exchange primo BitMEX for flouting money laundering rules.

The case has sent shockwaves across the industry with the decision splitting the industry. According to the report, the top officials of Bitmex were all involved in the charges, including chief executive Arthur Hayes.

In the report put forth by the US Department of Justice, the judges have charges Arthur Hayes, Samuel Reed, Benjamin Delo, and Gregory Dwyer, BitMEX’s first employee who eventually became the company’s head of development. All four officials were accused of violating the Bank Secrecy Act instituted by the US federal government.

Federal prosecutors in Manhattan stated that the cryptocurrency exchange had taken few or no steps to limit customers on the platform even after warnings of hacks. The hacks were being investigated by the DoJ with the body suspecting that BitMEX was being used to launder money by citizens of countries like Iran. One of the reports said that “BitMEX made itself available as a vehicle for money laundering and sanctions violations”.

Another crucial point that brought BitMEX under the scanner was the fact that the company was incorporated in Seychelles even though its officers were in New York and Hong Kong. Earlier recordings have Hayes clearly claiming that bribing officials in Seychelles would be as expensive as buying a coconut. Hayes and his team of lawyers have come out strongly against the charges with the initial defense expected to be vigorous.

As BitMEX plans to defend itself, the Commodity Futures Trading Commission [CFTC] has filed a separate civil lawsuit to halt BitMEX’s US derivatives business. The CFTC was also joined by the Federal Bureau of Investigation [FBI] Assistant Director William Sweeney in the case against BitMEX. Sweeney was livid that the company officials had openly talked about bribing government officials and assured the public that justice would be served.