Tag: Crimes

Lawyers for SBF time to discuss additional bail conditions

by Blockchain News

In the federal court, the attorneys who are defending former FTX CEO Sam Bankman-Fried have asked for additional time to prepare and present a proposal concerning the conditions of their client’s release on bond. This request was made in response to the fact that the attorneys need additional time to prepare the proposal. A request similar to this one was submitted in response to a request that was made by the court.

Mark Cohen of Cohen & Gressler stated on February 24 in a document that was presented to the United States District Court for the Southern District of New York that the legal team wanted until March 3 to present a proposal for additional bail conditions for Bankman-Fried and find a suitable candidate to act as a technical expert in the case. This document was submitted to the court by Cohen & Gressler. In addition, Mark Cohen indicated that the legal team desired to locate a good candidate to testify in the case by March 3; they stated that they wanted to give themselves this much time. During the course of the hearings for the case, the judge was shown the document that was being submitted. Following the hearing that took place on February 16 concerning the usage of a virtual private network, also known as a VPN, by the former CEO of FTX, the attorneys reached a consensus to retain the services of an expert witness.

It is said in the brief that “the parties have been painstakingly assessing individuals to serve as the Court’s technical consultant; but, they have not yet discovered a qualified candidate.” ” In a way that is analogous to this, the parties have been having fruitful conversations over additional bail terms for Mr. Bankman-Fried; despite this, they would want more time to finish those talks.

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Former FTX CEO faces 12 criminal charges

by Blockchain News

The federal court who is presiding over the prosecution of the former chief executive officer of FTX, Sam Bankman-Fried, has given the order for a superseding indictment to be disclosed. This indictment contains 12 separate criminal offenses.

In a superseding indictment that was submitted to the United States District Court for the Southern District of New York on February 22, United States Attorney Damian Williams alleged that the actions of Bankman-Fried in the case involving FTX and Alameda warranted the filing of 12 charges against him. According to the indictment, they included eight accusations connected to conspiring to commit fraud, as well as four charges each for wire fraud and securities fraud.

The superseding indictment against Bankman-Fried mentioned an additional charge for conspiracy to commit bank fraud and broke down individual wire fraud charges related to his alleged actions at FTX and Alameda. The initial indictment against Bankman-Fried, which was announced on December 13, included eight similar charges. However, the superseding indictment included nine charges. At the time, prosecutors also listed conspiracy to commit commodities fraud in its charges, which appeared to be included in the superseding indictment related to the “purchase and sales of derivatives” at FTX. This charge was seemingly included in the indictment related to the “purchase and sales of derivatives.”

The indictment states that Bankman-Fried engaged in fraudulent activity when he opened a bank account and tried 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 in connection with the operation of a cryptocurrency

In connection to the claims of illegal political donations, the filing said that SBF and others made more than 300 contributions worth “tens of millions of dollars” by using “straw donors” or corporate funding. According to the allegations made by the United States Attorney, Bankman-Fried was able to “evade contribution restrictions on individual contributions” that were imposed by the Federal Election Commission. These limits are typically set at $100.

According to the document, “While personnel at Alameda usually monitored loans to executives, the transfers to Bankman-Fried in the months before the 2022 midterm elections were not documented on internal Alameda monitoring spreadsheets.” “Instead, an internal Alameda spreadsheet indicated almost $100 million in political donations,” despite the fact that FEC records show that Alameda did not make any political contributions for the 2022 midterm elections to candidates or political action committees (PACs).

Since a bail hearing in December, during which his mother and father agreed to put up the equity from their property as part of Bankman-$250-million Fried’s bond, the former CEO of FTX has been primarily restricted to his parents’ home in California. The hearing took place in California. Andreas Paepcke, a research scientist, and Larry Kramer, a former dean of Stanford University’s law school, both signed on as sureties for Bankman-bail, Fried’s which was set at $200,000 and $500,000, respectively.

While the criminal trial against Bankman-Fried is set to begin in October in federal court, the matter regarding FTX’s bankruptcy is now being heard in the United States Bankruptcy Court for the District of Delaware. Caroline Ellison, the former CEO of Alameda Research, and Gary Wang, the co-founder of FTX, pleaded guilty as part of a plea agreement to allegations that were identical to those brought against SBF. Many industry analysts believe that they may provide evidence about SBF’s case.

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Paul Pierce settles with SEC for $1.4 million

by Blockchain News

A former NBA player named Paul Pierce has reached a settlement with the United States Securities and Exchange Commission in the amount of $1.4 million on allegations that he promoted a cryptocurrency token project on social media.

Pierce is accused of promoting EthereumMax (EMAX) tokens via social media platforms without revealing that he had received money for the promotion and of making “false and misleading representations” about the project, according to an announcement released by the SEC on February 17. In addition to his publishing posts on Twitter that reportedly showed incorrect information regarding revenues, promoters allegedly paid the former NBA great 244,000 worth of EMAX, as stated by the SEC.

In the past, the regulatory body for financial markets has gone against celebrities who were pushing EthereumMax tokens. Pierce was accused of failing to disclose a payment of $250,000 to publish a story on her Instagram promoting EMAX tokens. In October 2022, the SEC announced that it had reached a settlement with Kim Kardashian in the amount of $1.2 million for charges that were very similar to those that Pierce was facing.

SEC Chair Gary Gensler stated that “this case is yet another reminder to celebrities: The law requires you to disclose to the public from whom and how much you are getting paid to promote investment in securities, and you can’t lie to investors when you tout a security.” “This case is yet another reminder to celebrities that the law requires you to disclose to the public from whom and how much you are getting paid to promote investment in securities,” “When celebrities advocate investment options, including crypto asset securities, investors should be cautious to do research to see whether the investments are suited for them, and they should be aware of the reasons why celebrities are making such recommendations,”

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The identities of the guarantors who signed on as sureties

by Blockchain News

Following a request made by multiple news outlets, a federal judge agreed to allow the identities of the guarantors who signed on as sureties for former FTX CEO Sam Bankman-$250 Fried’s million bond to be made public. This decision was made in response to the judge’s ruling that the identities of the guarantors could be made public.

Andreas Paepcke, a senior research scientist at Stanford University, and Larry Kramer, a former dean of Stanford Law School, have been revealed to be the two persons who had not been previously named, according to court records that were made public on February 15th. On January 25, each of these individuals put up $200,000 and $500,000, respectively, as sureties in order to secure Bankman-release Fried’s on bail.

SBF’s parents, Joseph Bankman and Barbara Fried, were the other two people that signed off on their son’s bail in December 2022, after his arraignment. This occurred after SBF had been charged with a crime. Prior to the arrest of their son, the two were law professors at Stanford. Bankman seems to be becoming more of a target in FTX’s bankruptcy case, as corporate creditors sent subpoenas to him, his son, and other “insiders” on February 14.

According to a story published by Business Insider on February 15, Kramer said that he had known Bankman and Fried since the 1990s, and that the reason for his gift of half a million dollars was because of their friendship. At the time of publishing, it is unknown what kind of relationship, if any, Paepcke may have had with Bankman-Fried or his parents.

The terms of Bankman-bail Fried’s required that he be placed under house arrest at his parents’ home in California; however, he is free to leave the residence for court appearances and other authorized activities. The terms of SBF’s release on bail have been modified by Judge Lewis Kaplan to include prohibitions on accessing specific messaging applications, utilizing virtual private networks, and communicating with current and former employees of FTX and Alameda Research.

In a letter dated January 12, eight major news sites petitioned Judge Kaplan, asking the court to divulge the identities of the two persons “who supplied financial support to Mr. Bankman-Fried.” Initially, the petition was granted, but the court halted the revealing of the guarantors’ names until February 7 so that SBF’s legal team might have time to appeal the decision.

In a letter dated January 3, attorneys for Bankman-Fried argued against the publishing of Paepcke’s and Kramer’s names, noting that their clients had been the subject of “extreme media attention, harassment, and threats.” Paepcke and Kramer had not been identified at the time the letter was sent. As a result of the legal team’s announcement that they want to appeal Kaplan’s judgment, the distribution of the material has been postponed until February 14th.

The criminal prosecution against SBF is expected to commence in October, while the lawsuit against FTX’s bankruptcy is still active. Gary Wang, who was a co-founder of FTX, and Caroline Ellison, who was a former CEO of Alameda Research, have both pled guilty to specific offenses and are apparently collaborating with the police.

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Former FTX CEO Sam Bankman-Fried Restricted from Using encrypted messaging apps

by Blockchain News

It has been reported that a federal court has ruled against oral arguments asking that a former CEO of FTX, Sam Bankman-Fried, be permitted to use some chat applications.

As a condition of his release on a bond in the amount of $250 million, Judge Lewis Kaplan of the United States District Court for the Southern District of New York is reported to have upheld his ruling that Bankman-Fried be prohibited from using encrypted messaging apps. The report was published on February 9 by Reuters. On February 1, the judge issued an order requiring SBF to refrain from communicating using apps such as Signal. However, the legal team representing the former CEO and the prosecutors had previously negotiated a deal that allowed for exceptions, including the use of Facebook Messenger, Zoom, and FaceTime.

According to reports, Judge Kaplan said that he was “much less interested in [Bankman- Fried’s] convenience” than he was in SBF contacting possible witnesses in his criminal case. Court documents indicated that he had gone out to FTX US general counsel Ryne Miller and current FTX CEO John Ray. According to Bloomberg, the court reportedly said that Bankman-Fried may be “intelligent enough to encrypt anything without a computer,” implying that the existing bail conditions are required.

“There is still snail mail and there is still email and there are all sorts of methods to interact that don’t provide the same hazards,” said Kaplan. “There are many other ways to communicate that don’t present the same concerns.”

Following his arrest and arraignment, Bankman-Fried made a personal appearance in court as part of the bail hearing; but, since then, he has been mainly confined to the residence he shares with his parents in California. According to reports, the conditions placed on his release will continue to apply until the 21st of February as a result of Kaplan’s decision to prolong them.

It is anticipated that Bankman-criminal Fried’s trial will commence in the month of October. He is expected to be charged with eight separate crimes, the most serious of which include wire fraud and breaches of campaign financing legislation. The United States Attorney’s Office has requested that the court issue an order delaying the civil lawsuits, as well as the discovery from the Securities and Exchange Commission and the Commodity Futures Trading Commission, until after the outcome of the criminal case has been determined.

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Randall Crater, Founder of “My Big Coin” Sentenced

by Blockchain News

Randall Crater, the person responsible for operating the fraudulent scheme known as “My Big Coin,” was given a sentence of one hundred months in prison and was ordered to make restitution payments totaling more than seven and a half million dollars to those who had lost money as a result of his scheme.

According to a statement that was released by the United States Department of Justice on January 31, the United States District Court Judge Denise Casper in the state of Massachusetts was the one who handed down the sentence that was given to Crater.

This sentence was handed down to Crater after he was found guilty by a federal jury on July 21 of four counts of wire fraud, three counts of unauthorised monetary transactions, and one count of operating an unregistered money-transmitting corporation. All of these charges were related to the same scheme. After adding up all of these fees, it became clear that Crater was running an unlicensed money transmission business.

Crater launched My Big Coin in 2013, and despite the fact that it was never intended to be a payment mechanism for cryptocurrencies, the company promoted itself as such. This resulted in the solicitation of potential victims between the years of 2014 and 2017, and the con was carried out right up to 2017.

According to Crater, the digital currencies that are available for purchase on My Big Coin are fully operational tokens that are backed by gold. Furthermore, the website has a collaboration with Mastercard to facilitate transactions.

In addition, Crater provided its users with access to a marketplace known as “My Big Coin Exchange,” which was promoted as a location at which users could trade their cryptocurrencies for fiat currencies such as the United States dollar and other currencies.

A substantial percentage of the $7.6 million in finance that Crater and his marketing team were successful in generating was used for the acquisition of a residence, many automobiles, and more than one million dollars’ worth of antiques, artwork, and jewellery.

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Bitzlato crypto firm taken down

by Blockchain News

As part of the enforcement measures taken against the cryptocurrency company Bitzlato, the European Union Agency for Law Enforcement Cooperation, often known as Europol, has stated that authorities have taken custody of bitcoin wallets holding more than $19 million worth of cryptocurrencies.

Europol said on January 23 that around 46% of the assets that were transferred via Bitzlato were connected to illegal activity. At the time of publishing, this equated to 1 billion euros, which is equivalent to $1.09 billion USD.

According to the findings of the investigation conducted by the government agency, Bitzlato was in possession of more than 2.1 billion euro worth of cryptocurrencies, such as Bitcoin (BTC), Dash (DASH), and Dogecoin (DOGE), the majority of which were changed into Russian rubles.

According to Europol, despite the fact that converting crypto assets into fiat currency is not against the law, investigations into the cybercriminal operators suggested that huge amounts of illicit assets were passing via the site. “The bulk of suspect transactions are tied to companies that have been sanctioned by the Office of Foreign Assets Control (OFAC). Other questionable transactions are linked to cyber scams, money laundering, malware, and content that depicts child abuse.”

The United States authorities reported on January 18 that they had detained Anatoly Legkodymov, the creator of Bitzlato, in the state of Florida as part of their efforts by a cryptocurrency-focused enforcement team.

Europol added that the operation, which involved support from agencies in Belgium, Cyprus, Portugal, Spain, and the Netherlands, resulted in the arrest of four other individuals linked to the cryptocurrency exchange. One of these individuals was arrested in Cyprus, and the other three were arrested in Spain.

In addition to the arrests, Europol claimed that investigators had confiscated wallets worth around 18 million euros, which is equivalent to approximately $19.5 million, and blocked more than 100 accounts at other cryptocurrency exchanges, which controlled a total of 50 million euros.

The servers of Bitzlato were supposedly a “major money laundering concern” that was tied to Russian criminal financing, and the authorities in the United States of America were engaged in the attempts to confiscate them.

Following his arrest on January 18, Legkodymov was allegedly brought before the U.S. District Court for the Southern District of Florida to have his arraignment.

There is a lack of clarity on the potential charges, if any, that his partners at Bitzlato may face in Europe.

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Chainalysis report finds most NFT wash traders unprofitable

by Cointelegraph

Nonfungible tokens (NFT) have taken the world by storm, resulting in mainstream interest and greater adoption of cryptocurrency. According to blockchain analysis firm Chainalysis, NFT popularity skyrocketed in 2021. Chainalysis’ “NFT Market Report” shows a minimum of $44.2 billion worth of cryptocurrency sent to Ethereum smart contracts associated with NFT marketplaces and collections last year. The report notes that this number was $106 million in 2020.

While impressive, increasing scams and fraudulent activities have infiltrated the NFT space. For instance, major NFT marketplace OpenSea recently announced that its free minting tool was prone to misuse. As a result, OpenSea shared that 80% of NFTs created using this tool were either plagiarized, fake or spam. If that wasn’t bad enough, Chainalysis’ latest blog post highlighting its “2022 Crypto Crime Report” found that the NFT sector is vulnerable to wash trading and money laundering.

Wash trading in the NFT sector grows

According to the blog post, wash trading refers to a transaction in which a seller is on both sides of the trade in order to paint a misleading picture of an asset’s value and liquidity. 

Unsurprisingly, wash trading has become a major concern within the NFT sector. Most recently, data generated from the LooksRare NFT marketplace found the platform to be very prone to wash trading.

Yet as wash trading becomes more common across NFT marketplaces, new solutions are being developed to detect fraudulent activity. Kim Grauer, head of research at Chainalysis, told Cointelegraph that the firm has created a potential tool capable of detecting individuals who are self-funding their own crypto wallets to conduct misleading transactions:

“By using Chainalysis software, we can see when a person buys a token using funds from the same person who sold them that very token. This is the definition of wash trading.”

The Chainalysis blog post further explains that by using blockchain analysis, the firm is capable of tracking NFT wash trading by analyzing sales of NFTs to addresses that were self-financed, meaning they were funded either by the selling address or by the address that initially funded the selling address.

Interestingly enough, while Chainalysis found that some NFT sellers have conducted hundreds of wash trades, Grauer pointed out that most NFT wash traders are in fact unprofitable. She said:

“Overall, we found that it’s not profitable to wash trade NFTs because you end up paying a lot in gas fees. Many wash traders came out negative due to the amount spent on gas versus the amount generated from their sales.”

More specifically, Chainalysis’ findings indicate that 152 Ethereum addresses associated with wash traders resulted in losses of $416,984. On the other hand, Grauer pointed out that some wash traders have been successful. Data from Chainalysis shows that 110 Ethereum addresses received $8.9 million in profits from wash trading.

According to Grauer, successful wash traders tend to be individuals conducting multiple NFT trades across a number of platforms. However, she noted that overall, it’s not a good idea to wash trade due to the high costs of gas fees coupled with the fact that all transactions can be seen across the Ethereum blockchain network. “This is a risky type of crime to carry out, and even riskier given that people have to pay large gas fees. Those who do this at scale have to be experienced,” remarked Grauer.

How NFT platforms can keep users safe

Although wash trading NFTs have proven to be risky and unprofitable for most, Grauer believes this activity will become more common as the NFT space continues to grow. “Anyone can easily engage in wash trading — if you can download an ETH wallet and purchase an NFT, you can do it,” she remarked. With this in mind, it’s becoming increasingly important for NFT platforms to enforce initiatives to help keep users safe from fraudulent activities.

Alex Salnikov, co-founder and head of product at NFT marketplace Rarible, told Cointelegraph that in terms of what the platform has seen in the broader NFT ecosystem, there tends to be a pattern of users wash trading on platforms that provide incentive rewards for trading. To Salnikov’s point, the LooksRare platform planned to offer user rewards in the form of the platform’s native token, which could have added to the amount of wash trading on the platform.

Salnikov explained that after realizing this vulnerability, the Rarible decentralized autonomous organization voted to stop RARI token distribution to Rarible users. As a result, “the issue is no longer relevant for our marketplace,” he said, adding that in order to further protect Rarible users, the platform has released a verification system that allows the Rarible team to manually review a creator’s profile. Salnikov elaborated:

“If this process is successful, the user will earn a yellow checkmark on their Rarible marketplace profile. It is important to note that collectibles from unverified creators do not appear in our search results or the explore feed. Users are also warned if they are about to purchase a collectible by an unverified creator or collection.”

While Rarible has taken a number of steps to ensure user safety across the platform, Grauer mentioned that Dapper Labs, a blockchain platform that offers NFT-based products and decentralized apps, is working closely with Chainalysis to monitor wash trading and other illicit activities. 

Additionally, OpenSea published a blog post on Jan. 17 introducing its new “NFT Security Group.” According to the post, members will be expected to share and learn about vulnerability reports that have not been publicly announced in order to fix problems before users are impacted. Members will also focus on creating solutions to ensure greater security around blockchain consensus, smart contacts, wallets and metadata, along with awareness for interoperability implications.

Will regulations keep users safe?

In addition to these measures, discussions around NFTs and compliance are coming to fruition. Joseph Weinberg, co-founder of Shyft Network — a compliance-focused blockchain network — told Cointelegraph that while it’s hard to say if NFTs should be regulated, he believes that the space needs oversight:

“I think trading platforms that accept funds — like an OpenSea, for example — will inevitably become regulated as VASPs, as they are in the business of matching to counterparties and they accept fees. As far as how NFTs could be regulated, you can do things like multi-address hop detection and address screening to cluster and determine if there’s a likelihood that people are wash trading.”

However, Weinberg remarked that NFTs are still a grey area when it comes to regulations. “Regulators haven’t even been able to give us clear guidance on DeFi [decentralized finance], so I think they’re waiting to see how it plays out,” he said, adding that the biggest challenge currently facing regulators is the fact that art is not a regulated environment:

“Historically, it’s known that art markets are not subject to KYC [Know Your Customer] and AML [Anti-Money Laundering] requirements. It’s also widely known that the art world is where a lot of money laundering takes place — and has for a long time. The question that needs to be asked is if the ‘form’ is different from the ‘function’ because a token has a different set of use cases than a piece of paper.”

As such, Weinberg believes that regulators first need to focus on how NFTs should be approached before coming up with guidance. In the meantime, some industry experts believe that the NFT community will take its own set of actions. Jack O’Holleran, chief operating officer of Skale Labs — a platform developing solutions for Ethereum scalability — told Cointelegraph that he believes free markets will ultimately prevail. “End users will not want to purchase NFTs from sites that don’t clearly remove or call out overt wash trading numbers. NFT traders and purchasers will move their business to exchanges and data aggregation sites that give them real views of market data.”

NFT scams will continue to rise, even with solutions

Unfortunately, even with compliance solutions, initiatives from NFT platforms and possible regulations, Grauer predicts that there will be a rise in criminal activity in the NFT space before there is a decline.

Moreover, while Chainalysis found money laundering associated with NFT addresses to be relatively low in 2021, Grauer expressed concerns that the space will only continue to worsen. “My prediction is that the sector will get worse in many ways before it gets better with industry solutions. It’s possible that some NFT platforms will adopt compliance to help things progress.”