US House Committee to Probe Crypto Crimes in November Hearing

The Financial Services Committee (FSC) of the United States House of Representatives is gearing up for a critical hearing on November 15, 2023, diving deep into the shadowy corners of cryptocurrency. Entitled “Crypto Crime in Context: Breaking Down the Illicit Activity in Digital Assets,” this session aims to unravel the complexity of illegal activities within the digital asset ecosystem.

At the forefront are notable witnesses including Mr. Bill Hughes from ConsenSys, Ms. Jane Khodarkovsky from Arktouros, and Mr. Jonathan Levin from Chainalysis, each bringing a unique perspective from their extensive experience in both the crypto industry and legal enforcement.

The hearing’s central theme emerges from the FSC’s intent: comprehending the extent of illicit activities in digital assets to effectively counteract them. Discussions will revolve around identifying gaps in the current system and exploring tools to prevent and detect criminal activities.

Highlighting the gravity of the situation, the FSC will delve into the concerning trends of money laundering and the funding of terrorist organizations through cryptocurrencies. The hearing will utilize data from Chainalysis, which indicates a surge in illegal crypto transactions despite increased sanctions and hacking attempts.

A significant part of the discussion will be dedicated to assessing the anti-money laundering and counter-terrorist financing measures employed by crypto exchanges and decentralized finance providers. Moreover, the roles of the Financial Crimes Enforcement Network, the Office of Foreign Assets Control, and the Department of Justice (DOJ) will be under scrutiny.

In parallel, the hearing will also touch upon legislative efforts, notably the markup of legislation for stablecoin regulation. Simultaneously, the DOJ is intensifying its focus on crypto-related crimes, merging two of its teams to form a specialized unit targeting ransomware offences.

This hearing marks a pivotal moment for the crypto industry, as it faces stringent scrutiny from lawmakers and regulators. The outcome could significantly influence the future regulatory landscape for digital assets.

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Authorities in the U.S and Brazil Disrupt Crypto Fraud Ring

There seems to be a surge in crime related to cryptocurrency as blockchain technology keeps expanding. 


The United States Immigration and Customs Enforcement recently reported an investigation by the Brazilian National Police, U.S. Homeland Security Investigations (HSI) and other law enforcement agencies that led to the disruption of crypto-related fraud across several countries but with operational base in Curitiba, Brazil.

A U.S investigation has revealed that 37-year-old Brazilian citizen and former US resident Francisley Valdevino da Silva is the ringleader of a crypto fraud ring. Investors in more than a dozen countries were tricked into believing that there was a well-organized high-end crypto-financial product, when in fact the organization promoted fraudulent cooperation and licensing that enticed victims to invest millions of dollars in questionable cryptos. Ultimately, the cryptocurrency had little or no value.

The Brazilian authorities have also identified a similar fraudulent activity in Brazil with around $800 million wired through the Brazilian banking system alone aside from illegal proceeds transferred through cryptocurrency.

Governments Regulating Crypto-Related Crimes

The increase in online activities has created an opportunity for the growth of criminal activities in the digital ecosystem. Measures have therefore been put in place by different governments across the globe to fight such activities.

The U.S Department of Homeland Security hopes to put an end to the increasing cases of money laundering by creating a special unit called the Cyber Fraud Task Force ( CFTF). To effectively monitor and stop illegal online activity, CFTF investigators must be able to analyze a computer network, monitor IP addresses, and coordinate with Internet Service Providers (ISPs) to identify suspicious activity.

The Financial Crimes Enforcement Network (FinCEN) has also proposed methods for businesses operating in the crypto space, particularly exchanges. In the proposal, unhosted wallets properly monitored and transactions above $3,000 from unhosted wallets should be verified before concluding transactions with them.

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Bitcoin ATM Stolen During Raid In Barcelona

Crypto-related crimes have been on the rise in Spain in recent times. The most recent incident is the case of a stolen Bitcoin ATM in Barcelona.

Related Reading | Data Shows Crypto Hacks And Fraud In 2021 Are On Track For A New Record

Bitcoin ATMs are kiosks that allow a person to purchase Bitcoin and other cryptocurrencies by using cash or debit card. According to this website, Spain has the highest number of crypto ATMs in Europe. With 185 ATMs, it is also the fourth highest in the world.

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Bitcoin ATM Theft

Local news reported on Friday that the Spanish police are investigating the theft of a Bitcoin ATM. The thieves stole the machine in a raid on a cryptocurrency exchange outlet in a wealthy Barcelona neighborhood.

The police force of Catalonia, Mossos d’Esquadra, said that the ATM theft happened around 3 a.m. They however did not provide any further information on the case to avoid hindering the investigation.

According to the news agency, police sources said thieves took the ATM from a shop on Beethoven street in the Sarria area. The area houses a branch of Grayscale Bitcoin Trust (GBTC). GBTC reportedly declined to comment, and the police also refused to confirm the exact location of the robbery.

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An unverified video that surfaced showed an SUV crashing into the GBTC storefront. Afterward, some hooded people from another car made away with the ATM.

This incident is just the most recent of the bitcoin-related crimes in Spain. A few days ago, a Spanish techpreneur reported that he had been robbed. Zaryn Dentzel, the victim, is the co-founder of Tuenti, a Spanish social network-turned communications firm owned by Telefónica telecommunications company.

He claimed that four or five hooded people robbed him of millions of Euros worth of crypto from his house in Madrid. They blindfolded him, covered his home’s security cameras, and beat him up. He was then forced to give up the password to an online account containing his cryptocurrencies which held tens of millions of euros in Bitcoin. However, the thieves were unsuccessful in stealing any of his cryptos.

Crypto Crime On The Rise

Crypto attacks are hardly rare. They occur more frequently than most people think, mostly through hacks, phishing scams, ransom attacks, and fake advertisements.

A couple of the most popular attacks this year are the $600 million Poly Network attack and the Colonial Pipeline ransomware attack.

Related Reading | Over $5 Billion In BTC Paid In Top 10 Ransomware Variants, Says U.S. Treasury

According to the U.S. Treasury Department, the total value of suspected ransomware payments during the first half of 2021 was $590 million. Also, roughly $5.2 billion in outgoing BTC payments were tied to the top 10 ransomware variants over the past three years.

Many Bitcoin crimes have also been recorded in the U.K., Hong Kong, Australia, and New Zealand, to name a few.

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US gov attorneys to target individuals and gatekeepers for crypto prosecutions

A group of high-level U.S. government attorneys has oulined their priorities for the enforcement and prosecution of individuals and companies that have committed crypto-related crimes.

Enforcement officials from the U.S. Department of Justice (DoJ), Securities and Exchange Commission (SEC), and Commodity Futures Trading Commission (CFTC) spoke about the direction their agencies will take at a panel discussion at the American Bar Association’s annual institute on white-collar crime in Miami on Oct. 27.

In addition to corporate players, lawmakers are taking a closer look at individuals according to a report of the event by Law360. Principal deputy assistant attorney general of the DoJ’s Criminal Division, Nicholas McQuaid, stated the prosecution of individuals in white-collar cases was a top priority.

He added that the department was expanding its use of data-based probes in such cases relating to cryptocurrencies. The DoJ is forming a specialized group within the FBI to work with its fraud section to assist with investigations and prosecutions.

SEC Enforcement Director Gurbir Grewal commented on the agency’s increased scrutiny of unregistered and fraudulent initial coin offerings (ICOs), unregistered crypto exchanges, and crypto lending and award programs. He stated “we’ll make sure that those players and actors are abiding by the rules,” before adding:

“That’s why we’ll be taking a hard look at gatekeepers like auditors and audit firms, attorneys, and underwriters.”

In early September, the SEC threatened legal action against Coinbase over its stablecoin yield program, Lend. Coinbase has since scrapped plans to launch the service.

The SEC also targeted Terraform Labs CEO Do Kwon with a subpoena in September. Being a resident of South Korea, Kwon hascontested it on grounds that the regulator had no jurisdiction.

In October 2020, the DoJ filed criminal charges against four BitMEX executives for illegally operating a derivatives exchange, the trial has been set for March 2022.

Related: Regulatory and privacy concerns trail SEC’s threat to Coinbase

Acting director of enforcement for the CFTC, Vincent McGonagle, said he was also concerned about digital assets and the decentralized finance (DeFi) sector. He did note that the crypto asset space may not be the sole component of illegal activity as there may be other factors involved such as forex:

“In the digital asset space, we’ve brought several actions against entities where they’re offering digital assets, Bitcoin or others on a margin or finance basis.”

Government agencies are clearly ramping up activity against crypto companies and individuals.

In mid-August, lawmakers urged the SEC and CFTC to form a joint working group on crypto assets so that they could work out how to “effectively use their current jurisdiction cooperatively.” In late September, the CFTC charged 12 New York crypto options firms for failing to register.

On Oct. 18, the New York Attorney General’s office ordered crypto lending firms to cease activities. The Celsius crypto lending platform stated that it was not one of the two but was instead working with NY regulators.


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US DOJ Launches National Crypto Enforcement Team

The United States Department of Justice, through Deputy Attorney General Lisa O. Monaco, has unveiled an establishment of the National Cryptocurrency Enforcement Team (NCET), a body that is now tasked with the responsibility of fighting criminal activities involving digital currencies.

Per the press release issued by the DOJ, the new team has the authority to investigate and prosecute the criminal activities of cryptocurrency, particularly crimes committed by virtual currency exchanges, mixing and tumbling services, and money laundering infrastructure actors.

The US DOJ has been uptight in its fight against crimes bordering on digital currencies, ranging from the flagging of a diamond-back token investment scam back in September 2020 to the crackdown on Tether Stablecoin over its reserve claims which resulted in an $18.5 million back in February this year.

The inaugural of the National Crypto Enforcement Network stems from the framework for regulating the nascent digital currency industry back in Q4 2020. The new team will serve as a more direct approach for the DOJ to keep using virtual currencies in criminal activities across the country.

“Today, we are launching the National Cryptocurrency Enforcement Team to draw on the Department’s cyber and money laundering expertise to strengthen our capacity to dismantle the financial entities that enable criminal actors to flourish — and quite frankly to profit — from abusing cryptocurrency platforms,” said Deputy Attorney General Monaco. “As the technology advances, so too must the Department evolve with it so that we’re poised to root out abuse on these platforms and ensure user confidence in these systems.” 

The DOJ confirmed that the members of the NCET will be reallocated from U.S. Attorneys’ Offices across the country. The leader of the team will be a veteran with experience in dealing with complex criminal investigations and prosecutions, as well as the technology underpinning cryptocurrencies and blockchain issues. 

According to the DOJ, the NCET team will carry out its responsibilities in collaboration with other relevant government watchdogs.

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Largest Crypto Seizure In Australia: Police Seize $6M Worth Of Digital Currency

The percentage of illegal crypto transactions, according to this Chainalysis report, is about 2% of total transactions. Although the majority of cryptocurrency transactions is not illegal, it is increasingly being used for criminal activities.

As part of a dark web operation, Australian police have conducted a massive cryptocurrency seizure. The total value seized was about $6 million (AUD 8.5 million). According to the authorities, this is the largest crypto seizure made in Australia in history.

Crypto Seizure And The Dark Web

Victoria police reported that the seizure was part of an ongoing investigation into online drug trafficking. The arrests and seizures constitute part of an investigation into drug trafficking on a dark web platform that has been online since 2012. Australian authorities have been investigating the drug trafficking dark web platform since early 2021.

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Related Reading | US Government Plans To Pay Rewards To Dark Web Informants In Cryptocurrency

On Thursday, detectives conducted searches at properties in Kinglake, Preston, Prahran, Dollar, and South Yarra. They carried out the searches with assistance from East Gippsland Crime Investigation Unit and Bass Coast Crime Investigation Unit. Several items were seized from the properties. These include drugs believed to be cannabis, Psilocin (magic mushrooms), MDMA, prescription medication, and white powder and crystals. The police also seized assets worth a total of AUD 13.1M. Among these were two properties in Kinglake and Dollar valued at about $2M. Vehicles, including a Toyota Prado and VW T-Cross, valued at about $100,000, were also seized.

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Three people were arrested and interviewed by the police. This includes a 31-year-old Kinglake woman and a 30-year-old Preston man. Although both have been released pending further inquiries, the woman was charged with possession of cannabis. A 33-year-old man was also arrested at the Preston address.

Investigations Remain Underway

Investigations into drug trafficking in Australia are still ongoing. The authorities urge anyone with information to contact them. Victoria Police Crime Command, Commander Mick Frewen, noted that the case highlights the modern nature of the serious and organized crime. “This is the 21st-century version of drug trafficking and money laundering, with criminals using technology to enable immense amounts of community harm and misery,” he stated.

He also mentioned that although there may be a perception of anonymity in online drug trafficking, the investigation shows otherwise. “We make no apology for targeting those involved in the manufacture and trafficking of illicit drugs and holding them to account”.

Related Reading | UK Police Seize Ethereum Worth $9.5 Million Found On USB Stick

This incident is just one of many recorded in recent times. The UK police have conducted investigations that have resulted in crypto seizures. The latest confiscation involved significant amounts of Ethereum (ETH) found on USB sticks connected to an international cryptocurrency scam.

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China crypto crime: Still ‘top ranked’ for illicit activity but crime is falling

A new report from Chainalysis has found that while China’s share of global criminal crypto flows has been falling since the third quarter of 2019, the country still represents a disproportionate amount of illicit cryptocurrency activity.

In its August 3 Cryptocurrency and China report, Chainalysis stated that more than $2.2 billion worth of crypto had been sent from Chinese wallets to addresses associated with illicit activity between April 2019 and June 2021.

Chinese addresses also received more than $2 billion worth of digital assets tied to nefarious activity such as scams and darknet marketplaces. Despite this, the report says crime has fallen significantly:

“China’s transaction volume with illicit addresses has fallen drastically over the time period studied, both in terms of raw value and in relation to other countries. Much of the drop is due to the absence of large-scale Ponzi schemes like the 2019 PlusToken scam.”

Chainalysis added that, “While China remains one of the top-ranked countries for illicit transaction volume, it used to beat all others by a wide margin, suggesting that cryptocurrency-related crime in the country has fallen.”

The authors cite “historical transaction data” as suggesting that Chinese over-the-counter (OTC) Bitcoin brokers “have played an outsized role in facilitating money laundering for those involved in cryptocurrency-based crime.”

The report adds that the “vast majority” of illicit Chinese crypto flows have been associated with scam activity, although digital asset-based money laundering is still “disproportionately carried out in China.”

Chainalysis noted that China’s central government carried out more than 1,100 arrests associated with digital asset-based money laundering in June, indicating a willingness to crack down on the sector.

“It will be interesting to see whether the arrests lead to a drop in flows of illicit funds to China-based cryptocurrency businesses and OTC traders.”

Chainalysis speculates that China’s increasing moves to clamp down on traditional decentralized cryptocurrencies may undermine the nation’s status as a global crypto superpower moving forward.

The report attributes China’s renewed hostility toward decentralized crypto assets to its plans for widespread adoption of the digital yuan.

Related: China’s crackdown signals an oncoming crypto ban, Bobby Lee says