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  • DOJ seizes $9 million in crypto from criminal scammers

    Financial Crimes

    On November 21, the DOJ seized nearly $9 million in stablecoins from cryptocurrency scammers after the criminals exploited over 70 victims. The DOJ seized stablecoins, a certain crypto asset pegged to a central bank’s currency, tied to the U.S. dollar. The scammers employed a long-con technique called “pig butchering” which is a tactic to build and exploit a victim’s trust over time by creating fake romantic enticements meant to swindle victims into handing over money. The criminals targeted and convinced victims to “make cryptocurrency deposits by fraudulently representing that the victims were making investments with trusted firms and cryptocurrency exchanges.”

    The DOJ was able to trace the stolen funds based on the funds’ cryptocurrency addresses as part of a money laundering technique known as “chain hopping… used to ‘layer’ the proceeds of criminal activity into new cryptocurrency ecosystems, all to obfuscate the… ownership of those proceeds.” The DOJ worked with the U.S. Secret Service to trace the victim’s deposits, and it was originally alerted from victim reports made on the FBI’s Internet Crime Complaint Center and the FTC’s Consumer Sentinel Network.

    Financial Crimes DOJ Cryptocurrency Stablecoins Enforcement Money Laundering

  • DOJ charges six with crypto fraud

    Federal Issues

    On June 30, the DOJ charged six individuals in four separate cases for allegedly playing a role in several cryptocurrency-related fraud schemes. In its press release announcing the indictments, the DOJ said these schemes include “the largest known Non-Fungible Token (NFT) scheme charged to date, a fraudulent investment fund that purportedly traded on cryptocurrency exchanges, a global Ponzi scheme involving the sale of unregistered crypto securities, and a fraudulent initial coin offering.”

    • Crypto NFT Scheme: The DOJ charged a Vietnamese national with one count of conspiracy to commit wire fraud and one count of conspiracy to commit international money laundering related to his involvement in an NFT project, in which the individual and his co-conspirators allegedly engaged in a “rug pull” that ended the investment project and stole roughly $2.6 million from investors. Shortly after the rug pull, the DOJ said in its announcement that the individuals allegedly “laundered investors’ funds through ‘chain-hopping,’ a form of money laundering in which one type of coin is converted to another type and funds are moved across multiple cryptocurrency blockchains.” The individuals also allegedly used decentralized cryptocurrency swap services to hide the trail of investors’ stolen funds.
    • Crypto Ponzi and Unregistered Securities Scheme: The DOJ charged two Brazilian nationals and a Florida resident with one count of conspiracy to commit wire fraud and one count of conspiracy to commit securities fraud in connection with a global cryptocurrency-based Ponzi scheme that generated approximately $100 million from investors. The Brazilian nationals were also charged with conspiracy to commit international money laundering. According to the DOJ, the individuals fraudulently promoted a cryptocurrency investment platform and unregistered securities offering by misrepresenting a purported proprietary trading bot and falsely guaranteeing returns to investors. The Brazilian nationals allegedly laundered investors’ funds through a foreign-based cryptocurrency exchange and paid earlier platform investors with money obtained from later investors, the DOJ said. The SEC also filed a lawsuit against all three individuals and their company in the U.S. District Court for the Southern District of Florida.
    • Crypto Initial Coin Offering Scheme: A California resident who founded a cryptocurrency investment platform was charged by the DOJ with one count of securities fraud for his role in a cryptocurrency fraud scheme involving the platform’s initial coin offering (ICO), which raised roughly $21 million from investors globally. According to the DOJ, the individual falsified information in company white papers for prospective investors, promoted fake testimonials, and fabricated purported business relationships with the Federal Reserve Board and dozens of major companies to appear legitimate.
    • Crypto Commodities Scheme: The DOJ charged the owner of a cryptocurrency investment platform with one count of conspiracy to commit wire fraud, four counts of wire fraud, one count of conspiracy to commit commodities fraud, and one count of obstruction of justice. The Nevada resident allegedly raised approximately $12 million from investors by using the platform to solicit investors’ participation in an unregistered commodity pool (“a fund that combines investors’ contributions to trade on the futures and commodity markets”), told investors that he used a trading bot that “could execute over 17,000 transactions per hour on various cryptocurrency exchanges” to earn profits, and falsely represented that this trading bot would generate between 500 to 600 percent returns on the amount invested.

    “Our office is committed to protecting investors from sophisticated scammers seeking to capitalize on the relative novelty of digital currency,” U.S. Attorney Juan Antonio Gonzalez for the Southern District of Florida stated. “As with any emerging technology, those who invest in cryptocurrency must beware of profit-making opportunities that appear too good to be true.”

    Federal Issues Digital Assets Securities DOJ Enforcement Cryptocurrency Fraud Indictment NFT Wire Fraud Money Laundering

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