At least $3.3M in Drug Proceeds Laundered by 2 Cincinnati Businesses

By: Erin Couch

Prosecutors say Tri-State Jeweler on Race Street and Nationwide Automotive on Vine Street were both used to launder proceeds from a narcotics conspiracy that took place between March 2016 through October 2019.

According to the indictment, the conspiracy involved at least 400 grams of fentanyl, at least 500 grams of methamphetamine and at least 5 kilograms of cocaine. Prosecutors say defendants conspired to possess and intended to distribute the drugs.

The indictment indicates cash was stored at the two businesses, where it was hidden and then transported to and from the Cincinnati area.

Prosecutors say at least $3.3 million in drug proceeds total had been laundered.

According to the office, federal agents seized 19 pounds of fentanyl, three pounds of heroin, 100 pounds of cocaine, 42 pounds of meth, 47 weapons, 12 vehicles, jewelry store inventory, and $1.1 million in assorted jewelry from defendants and residences, all valued at $1.1 million. They also seized more than $500,000 in cash.

Tri-State Jewelers is accused of storing at least $2.5 million total between December 2018 and April 2019. Nationwide Automotive is accused of laundering at least $800,000.

They cite three July incidents at Tri-State Jewelers where the store reportedly sold jewelry pieces purchased with drug proceeds, totaling to $20,400. They say also in July Nationwide Automotive sold a vehicle for $38,800 reportedly purchased narcotics proceeds

Twenty-two of the 37 defendants are local to Cincinnati, according to the office.

The 37 defendants include:

Thirty-seven people were charged Tuesday in connection with a $3.3 million drug-money laundering scheme.
Thirty-seven people were charged Tuesday in connection with a $3.3 million drug-money laundering scheme. (Source: Southern District of Ohio U.S. Attorney)

Professor Who Wrote Book on Drug Crime Is Accused of Money Laundering

By: Bob Van Voris

A Miami professor who’s an expert on drug trafficking and organized crime was charged by the U.S. with laundering money from Venezuela, skimming more than $250,000 for himself.

Bruce Bagley, 73, a professor of international studies at the University of Miami, was the co-editor of the 2015 book “Drug Trafficking, Organized Crime, and Violence in the Americas Today” as well as a contributor to various journals on the topic.

But on Monday prosecutors in Manhattan charged Bagley with laundering about $2.5 million into the U.S., money that foreign nationals embezzled and got from bribes and other corrupt schemes. Bagley pocketed about 10% of the money, according to prosecutors.

“Bagley, an American professor, contributed to the success of illegal activity overseas, carried out against the Venezuelan people,” FBI Assistant Director-in-Charge William F. Sweeney Jr. said in a statement.

relates to Professor Who Wrote Book on Drug Crime Is Accused of Money Laundering

Bruce Bagley

Bagley, of Coral Gables, Florida, appeared in federal court in Miami Monday, according to court records. He was released on $300,000 bond cosigned by his son and daughter.

The University of Miami, where Bagley is a professor of international studies, said he was put on administrative leave after the school learned he was indicted.

“The arrest came as a complete surprise to everyone and we are just now reviewing the indictment,” Bagley’s lawyer, Daniel Forman, said in an email. “Based on my extensive knowledge of Dr. Bagley, both professionally and personally, I am confident he will be vindicated at the end of the day.”

Widely quoted in the media about drug trafficking, Bagley has criticized flawed efforts at combating it. Last year, he told Bloomberg News that Marxist guerrillas from the National Liberation Army in Colombia were “serious about peace” and that the government was dragging its feet implementing land reform and ensuring security.

The New York Times cited him in 2012 about what he called a “Whac-A-Mole” approach, in which targeting trafficking in one place just moves to another location.

On the “Rate My Professors” website, Bagley has a few, mixed reviews. While the most recent, from 2013, describes him as “awesome,” others from earlier complain he belittles students with opinions contrary to his and with one calling him a “guy who loves to hear himself talk.”

According to U.S. prosecutors, Bagley opened a bank account using a company he owned, taking in 14 payments from November 2017 to October 2018. The payments came from Swiss and United Arab Emirates accounts, prosecutors said. The description of Bagley’s company, which isn’t named in court papers, matches Bagley Consultants Inc., a defunct Florida corporation opened by the professor in 2005.

Overseas Accounts

The overseas accounts were held by a “purported food company” and a wealth management firm allegedly controlled by a Colombian, whom the government didn’t identify.

Prosecutors claim Bagley would withdraw 90% of the payments in the form of cashier’s checks payable to an account held by an unnamed person and transfer the rest to his own account.

Even after the bank account was shut down for suspicious activity in October 2018, Bagley opened a second one in December, where he received money on two separate occasions, prosecutors said.

Bagley is charged with two counts of money laundering and one count of conspiracy. He faces as long as 20 years in prison if convicted.

“About the only lesson to be learned from Professor Bagley today is that involving oneself in public corruption, bribery, and embezzlement schemes is going to lead to an indictment,” Sweeney said.

The case is U.S. v. Bagley, 19-cr-00765, U.S. District Court, Southern District of New York (Manhattan).

Blow To Bitcoin As Former ECB Boss Makes Dire Warning Over Crypto’s Future

By: Billy Bambrough

Bitcoin and cryptocurrencies have attracted strong criticism from the world’s central bankers this year–sparked, perhaps, by Facebook’s plans for its own bitcoin rival.

The bitcoin price soared in the first six months of this year only to stall amid concerns lawmakers and regulators could be poised to crack down on the nascent bitcoin and crypto industry.

Now, former European Central Bank (ECB) president Jean-Claude Trichet has slammed bitcoin and Facebook’s libra project, warning bitcoin is “not real” and not the future of money.

“I am strongly against bitcoin, and I think we are a little complacent,” said Trichet, speaking during a panel discussion at Beijing-based media group Caixin’s annual conference last weekend. His comments were first reported by the South China Morning Post newspaper.

“[Bitcoin] itself is not real, with the characteristics that a currency must-have.”

Trichet also slammed bitcoin and cryptocurrency speculation, which he branded “not healthy.”

“Even if [the cryptocurrency] is supposed to be based on underlying assets, I am observing a lot of speculation. It is not healthy,” Trichet said, adding buying a cryptocurrency is “in many respects pure speculation.”

Bitcoin and cryptocurrency adoption has failed to live up to sky-high expectations since bitcoin exploded into the public consciousness in 2017.

Bitcoin soared in 2017 from under $1,000 per bitcoin to almost $20,000, sparking a digital gold rush and making many early adopters overnight millionaires.

Trichet’s remarks come amid excitement in the bitcoin and cryptocurrency industry that China could be about to relax its strict crypto restrictions following a ban on bitcoin exchanges in 2017.

Last month, some bitcoin and cryptocurrency market analysts pointed to comments made by China’s president President Xi Jinping that the country should “seize the opportunity” of bitcoin’s blockchain technology as the reason behind bitcoin’s sudden rally.

“We are already in a domain which has much less physical currency,” he said. “Whether we are in a domain where that will be replaced with crypto? I have doubts there.”

Trichet’s comments echo remarks made by new ECB president Christine Lagarde earlier this year when she warned cryptocurrencies are “shaking the system”—something that could signal a change in the ECB’s approach to bitcoin and crypto and potentially spur adoption.

Elsewhere, the last ECB president, Mario Draghi, has said that bitcoin and crypto “are not designed in ways that make them suitable substitutes for money.”


Vallejo Man Sentenced to Seven Years in Prison for Money Laundering

A 58-year-old Vallejo man will spend the next seven years in federal prison after a jury found him guilty of conspiracy to commit money laundering, two counts of substantive money laundering, and filing a false tax return, U.S. Attorney McGregor W. Scott announced on Thursday.

Marty Marciano Boone and his wife and co-defendant Ronda Boone, 56, filed separate false tax returns claiming that they were owed millions of dollars in refunds from the IRS, Scott said in a news release. While the IRS flagged Ronda Boone’s tax return as fraudulent and denied her claim, Marty Boone’s false return resulted in the IRS paying him over $1.9 million in a refund check.

The couple then laundered those funds through domestic and foreign accounts, including by establishing a shell corporation in Cyprus and a church in the state of Washington through which the defendants moved the fraudulently obtained money.

Ronda Boone is scheduled to be sentenced on Nov. 21. She faces a maximum penalty of 10 years in prison.

Council of Europe Anti-Money Laundering and Counter-Terrorist Financing Committee visits Georgia

Financing of Terrorism (MONEYVAL) carried out an onsite visit to Georgia from 4 to 15 November 2019.

The delegation was composed of MONEYVAL experts with a legal, law enforcement and financial background and supported by members of the MONEYVAL Secretariat. The delegation has been received by the Deputy Head of the Georgian Financial Intelligence Unit and by the First Deputy of the General Prosecutor’s Office. The delegation met with the authorities responsible for the Georgian anti-money laundering and countering the financing of terrorism (AML/CFT) system (i.e. competent ministries, criminal justice and operational agencies, financial sector bodies and supervisors of businesses and professions with AML/CFT obligations). The delegation also held meetings with a great number of private stakeholders (e.g. financial institutions, notaries, lawyers, real estate agents, and casinos) and representatives from non-profit organizations.

The delegation is tasked with analyzing – in the form of a mutual evaluation report – Georgia’s level of compliance with the Financial Action Task Force (FATF) 40 Recommendations and the level of effectiveness of Georgia’s AML/CFT system, and with providing recommendations on how the system could be strengthened.

The report will be scheduled for discussion and adoption at MONEYVAL’s 60th Plenary meeting: 29 June – 3 July 2020.

CipherTrace Urges Crypto Companies to Prepare for Anti-Money Laundering Compliance

By Rachel Wolfson

For better or for worse, the cryptocurrency space is coming of age. Since Bitcoin’s rise to mainstream prominence in 2015, there has been increasing recognition of digital assets from government agencies around the world. In turn, new regulations are being imposed to control the way cryptocurrency companies operate and do business globally.

Most recently, the Financial Action Task Force issued new guidelines on how digital assets should be regulated. In order to raise awareness around these requirements, the blockchain security company CipherTrace hosted a conference and hackathon this week in San Francisco dedicated entirely to discussions on the FATF guidelines, also known as the “travel rule.”

The travel rule requires regulators and Virtual Asset Service Providers, such as exchanges from various countries worldwide, to collect and share personal data during transactions. Much like the guidelines followed by traditional banks under the United States Bank Secrecy Act, the travel rule being enforced for crypto firms follow the same requirements as money transmitters do to record identifying information on all parties in fund transfers made between financial institutions.

Yet, unlike traditional financial firms, many cryptocurrency exchanges do not capture personally identifiable information by default. Complying with the travel rule will, therefore, require significant shifts for businesses operating in the crypto space.

“The new regulations coming from FATF will ultimately change the way crypto companies operate, requiring them to track not only their own customers’ transactions but also where their customers are sending money to,” Dave Jevans, CEO of CipherTrace, told Cointelegraph.

One of the main goals of the CipherTrace conference was to gather regulators, banks, crypto companies, and programmers together to make sense of the new guidelines, and then build a solution that would allow organizations to easily comply with the FATF rules.

“There are broad implications around privacy, identification of customers, how data works across various blockchains and privacy coins,” said Jevans. “We need to come up with solutions to ensure that companies can easily comply with these regulations, which is what we aim to achieve here.”

Companies must act now

Prior to working on a compliance solution at the hackathon, a number of panels highlighted the themes and main challenges surrounding the FATF regulations. While these rules are not yet legally binding — as the FATF said in a public statement in June that countries have until June 2020 to adopt the guidelines — a broad theme at the CipherTrace conference was that action must be taken immediately. The G-20 stated that it already uses the recommendations for anti-money laundering regulation of cryptocurrencies, so crypto companies that fail to comply with the new regulations are likely to face penalties.

“The consequences for non-compliance could range from a slap on the wrist, to going to jail if a company violates the Bank Secrecy Act,” Carol Van Cleef, CEO of blockchain consulting firm Luminous Group, warned on stage during the legal requirements panel. “No matter how big or small a company is, each has obligations to fulfil under the law.”

Although this may be the case, John Jefferies, CipherTrace’s chief financial analyst, pointed out that many companies operating in the cryptocurrency sphere have yet to comply with the new regulations.

“Many U.S. exchanges may not yet be compliant, but they should be at this time,” Jefferies said. “Moving forward, when Binance or Coinbase completes a transaction for example, they need to send the sender recipient data at the same time with that transaction. Otherwise, they are not in compliance.”

While most crypto companies are not yet compliant with the FATF regulations, Jevans, the CEO of CipherTrace, stressed the importance of getting everyone on the same page.

“Education is the main challenge we have to tackle first,” he said. “We need to know what the FATF laws are, why we should care and what can happen if companies don’t comply.”

The U.S. Treasury Department’s Financial Crimes Enforcement Network emerging technology policy specialist, Carole House, explained the FATF guidelines during her keynote. She highlighted that the guidelines are designed to curb the use of cryptocurrencies for financial crimes by making crypto transactions more traceable, giving regulators increased visibility into both cross-border and domestic currency transfers.

“Crypto companies need to comply with virtual currency recommendations by the end of June 2020. We’ve already been involved with a number of people from the Digital Commerce Association to provide commentary around accomplishing this,” House stated.

The regulations are clear — now what?

As the FATF regulations were brought to light, a number of challenges around ensuring compliance followed.

For instance, the question of how the FATF guidelines would relate to privacy coins was a pressing issue. One of the stated goals of privacy coins such as Monero and Zcash is to ensure that users have anonymized transactions, so it is questionable how these could be compliant with the new regulations.

During the privacy coin panel, Jack Gavigan, head of product and regulatory affairs at Zcash, asked, “Is compliance possible in relation to privacy coins?”

Answering his own question, Gavigan stated his belief that compliance is indeed possible, as a number of privacy coins are already listed in U.S. exchanges regulated by the Financial Crimes Enforcement Network.

Even though this may be the case, understanding how to abide by the FATF regulations in a way that focuses on privacy while maintaining the decentralized ethos of cryptocurrency and blockchain remains a challenge.

Jake Tarnow, a security software developer at CipherTrace, aimed to solve this problem during the hackathon. His team came up with an impressive solution that aims to keep data anonymous when information is being exchanged between Virtual Asset Service Providers.

“If VASP A is trying to send data to VASP B, we need to know how this can be done in a way that none of the information is in the clear,” Tarnow told Cointelegraph.

His solution entailed using a zk-SNARK — short for a “zero-knowledge succinct non-interactive argument of knowledge” — a form of cryptography that allows one party to securely reveal that it possesses a piece of information, without actually exposing the information itself.

“By using zk-SNARKs, VASPs can send this information in a bulletproof way, where no one else can pick that up and pull out their proprietary information,” explained Tarnow.

During the hackathon, developers also worked closely with security software gurus to integrate the Travel Rule Information Sharing Architecture into their systems. CipherTrace announced the release of TRISA in September as an open-source, peer-to-peer design for cryptocurrency companies and blockchain projects to comply with the FATF regulations.

TRISA is meant to provide secure, reliable delivery of personally identifiable information, or PII, to the correct VASP, eliminating a huge risk for exchanges. However, sharing PII is prone to spamming, a problem that developers at the CipherTrace hackathon aimed to solve.

“Various backend systems managing PII are vulnerable to spamming, as spammers can get into these systems and start asking people to send PII,” explained Jefferies.

Independent consultant Kenneth Kron and his team won first place in the hackathon for coming up with a solution that introduces PII tokens to prevent spamming in TRISA.

“We want to solve the problem of PII spamming in TRISA by introducing PII tokens and KYC providers who can generate enhanced KYC tokens. If spammers are trying to capture personal information and get a hit, all they get back is a token in this case,” Kron told Cointelegraph.

All the ingredients for a compliance recipe

Overall, the CipherTrace conference and hackathon gathered a unique mix of individuals to discuss the future of cryptocurrency regulations. The discussions throughout the event demonstrated that action must be taken now to ensure that crypto companies are compliant with the FATF regulations by June 2020.

“We gathered many tribes that do not typically interact, enabling experts from government, exchanges and privacy groups to understand each other’s diverse perspectives,” Jefferies told Cointelegraph after the conference. “The conversations instilled a sense of urgency in the community and TRISA, while creating an open-source path to meet these tight regulatory deadlines and defend privacy at the same time.”

4 American Airlines Flight Attendants Arrested on Money Laundering Charges After Trip From Chile

By Paulina Dedaj

Four Chilean nationals working as American Airlines flight attendants were arrested this week on money laundering charges after federal agents say they were found with more than $22,000 in cash.

U.S. Customs and Border Patrol agent was performing a routine check at Miami International Airport on Monday when he came across one of the flight attendants, identified as Carlos Alberto Munoz-Moyano.

Three other women traveling with Munoz-Moyano were also arrested after reportedly telling federal agents they were smuggling the cash on behalf of someone else. It is unclear if the suspects were working on the flight when it arrived in Miami.

The arrest report stated that 55-year-old Maria Del Pilar Roman-Strick had $7,300 and 48-year-old Maria Wilson-Ossandon had $6,371.

Maria Pasten-Cuzmar also was arrested with no cash on her, but agents say the other three named her as the director of the illicit operation, the Miami Herald reported.

A spokesperson for American Airlines told Fox News on Wednesday: “We take this matter seriously and are cooperating with law enforcement throughout their investigation.”

He also confirmed that they were all Chilean citizens and that the state would be handling the case after the U.S. attorney declined the case.

Each suspect faces charges of money laundering and transmitting unauthorized money.

Silk Road Seller Pleads Guilty to Money Laundering $19 Million With Bitcoin

By Danny Nelson

A former narcotics trafficker pled guilty to charges that he laundered $19 million in profit through Silk Road.

Prosecutors with the Southern District of New York announced a plea deal with Hugh Brian Haney on Thursday, adding another postscript to the infamous dark web marketplace’s history. According to a press release, Haney was accused of laundering close to $20 million using bitcoin in early 2018.

Silk Road was among the dark web’s earliest drug marketplaces and a haven for its bitcoin-accepting vendors until its operator, Ross Ulbricht, was arrested in October 2013 and the site was shut down. Ulbricht is currently serving a life sentence on charges of narcotics distribution, computer hacking and conspiracy.

Haney was one of the sellers who used the marketplace. According to the prosecutors, Haney was a “high-ranking member” of a narcotics outfit known as Pharmville, and is said to have received nearly 4,000 bitcoin from Silk Road-linked accounts through February 2012. According to the complaint, he trafficked in fentanyl, oxycontin and other narcotic sales.

“Hugh Haney used Silk Road as a means to sell drugs to people all over the world,” U.S. Attorney Geoffrey S. Berman said in a statement. “Then he laundered more than $19 million in profits through cryptocurrency.”

He was caught after liquidating his remaining bitcoins on an exchange for $19,147,053 in January and February 2018. The unnamed company froze his account and launched an internal investigation that ultimately led to a search warrant. Haney was arrested in July 2019.

Initially, Haney claimed his bitcoin came from a mining operation. But investigators used “blockchain analysis software” to show the funds came from Silk Road, according to the July complaint.

According to his plea deal, Haney pled guilty to one count of concealing money laundering and one count of engaging in a financial transaction in criminally derived property. He is set to be sentenced in February 2020.


Active-duty Fort Carson Soldier Arrested for Money Laundering and Criminal Impersonation

By Toni Keith

FOUNTAIN, Colo. (KKTV) – An active-duty Fort Carson soldier is facing a long list of charges after police say he used social media to take advantage of people.

The Fountain Police Department announced the arrest of 22-year-old Christian Johnson on Wednesday. Investigators believe he was advertising on social media for assistance to help cash checks. The victims would pay a certain amount and the rest of the money was given to Johnson in cash. The checks were fraudulent and did not clear with the bank, forcing the victim to owe or lose money.

Multiple transactions occurred in Fountain and Colorado Springs.

Johnson was booked into the El Paso County Criminal Justice Center and is being charged with money laundering, forgery, criminal impersonation, issuing false financial statements, fraud and bait advertising.

If you believe you were a victim of Johnson in reference to cashing checks, you can call Officer Daly at 719-382-4234.

Anyone with information, or is a witness to this investigation, is asked to call the El Paso County Sheriff’s Office Communication Center at (719) 390-5555

Lawyer Made Millions Laundering Money in Crypto Scam, U.S. Says

By Bob Van Voris

Mark Scott got a nice bump when he left his partnership at a big law firm and took up money laundering for a multibillion-dollar international pyramid scheme based on the fake cryptocurrency OneCoin, federal prosecutors say.

Scott, who has pleaded not guilty, is accused of using a network of shell companies, offshore bank accounts and phony investment funds to hide the origin of $400 million in illegal proceeds. He made millions, which he used to buy a 57-foot yacht, multimillion-dollar homes in Cape Cod, Massachusetts, and luxury cars, including three Porsches, Assistant U.S. Attorney Julieta Lozano told jurors on Tuesday in her opening statement in Scott’s criminal trial in Manhattan.

“The scheme raked in billions of dollars in dirty money,” Lozano said. “It was the defendant’s job to clean that money.”

OneCoin generated 3.4 billion euros ($3.8 billion) in revenue from the fourth quarter of 2014 to the third quarter of 2016, according to the government, but had no real value and couldn’t be used to buy anything.

The company that allegedly ran the scheme, OneCoin Ltd., claimed to have more than three million members worldwide. It operated as a multilevel marketing network that paid commissions to members for recruiting others to buy OneCoin packages, prosecutors say.

Scott, 51, is a former partner with Locke Lord LLP, a U.S.-based law firm with 21 offices including Houston, Dallas, and Chicago. He was arrested in September 2018 in Barnstable, Massachusetts. He’s charged with one count each of money-laundering conspiracy and bank-fraud conspiracy and could spend years in prison if convicted.

Also charged in the case are Ruja Ignatova, one of two people who founded OneCoin in 2014 in Sofia, Bulgaria, and her younger brother Konstantin Ignatov. Ignatova, known at OneCoin’s peak as the “cryptoqueen,” disappeared in 2017 as OneCoin came under suspicion. Ignatov was arrested at Los Angeles International Airport in March and is in custody. He’s testifying as a witness for the government.

On Tuesday, Scott’s lawyer told jurors his client didn’t realize OneCoin was based on a worthless electronic currency. Scott believed he was running his own legitimate investment fund with money from his client, Ignatova, who is to blame for the fraud, he said.

“He did not know that OneCoin was a scam,” the lawyer, Arlo Devlin-Brown, told jurors. “Mark is one of the people that she lied to.”

The case is U.S. v. Scott, 17-cr-630, U.S. District Court, Southern District of New York (Manhattan).