How Wells Fargo Uses AI, Biometrics To Fight Money Laundering

Digital banking customers of today aren’t looking for the bank with the newest features — they’re looking for the bank that can keep their data safe. Any security mishap can send customers to one of the other digital banking apps that are ready and waiting for them.

In the new Digital Banking Tracker™, PYMNTS examines the ways digital banking is changing as security measures grow more stringent, and challenger banks look to amass more customers.

Around the Digital Banking World

One such brand looking to expand within the next year is German challenger bank N26, which is seeking to branch out of its native Europe and into the United States. Following a funding round of approximately $300 million, the fully digital bank is aiming to compete with both U.S. incumbents and challengers by the end of 2019. The challenger’s expansion comes as banks around the world are launching platforms of their own, including financial institutions (FIs) in Thailand and the Philippines.

Thailand’s United Overseas Bank, for one, is opening a fully digital brand this year called TMRW. The digital bank is designed to target millennial consumers who are more comfortable using digital services, and comes equipped with live chat features to support digitally native conversations.

Meanwhile, several global scandals have brought the importance of anti-money laundering (AML) protections to the forefront. The more than $220 billion money laundering scandal involving Estonia-based Danske Bank continues to affect the global banking world. Several banks, including Germany’s Deutsche Bank, are caught in the crossfire, with their own AML protections coming under scrutiny from German regulators.

Tapping into Emerging Tech: How Wells Fargo is Fighting Fraud

To protect against the rise of money laundering and digital fraud hammering banks, many are turning to new technologies to stem the tide. Wells Fargo, for one, is using artificial intelligence (AI) and biometric authentication tools in combination to track patterns that human analysts overlook, according to Chuck Monroe, head of AI enterprise solutions for Wells Fargo.

“We’re using AI to go through and look across the internet, including the deep dark web, [for] signals that would apply to a particular AML situation,” Monroe said in a recent interview with PYMNTS. “There are lots of opportunities in the AML space to leverage AI to look much [deeper], because no human could do that level of investigation.”

To learn more about how Wells Fargo is using AI and biometrics for AML, take a look at the Tracker’s feature story.

Deep Dive: Digital Banking and Anti-Money Laundering

As the banking world gets more digital and interconnected, many banks are starting to worry about money laundering. Take the banks that were engaging in routine business with Danske Bank, for example. Several of those banks are now being examined by regulators to ensure that they’re staying compliant with AML rules to keep launderers out.

That said, the digital banking world is expanding quickly, which means that banks across the globe need to keep a careful eye on the methods they’re using for AML and other fraud protections. To find out how banks are upgrading their security, take a look at the Tracker’s Deep Dive.

About the Tracker

The Digital Banking Tracker™, in collaboration with Feedzai, brings the latest news, research and expert commentary from the FinTech and consumer banking space. It also includes a provider directory that features the rankings of more than 250 companies serving or powering the digital banking sector.

Crypto Activist and Bitcointopia Founder Pleads Guilty to Charges: Land Fraud, Money Laundering

By Bitcoin Exchange Guide News Team

The way to bitcoin-utopia is laden with regulatory issues and scam artists. In a recent confession, Morgan Rockoons the founder of Bitcointopia and a well-known crypto activist has conceded to both charges against him in two bitcoin-related cases.

He had been charged with an illegal wire transfer as well as being party to a real estate scam venture.

What was going on with money laundering?

In early 2018 Morgan Rockoons was under the microscope as the government came down heavily on him for money laundering. As such activities make traceability of money extremely hard and raise fears of funding criminal activities, this is considered pretty serious and dealt with appropriately.

When the case came out, news outlets were projecting this as a test case to see how far the judiciary of the land was willing to loosen the leash and allow cryptocurrency advocates to trade in fiat currency.

However, the events that transpired seem to suggest this has little to do with Crypto and more with a trader not following clearly laid down rules. According to the officials, Morgan Rockoons was running his operation without the requisite license and not following protocol. He is alleged to have transferred “about $9,200 in bitcoin to the agent for $14,500 in cash, taking the remainder as a transaction fee”.

That is exactly what the recent plea also seems to bring into focus; that the whole case had more to do with business fraud than any precedent-setting cryptocurrency case. This appears to be a simple case of a business being charged for money transmission violations without a proper financial license.

The Bitcoin City dream in ashes

At the time of his arrest, Rockoons was rather boisterous and was playing up his crypto credentials. After being released on bail he had started pushing the blockchain agenda more. And one of the ventures he advocated was a plan to start an idealistic community. He quickly went about advertising this “Bitcoin City”.

Soon all his channels and associates were pushing for this, a Disneyland-Ishq venture. To this end, the Bitcointopia Inc was launched giving everyone the impression Morgan Rockoons was a visionary and futurist.

However, this all came crashing down when he was arrested again. This time the prosecution alleged that the whole scheme was a fraud. Rockoons and his partners had pushed to sell almost a 1000 acre of undeveloped land in Elko County, Nevada to build a city centered around automation and blockchain technology.

As facts came out it became apparent that most of this was federally owned land with only about 10 odd acres in the embattled CEOs or his company’s name. In January, he seemed to be more combative, twitting:

” I am going to court on Monday at 2 PM, in room 4A, if you support me and my mission to protect Bitcoin & build a Bitcoin City please come to court and show support, it would mean the world to me, PS, Jail Sucks, Love Morgan, From FEDERAL PRISON XO”.

Yet that fire seems to have been extinguished in a little over a month as on the 8th of this month he pleads guilty to both charges of wire and land fraud.

As this publication has repeatedly stated, the actions of individuals cannot and should not reflect on the technology. Unlike men ideas are incorruptible. The idea of a freer and more transparent future should not get muddled by the actions of someone.

Weather Rockoons actions were deliberate or misinformed if a law has been broken and a fair trial has ensued then punishment should ensue.

Crypto Money Laundering Cases in Japan Dramatically Shoots Up 10-Fold

By Yashu Gola

Suspicious financial transactions filed by Japan-based cryptocurrency exchanges increased ten times over the previous year, according to the National Police Agency.

The central enforcement body said Feb 28 that 7,096 out of the total 417,465 suspected money laundering cases mentioned the use of cryptocurrencies in 2018. In the period between April and December 2017, the agency had reported 669 of such cases, after it became compulsory for crypto services to report suspicious dirty money transactions under an amended ‘Law for Prevention of Transfer of Criminal Proceeds.’

ORGANIZED CRIME, DRUGS PEDDLING, AND WHATNOT

NPA noted that criminals were using a variety of tricks to conceal their identities during a mandatory know-your-customer procedure. In many instances, suspected offenders had different names and birth dates but the same ID photo. In a few cases, users logged into cryptocurrency exchanges from abroad even though they said they were in Japan. The agency also noted that criminals were allegedly using cryptocurrencies to purchase drugs and child pornography from underground online marketplaces.

NPA acknowledged that the number of confirmed money laundering cases in 2018 had touched a high of 511. That marked a 42-percent jump over the previous year. The agency confirmed that in 377 cases, offenders had a definite motive to cover up the proceeds of criminal activities. At the same time, 36 among these cases involved organized crime organizations, a 57-percent increase than in 2017.

Nevertheless, banks, payment firms, and credit card service providers reported more suspicious money laundering transactions than cryptocurrency exchanges in 2018. The NSA noted that banks and other financial institutions had listed 346,014 cases. At the same time, they received reports of 15,114 irregular economic activities from credit card firms.

On the whole, NPA handed 8,259 cases to higher authorities and kept 1,124 cases that involved fraud with itself. It is reportedly investigating the rest of the cases, the outcome of which would take its course of legal action.

TACKING CRYPTO CRIMES

Despite being a crypto frontrunner when it comes to regulation, Japan had suffered a series of significant setbacks. The country’s crypto records are full of crypto thefts already. Atop that, an increase in money laundering crimes prevents their crypto sector from growing to its full potential.

In its response, NPA plans to train technologists in data analysis, and build newer artificial intelligence tools that would detect anomalies in cryptocurrency trading. Per the agency, their new workforce will detect patterns that relate cryptocurrencies with drugs and money laundering crimes.

On the regulatory front, Japan’s financial regulator, the Financial Services Agency, has mounted its surveillance on local cryptocurrency exchanges to prevent crimes related to money laundering and terrorist financing.

Cryptocurrency Money Laundering: Alarming New Trends

By Nick Holland

Despite the value of cryptocurrency plummeting since 2017, cybercriminals and rogue nations are still using it to launder funds. One new scheme is “crypto dusting,” according to CipherTrace founder and CEO, Dave Jevans, who discusses the results of the company’s latest Cryptocurrency Anti-Money Laundering Report.

“This is when the bad guys, who typically operate money laundering operations and crypto, want to disable the ability of anti-money laundering and investigation tools,” Jevans explains in an interview with Information Security Media Group. “So what they’re doing is sending tens of thousands of people a week very small amounts of cryptocurrency that has obviously gone through money laundering services … so that everyone active in crypto is getting a negative reputation. Therefore tools that use reputation scoring don’t work anymore.”

In this interview (see audio link below photo), Jevans also discusses:

  • Cryptocurrency money laundering by nation-states, including Iran and Venezuela, to avoid economic sanctions;
  • The rise of cryptocurrency heists in 2018 despite a significant decrease in the value of many currencies;
  • The potential impact regulations could have on cracking down on cryptocurrency money laundering schemes.

Jevans is the founder and CEO of CipherTrace, which specializes in blockchain security and anti-money laundering compliance. He has 20 years of experience in the security and payments markets. He holds 17 U.S. patents in cybersecurity and has founded and sold three cybersecurity startups. He also serves as the chairman of the Anti-Phishing Working Group, a consortium of more than 1,500 government agencies, financial services companies, ISPs, law enforcement agencies and technology vendors.

Here’s how criminals use Bitcoin to launder dirty money

By David Canellis

Since 2009, estimates suggest criminals have used the hyper-connected cryptocurrency ecosystem to launder well over $2.5 billion worth of dirty Bitcoin $BTC▼1.83%.

Contrary to popular opinion, it’s actually quite easy to link Bitcoin transactions together in order to identify you. This should be obvious, considering public blockchains are totally transparent and browsable by anyone.

Still, dumb criminals are constantly caught for using Bitcoin in illicit activities.

This is because Bitcoin is not anonymous. In fact, there are barely any cryptocurrencies on today’s market that are capable of masking identitieswhen sending, receiving, and spending cryptocurrency.

So, ever wonder how these cyberbaddies are turning ill-gotten money, too sketchy for use in the real world, into clean cryptocurrency?

Let’s take a quick look at how they do it, for science!

Mixing services split up Bitcoin, only to reassemble it

Bitcoin mixers (also known as “tumblers”) purportedly clean dirty cryptocurrency by bouncing it between various addresses, before recombining the full amount through a Bitcoin wallet hosted on the dark web.

They’re a little painstaking to use, and definitely not free (standard fees will range from 1-3 percent of the cryptocurrency to be mixed).

You’ll need one Bitcoin wallet hosted on the ‘clearnet,’ (a fancy word for the standard internet). Also, you should open two or more Bitcoin wallets that run exclusively on the dark web (there are a few of these wallets available, but be careful!).

And of course, some Bitcoin to mix.

To start, Bitcoin is sent from a clearnet wallet to one of the hidden Torwallets. These kinds of transactions are called ‘hops,’ and can be done multiple times across dark web Bitcoin addresses, adding a layer of obfuscation with every ‘hop’.

With it stored on a dark web wallet, it’s time to run it through a tumbler. There are many mixing services that claim to be reputable, and charge various fees depending on the level of anonymity requested by the user, but it’s not up to me to show you where they are.

The tumbler will automatically split the Bitcoin up across multiple transactions, sending it at randomized intervals to enough Tor-hosted Bitcoin addresses that the ability to link the transactions together in a meaningful way is removed.

Once the tumbling is complete, the Bitcoin supposedly ‘clean’ enough to deposit on a cryptocurrency exchange to be traded for other cryptocurrencies, or even fiat.

It should be noted that researchers have studied these mixing services to determine just how effective they are. Unfortunately, they found even the most well-known and established ones had serious security and privacy limitations, highlighting the danger of using such services for criminal activities.

Bitcoin is easily laundered through unregulated exchanges

Unregulated cryptocurrency exchanges (those without Know-Your-Customer and Anti-Money-Laundering (KYC/AML) procedures, such as identity checks) can also be used to ‘clean’ Bitcoin, even without using a cryptocurrency mixing service beforehand.

This is done by simply trading the Bitcoin a number of times across various markets. For example, a user can deposit onto an unregulated exchange, swapping it for various altcoins.

Each time a trader exchanges cryptocurrency for another, they are adding degrees of privacy similar to ‘hopping’ between wallet addresses. Although, how effective this is depends heavily on the exchange’s monitoring technology, so this might not be a totally airtight solution.

The user can then withdraw their cryptocurrency to an external cryptocurrency wallet via other anonymous exchange accounts they own. Depending on the exchange, they could convert it to allegedly ‘clean’ fiat, but fiat markets on unregulated exchanges are hard to come by, and often shortlived.

Inevitably, money launderers turn to shady peer-to-peer markets and other nefarious deeds to turn their Bitcoin into cash. In 2016, Dutch police swooped on an international money laundering ring, seizing bank accounts, Bitcoin, luxury cars and ingredients for ecstasy.

Still, a few months back, researchers found unregulated cryptocurrency exchanges receive an overwhelming majority of the internet’s dirty Bitcoin. Even worse, the exchanges in countries where there is little-to-no AML regulations actually receive 36-times more Bitcoin from money launderers than those with appropriate rules in place.

Researchers estimated that after Bitcoin has been cleaned on exchanges, 97 percent of it ends up in countries with extremely lax KYC/AML regulations.

It’s also worth mentioning there are slightly less illegal (but still questionable) uses of these mixing services. In particular, regulated exchanges like Coinbase monitor their networks for possible interactions with prohibited cryptocurrency gambling sites.

As such, cleaning digital funds exposed to blockchain casinos before depositing to Coinbase and the like is an often-cited use-case, beyond the ultra illegal money laundering.

Bitcoin’s ‘First Felon’ Faces More Legal Trouble

Charlie Shrem went to prison in 2015 after he pleaded guilty to helping people buy drugs online. Now he’s being sued by the Winklevoss twins.

SAN FRANCISCO — Over the last year, Charlie Shrem, a 28-year-old Bitcoin investor, has bought two Maseratis, two powerboats — one of them 32 feet long — and a $2 million house in Florida, along with smaller pieces of real estate.

In the world of cryptocurrencies, where millions can be made and lost in a day, that might not make Mr. Shrem stand out. But unlike most Bitcoin entrepreneurs, in 2016 Mr. Shrem got out of prison, where he spent a year after pleading guilty to illegally helping people turn dollars into Bitcoin to buy drugs online.

Mr. Shrem, who had been the chief executive of Bitinstant, one of the first prominent Bitcoin businesses in the United States, has said in recent interviews that he went to prison with almost no money.

So where did the money for the expensive toys come from? That’s what two former business partners want to know.

Cameron and Tyler Winklevoss, the twins who turned money from a settlement with Facebook’s Mark Zuckerberg into a Bitcoin fortune, said they suspected Mr. Shrem had actually been spending Bitcoin that he owed them since 2012, according to a lawsuit unsealed in federal court on Thursday. The Bitcoin would be worth around $32 million at current prices.

“Either Shrem has been incredibly lucky and successful since leaving prison, or — more likely — he ‘acquired’ his six properties, two Maseratis, two powerboats and other holdings with the appreciated value of the 5,000 Bitcoin he stole from” the Winklevoss twins in 2012, the lawsuit says.

The judge who oversaw Mr. Shrem’s earlier trial has already agreed to freeze some of Mr. Shrem’s financial assets, according to court documents.

The lawsuit could blossom into an even bigger problem for Mr. Shrem because an affidavit filed in court suggests that Mr. Shrem has also not paid the government $950,000 in restitution that he agreed to as part of his 2014 guilty plea.

Mr. Shrem’s lawyer, Brian Klein, said in a statement that the claims by the Winklevoss brothers were baseless. “The lawsuit erroneously alleges that about six years ago Charlie essentially misappropriated thousands of Bitcoins,” he said. “Nothing could be further from the truth. Charlie plans to vigorously defend himself and quickly clear his name.”.

The lawsuit from the twins threatens another reversal of fortune for Mr. Shrem, who went from being one of the earliest Bitcoin millionaires to being called Bitcoin’s “first felon.”

When he was arrested in 2014, Mr. Shrem was accused by federal authorities of using his company, Bitinstant, to knowingly sell Bitcoin to people who wanted it to buy drugs from the online black market, Silk Road.

Since his release in 2016, Mr. Shrem has said in numerous interviews that he recognizes his past mistakes and wants to cut a new and legal path. On the podcast “Love, Sex and Money,” Mr. Shrem said that in the first months out of prison, he worked as a dishwasher and didn’t look at his email.

Over the last year, though, Mr. Shrem, has already gotten involved with a number of troubled projects.

He was among the leaders of two efforts — one a cryptocurrency credit card and the other an initial coin offering — that had to give money back to investors after various partnerships that Mr. Shrem had promised fell through.

But those are likely to be mere headaches compared to what he could face in a confrontation with the Winklevoss twins. Mr. Shrem helped get the brothers interested in Bitcoin in 2012 and became their first adviser in the young industry.

A few months into this partnership, the twins said they realized that Mr. Shrem had not given them all the Bitcoin they were due. The brothers gave Mr. Shrem $250,000 in September 2012, but the lawsuit says that a month later, he only delivered around $189,000 worth of Bitcoin at the going price, which was around $12.50 at the time.

The 5,000 or so missing Bitcoins became a point of tension between the twins and Mr. Shrem. They asked him numerous times for an accounting of the Bitcoins he had purchased and eventually brought in an accountant who documented the missing funds, according to court documents.

“I have been patient and at this point, it’s getting a bit absurd,” Cameron Winklevoss wrote to Mr. Shrem in 2013 in an email quoted in the lawsuit. “I don’t take this lightly.”

The missing Bitcoin, which were worth 98 percent less at the time, appeared to have been forgotten in a broader battle between the brothers and Mr. Shrem over an investment in Bitinstant.

In 2013, Bitinstant fell apart and the twins blocked Mr. Shrem’s efforts to revive the company with new investors because of their concerns about his management style. By the time Mr. Shrem was arrested in 2014, as a result of activities at Bitinstant that took place before the brothers invested, they had cut off contact with him.

The Winklevoss twins’ problems with Mr. Shrem have not held them back. They were briefly each cryptocurrency billionaires last year, and they have built one of the leading cryptocurrency exchanges, Gemini. Despite this year’s big drop in cryptocurrency prices, their holdings are still worth nearly a billion dollars.

Cameron Winklevoss said that he and his brother decided to pursue the missing Bitcoins again after they saw Mr. Shrem’s recent spending patterns.

“When he purchased $4 million in real estate, two Maseratis, and two power boats, we decided it was time to get to the bottom of it,” Mr. Winklevoss told The New York Times.

The brothers hired an investigator, who found that 5,000 Bitcoins were transferred in 2013 through addresses associated with Mr. Shrem and onto the Bitcoin wallet services Xapo and Coinbase, according to the complaint. The investigator traced the money on the blockchain, the public ledger where all Bitcoin transactions are recorded.

Jed S. Rakoff, a judge in the Federal District Court for the Southern District of New York, approved an application the twins made in September to freeze any funds that Mr. Shrem holds with those companies. Judge Rakoff wrote in his order that Mr. Shrem had “evidenced an intent to frustrate the collection efforts of his creditors.”

The court fight could cause problems for Mr. Shrem’s latest venture, a firm called Crypto.IQ. The company, which promises market intelligence to Bitcoin traders, is holding a conference for customers in Las Vegas this month promising “unparalleled insights from a roster of experts at the very epicenter of the crypto universe.”

In an interview with Breaker magazine last month, Mr. Shrem said he was getting used to the ups and downs.

“My personal life goes through bull and bear markets, too,” he said. “So the key is how to deal with it when you’re in the bear markets.”

Bitcoin [BTC] worth $5.84 million stolen from MapleChange; Binance CEO gives his insight

MapleChange, a Canada-based cryptocurrency exchange, recently announced that their platform was hacked. The exchange platform took to their Twitter handle to provide clarity on the situation, stating that they could not refund the stolen cryptocurrencies.

According to their official post, a bug on the platform enabled a group of hackers to withdraw funds remotely. The platform reported that 913 Bitcoins [BTC] were stolen and that they cannot refund any of the funds until a “thorough investigation” was conducted.

Another controversial aspect was that the “thorough investigation” resulted in the exchange platform realizing that they did not have funds for repaying its users. Furthermore, they stated that the platform would not function anymore and that they would soon deactivate their social media channels. Their official post stated:

“We have sustained a hack, and we are investigating the issue.”

On their official Twitter handle, the exchange stated that they had not “disappeared”, but had temporarily turned off their accounts to think of a solution.

In addition, they could not refund “everyone with all their funds”, but would soon open wallets in order to allow its users to “hopefully” withdraw whatever funds were left on the exchange. They added:

“We CANNOT refund any BTC or LTC funds unfortunately. We will try our best to refund everything else.”

Changpeng Zhao, the CEO of Binance, the world’s largest cryptocurrency exchange in terms of trading volume, was surprised by the hack and stated that a procedure was required to rank exchanges based on their wallet storage. He added that users had to avoid using exchange platforms which did not have anything in their cold wallets.

Maplechange’ed, a platform dedicated to find, take down and expose maplechange.com, with the help of members from the Lumeneo [LMO] telegram channel, allegedly found that Glad Poenaru, a service technician at American Piledriving Equipment, could have been responsible for the hack.

Joseph Young, a cryptocurrency investor and analyst, stated:

“A small crypto exchange pulled off an exit scam, taking all customer funds. There is no incentive for using small exchanges. Use established exchanges that are regulated, & transparent. Small exchanges also focus on maximizing profitability, not security or investor protection.”

MapleChange further added:

“We are sending all of the coin developers the wallets containing the coins we have left. So far, LMO and CCX have been handed over the funds.”

https://ambcrypto.com/bitcoin-btc-worth-5-84-million-stolen-from-maplechange-binance-ceo-gives-his-insight/

How Binance is Legitimizing the Crypto Market by Eliminating Money Laundering

Binance, the world’s largest crypto exchange, has voluntarily engaged in an initiative to eliminate money laundering on its platform.

For years, despite the inherent lack of privacy measures on major public blockchain networks like Bitcoin and Ethereum that discourage the settlement of illicit transactions, a widely pushed narrative against crypto has been the suspected usage of digital assets by criminals.

Eliminating Easily Refutable Claims

Bitcoin, Ethereum, Ripple, Bitcoin Cash, EOS, and many other major cryptocurrencies are not anonymous by nature. With Know Your Customer (KYC) and Anti-Money Laundering (AML) systems integrated by cryptocurrency exchanges, it is extremely difficult for criminals to utilize digital assets to settle the transfer of illegal proceeds.

Authorities and government agencies across the globe are well aware of the non-anonymous characteristic of blockchains, which could have motivated governments like the US, Japan, and South Korea to legitimate and recognize the cryptocurrency market.

This week, Binance has started to cooperate with Chainalysis, a leading blockchain analysis company that evaluates suspicious transactions and addresses, to improve its AML system and to further legitimize the cryptocurrency sector.

binance cryptocurrency exchange

“Cryptocurrency businesses of all sizes face the same core challenge: earning the trust of regulators, financial institutions and users. We expect many to follow Binance’s lead to build world-class AML compliance programs to satisfy regulators globally and build trust with major financial institutions,” said Jonathan Levin, co-founder and COO of Chainalysis.

In 2018, some of the world’s most influential banks were cracked down for money laundering. Danske Bank laundered $243 billion from criminal groups, and as CCN reported on October 20, Nordea Bank, the largest financial group in the Nordic countries, is said to have taken several illicit payments from banks in the Baltic region.

With the institutional market of cryptocurrencies growing exponentially, the tightening of AML systems employed by public exchanges is expected to solidify cryptocurrencies as a recognized asset class and the digital asset market as a well-regulated sector.

Wei Zhao, the CFO at Binance, said that maintaining the firm’s vision of increasing the freedom of money globally, the exchange will continue to adhere to regulatory mandates in the countries it operates in.

“By working with Chainalysis, we are able to continue building a foundational compliance program that enables the next phase of our growth. Our vision is to provide the infrastructure for a blockchain ecosystem and increase the freedom of money globally, while adhering to regulatory mandates in the countries we serve.”

Importance of Compliance

The cryptocurrency sector is entering a new phase of development and growth, as Zhou explained.

During the 2017 bull market in which the valuation of the cryptocurrency market surged to $800 billion, the asset class obtained significant mainstream awareness in both countries that support crypto and regions that have established impractical regulatory frameworks to prevent local blockchain markets to flourish.

In a period in which governments are introducing increasing efforts to embrace crypto and blockchain businesses as a part of the fourth industrial revolution, voluntary initiatives by companies like Binance to legitimize the industry will ease the process of governments in regulating and acknowledging the global market.

https://www.ccn.com/how-binance-is-legitimizing-the-crypto-market-by-eliminating-money-laundering/

Dark Web Dealer ‘OxyMonster’ Forfeits $700,000 in Crypto with 20-Year Prison Term

US District Judge Robert Scola has imposed a 20-year prison sentence on 36 year-old Gal Vallerius also known as “Oxymonster” on the dark web drug hub Dream Market.

In June, CCN reported that the French-Israeli citizen was apprehended by police at Atlanta airport in 2017 while attending the World Beard and Moustache Championship in Austin Texas. He will now start his prison term in Southern Florida after being convicted of money laundering and narcotics trafficking.

Huge Crypto Seizure

In his plea agreement, Vallerius admitted to selling drugs like oxycodone, heroin, cocaine, fentanyl and Ritalin in exchange for cryptocurrencies including bitcoin and bitcoin cash on the dark web. More than 100 BTC and 121.95 BCH – equivalent to over $700,000 – seized from him as proceeds of illicit activity will now be forfeited to the government.

For many, the big question following the forfeiture is: “What becomes of this huge amount of crypto in the hands of the U.S. government?”

A development of this nature is not new. In 2015, after Silk Road creator, Ross Ulbricht was given a life sentence, the government took possession of 144,336 BTC found on his laptop. At a time when the price of one bitcoin was just over $300, the government realized a total of over $48 million selling to multiple auctions. Some later criticized the government’s hasty sale which prevented it from earning far more.

With his plea agreement, sources say Vallerius would have to “provide all necessary passwords” to enable the government gain access. It remains uncertain if the government will take similar action to that taken of Silk Road, or delay auctions till prices show upward movement. The rarity of this situation makes it hard for analysts to predict what decision the government will make.

Earlier this week, Irish native Gary Davis pleaded guilty to conspiring to sell drugs on the Silk Road under the alias Libertas. In 2017, the District Court in California also seized over $8 million worth of cryptocurrency from Alexandre Cazes who committed suicide in Thailand after being accused of running a dark web market AlphaBay. With more cases related to crime which might ultimately lead to similar forfeitures, the U.S. government might just be dealing with crypto auctions more regularly.

Some have however suggested that at a time when the U. S. Justice Department is investigating the possible manipulation of cryptocurrency prices, crypto acquired through the legal system is somewhat unlikely to last in the custody of government for long.

https://www.ccn.com/dark-web-dealer-oxymonster-forfeits-700000-in-crypto-with-20-year-prison-term/

Bitcoin Hedge Fund and CEO Slapped With $2.5 Million Penalty for Ponzi Scheme

A New York federal court has ordered cryptocurrency hedge fund Gelfman Blueprint, Inc. (GBI) and its CEO Nicholas Gelfman to pay over $2.5 million for operating a fraudulent Ponzi scheme, according to an official announcement published Oct. 18.

GBI is a New York-based corporation and denominated Bitcoin (BTC) hedge fund incorporated in 2014. As stated on the company’s website, by 2015 it had 85 customers and 2,367 BTC under management.

The order is the continuation of the initial anti-fraud enforcement action filed by the U.S. Commodity Futures Trading Commission (CFTC) against GBI in September 2017. The CFTC charged GBI for allegedly running a Ponzi scheme from 2014 to 2016, telling investors that it had developed a computer algorithm called “Jigsaw” which allowed for substantial returns through a commodity fund. In reality, the entire scheme was a fraud.

Per the announcement, GBI and Gelfman fraudulently solicited over $600,000 from at least 80 customers. Moreover, Gelfman set up a fake computer “hack” to conceal the scheme’s trading losses. It eventually resulted in the loss of almost all customer funds.

The current order charges GBI and Gelfman to pay over $2.5 million in civil monetary penalties and restitution. GBI and Gelfman are ordered to pay $554,734.48 and $492,064.53 in restitution to customers and $1,854,000 and $177,501 in civil monetary penalties, respectively.

James McDonald, the CFTC’s Director of Enforcement, said that “this case marks yet another victory for the Commission in the virtual currency enforcement arena. As this string of cases shows, the CFTC is determined to identify bad actors in these virtual currency markets and hold them accountable.”

Last month, the CFTC filed a suit with the U.S. District Court for the Northern District of Texas against two defendants for the allegedly fraudulent solicitation of BTC. Per the suit, defendants Morgan Hunt and Kim Hecroft were running two fraudulent businesses and misleading the public to invest in leveraged or margined foreign currency contracts, such as forex, binary options, and diamonds.

https://cointelegraph.com/news/bitcoin-hedge-fund-and-ceo-slapped-with-25-million-penalty-for-ponzi-scheme
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