Australia proposes stronger money laundering rules, includes bitcoin

SYDNEY (Reuters) – Australia said on Thursday it would strengthen its money laundering laws, including bringing bitcoin providers under the government’s financial intelligence unit, days after a fresh scandal at one of the country’s biggest banks.

The government said a coming bill would be the first stage of reforms to strengthen the country’s Anti-Money Laundering And Counter Terrorism Financing Act.

“The threat of serious financial crime is constantly evolving, as new technologies emerge and criminals seek to nefariously exploit them. These measures ensure there is nowhere for criminals to hide,” Minister of Justice Michael Keenan said, without specifying when the legislation would be introduced.

The bill will also aim to bolster the investigative and enforcement powers of the financial intelligence agency AUSTRAC.

The announcement comes just days after the agency accused the Commonwealth Bank of Australia (CBA.AX) of “serious and systemic” breaches of money laundering laws.

But the move is more than two years after global watchdog Financial Action Task Force (FATF) found significant deficiencies in Australia’s anti-money laundering framework.

The next and more challenging phase of legislative reforms in Australia will be to extend the rules to lawyers, accountants, real estate agents and dealers in high-value goods.

Under Australian regulations, one can pay millions in cash for precious stones or a prime property without having to identify themselves or the source of their funds.

Australia had agreed in 2003 to extend strict controls to these sectors, but has yet to act on those promises.

“Stopping the movement of money to criminals and terrorists is a vital part of our national security defenses and we expect regulated businesses in Australia to comply with our comprehensive regime,” Keenan said.

The digital currency exchange sector, which includes bitcoin, will be regulated for the first time, Keenan added.

The Australian Digital Currency & Commerce Association welcomed the reform, saying it will increase safeguards and provide regulatory certainty to digital currency businesses.

Photo: Jason Lee

Bitcoin splits, but clone off to slow start

(Reuters) – Bitcoin’s underlying software code was split on Tuesday, generating a new clone called “Bitcoin Cash,” but the new virtual currency got off to a slow start due to lackluster support for its network.

The initiative was headed by a small group of mostly China-based bitcoin miners – programmers who essentially operate the bitcoin network – who were not happy with scheduled improvements to the currency’s technology meant to increase its capacity to process transactions.

These miners, who get paid in the currency for contributing computing power to the bitcoin network, initiated what is known as a “fork” on Tuesday, where the underlying blockchain splits into two potential paths, creating a new digital currency.

The blockchain is a shared online ledger of all bitcoin transactions and has spawned a range of financial and business applications.

Bitcoin’s split has created a new competitor to the original digital currency, which remains the oldest and most valuable in circulation.

Yet only a small fraction of bitcoin miners have been contributing their computing power to the new blockchain, and it took nearly six hours for the first batch of Bitcoin Cash coins to be mined this afternoon, according to Blockdozer Explorer, a firm providing data on digital currencies.

“It’s been a slow start for Bitcoin Cash,” said Iqbal Gandham, managing director at trading platform eToro. “The delay … could be a result of a lack of miner support for the new cryptocurrency.”

Bitcoin Cash on Tuesday traded on certain exchanges at a median price of $146.37, according to, while bitcoin was at $2,729 BTC=BTSP on the BitStamp platform, down 4.6 percent from Monday.

After the split, Bitcoin Cash has all the history from bitcoin’s blockchain, creating the same number of tokens, plus the new currency created. People who held bitcoins before the split now have access to an equal amount of Bitcoin Cash for free, which they will then be able to trade for fiat currencies – legal tender such as euros and dollars – or other digital tokens.

The creation of new tokens may speed up as less computing power will be required to mine new blocks, said Jeff Garzik, co-founder of blockchain startup, in an email.

Ryan Taylor, chief executive of Dash Core, a firm that manages the development of the Dash digital currency, said Bitcoin Cash may yet be short-lived.

“Bitcoin Cash has not solved scaling,” Dash said. “It has merely kicked the can down the road with slightly larger blocks, but still lacks a credible technology to scale to massively larger numbers of users.”

Photo: Reuters 

FinCEN Fines BTC-e Virtual Currency Exchange $110 Million for Facilitating Ransomware, Dark Net Drug Sales

WASHINGTON—The Financial Crimes Enforcement Network (FinCEN), working in coordination with the U.S. Attorney’s Office for the Northern District of California, assessed a $110,003,314 civil money penalty today against BTC-e a/k/a Canton Business Corporation (BTC-e) for willfully violating U.S. anti-money laundering (AML) laws. Russian national Alexander Vinnik, one of the operators of BTC-e, was arrested in Greece this week, and FinCEN assessed a $12 million penalty against him for his role in the violations.

BTC-e is an internet-based, foreign-located money transmitter that exchanges fiat currency as well as the convertible virtual currencies Bitcoin, Litecoin, Namecoin, Novacoin, Peercoin, Ethereum, and Dash. It is one of the largest virtual currency exchanges by volume in the world. BTC-e facilitated transactions involving ransomware, computer hacking, identity theft, tax refund fraud schemes, public corruption, and drug trafficking.

“We will hold accountable foreign-located money transmitters, including virtual currency exchangers, that do business in the United States when they willfully violate U.S. anti-money laundering laws,” said Jamal El-Hindi, Acting Director for FinCEN. “This action should be a strong deterrent to anyone who thinks that they can facilitate ransomware, dark net drug sales, or conduct other illicit activity using encrypted virtual currency. Treasury’s FinCEN team and our law enforcement partners will work with foreign counterparts across the globe to appropriately oversee virtual currency exchangers and administrators who attempt to subvert U.S. law and avoid complying with U.S. AML safeguards.”

FinCEN acted in coordination with law enforcement’s seizure of BTC-e and Vinnik’s arrest. The Internal Revenue Service-Criminal Investigation Division, Federal Bureau of Investigation, United States Secret Service, and Homeland Security Investigations conducted the criminal investigation.

Among other violations, BTC-e failed to obtain required information from customers beyond a username, a password, and an e-mail address. Instead of acting to prevent money laundering, BTC-e and its operators embraced the pervasive criminal activity conducted at the exchange. Users openly and explicitly discussed criminal activity on BTC-e’s user chat. BTC-e’s customer service representatives offered advice on how to process and access money obtained from illegal drug sales on dark net markets like Silk Road, Hansa Market, and AlphaBay.

BTC-e also processed transactions involving funds stolen between 2011 and 2014 from one of the world’s largest bitcoin exchanges, Mt. Gox. BTC-e processed over 300,000 bitcoin in transactions traceable to the theft. FinCEN has also identified at least $3 million of facilitated transactions tied to ransomware attacks such as “Cryptolocker” and “Locky.” Further, BTC-e shared customers and conducted transactions with the now-defunct money laundering website Liberty Reserve. FinCEN previously issued a finding under Section 311 of the USA PATRIOT Act that identified Liberty Reserve as a financial institution of primary money laundering concern.

BTC-e has conducted over $296 million in transactions of bitcoin alone and tens of thousands of transactions in other convertible virtual currencies. The transactions included funds sent from customers located within the United States to recipients who were also located within the United States. BTC-e also concealed its geographic location and its ownership. Regardless of its ownership or location, the company was required to comply with U.S. AML laws and regulations as a foreign-located MSB including AML program, MSB registration, suspicious activity reporting, and recordkeeping requirements. This is the second supervisory enforcement action FinCEN has taken against a business that operates as an exchanger of virtual currency, and the first it has taken against a foreign-located MSB doing business in the United States.



Criminal mastermind’ of $4bn bitcoin laundering scheme arrested

The Russian “internationally sought ‘mastermind’ of a crime organisation” accused of laundering more than $4bn in bitcoin, including funds obtained from the hack of failed bitcoin exchange Mt Gox, has been arrested in Greece.

A US jury indicted Alexander Vinnik on Wednesday after his arrest in a small beachside village in northern Greece on Tuesday, following an investigation led by the US justice department along with several other federal agencies and task forces.

Vinnik was described by the justice department as the operator of BTC-e, an exchange used to trade the digital currency bitcoin since 2011, which was allegedly used to launder more than $4bn for people involved in crimes ranging from computer hacking to drug trafficking.

US authorities also linked him to the failure of Mt Gox, the Japan-based bitcoin exchange that collapsed in 2014 after being hacked. Vinnik “obtained” funds from the hack of Mt Gox and laundered them through BTC-e and Tradehill, another San Francisco-based exchange he owned, they said in the statement.

“Just as new computer technologies continue to change the way we engage each other and experience the world, so too will criminals subvert these new technologies to serve their own nefarious purposes,” said Brian Stretch, US attorney for the Northern District of California.

Vinnik’s arrest is the latest in a series of US operations against Russian cybercriminals in Europe, including the taking down of two of the biggest dark web marketplaces for drugs, guns and other illicit items, AlphaBay and Hansa, last week.

The prosecutions also coincide with intensified scrutiny of Russian hackers after US intelligence officials determined that Russia interfered in the 2016 US presidential election using cyber-warfare methods to help Donald Trump, something Moscow denies.

During his time in the digital currency market, US authorities allege Vinnik facilitated crimes including hacking, fraud, identity theft, tax refund fraud, public corruption and drug trafficking. Greek police described Vinnik as a “an internationally sought ‘mastermind’ of a crime organisation”.

BTC-e, which has been out of service for more than a day, attributed this to “unplanned maintenance”. In a tweet on Wednesday after the arrest of Vinnik, BTC-e said it would restore service in the next five to 10 days.

The exchange is one of the oldest virtual currency platforms. It allows users to trade bitcoin pseudonymously against a variety of fiat and virtual currencies, and is known in cryptocurrency markets as having relaxed standards for checking users’ identity, and for not collaborating with law enforcement.

Pennsylvania police, hunting for stolen laptops, say they stumbled on $40 million bitcoin scam

Law enforcement in Pennsylvania’s Bucks County likely didn’t think they were dealing with a dark Web criminal pro when Theodore Price’s name first popped on their radar.

According to federal court documents, detectives from the Northampton Township Police Department north of Philadelphia began tracking the unemployed 30-year-old earlier this month after fielding a complaint from Price’s girlfriend’s parents about stolen laptops. But what started out as an alleged deadbeat boyfriend boosting valuables quickly accelerated into a wilder situation — and one with considerable more money involved.

By his own admission, Price told investigators he had stolen millions of dollars in bitcoin, the online currency powering illicit transactions online. The self-professed hacker claimed he’s pocketed nearly $40 million in online tender. If true it would make the bizarre case one of the biggest digital currency heists ever. And it may or may not be true. While a federal agent said in an affidavit that “the estimated value of Bitcoin obtained” fraudulently “is over $40 million,” the government withdrew, at least for the moment, a formal charge related to the bitcoin.

It all started when Janine and Steve Aversa returned home from vacation to their Bucks County home on July 4. According to an affidavit filed in federal court, the couple noticed two laptops were missing. They had an idea who was responsible. The court documents say Janine called her daughter Brittany Morton. The couple suspected Morton’s boyfriend, Price, was behind the robbery. Although he wasn’t allowed in her parents home, Morton admitted Price had been over while the Aversas were away.

The next day, Morton walked into the local police station with two computer bags. She told detectives she had asked Price about the computers and he had pleaded innocence. However, Morton was able to track down one of the missing laptops to a tech store; the clerks told her Price had sold the computer for $150. Morton next went to Price’s home, let herself in, and discovered two laptops in cases — one she believed to be her mother’s missing computer; the other was a rental computer she had gotten for Price, on which he had failed to make payments.

Also inside the bag, according to court documents, Morton found a credit card in her father’s name, as well as credit cards in her dead grandmother’s name, and her ex-boyfriend’s name. The bag also contained lists of the names and personal information of strangers. Morton went to police.

Police quickly traced Price to a hocked necklace that was also stolen from Aversas. Police also obtained a search warrant for Price’s address on July 12. There, detectives confiscated “‘thumb’ flash drives, two computers, multiple Micro SD memory cards as well as a piece of paper and a notebook which listed a victim’s name, address, phone number, credit card number to include a date of expiration as well as the three digit security code,” according to the affidavit.

Janine Aversa positively identified one of the confiscated laptops as one of the items stolen from her home. But when she fired up the computer, there were programs on there that weren’t there before, including a Tor browser, the anonymous deep Web navigation tool.

Police also discovered “105 pages of alphanumeric code” in the search, the court affidavit states. Local law enforcement brought the digits to the U.S. Department of Homeland Security. Agents suspected the numbers were linked to bitcoin accounts. During the search of his home, Price admitted to knowing about the Internet currency, but he told investigators he didn’t have much and only occasionally used his Tor browser to visit AlphaBay, the recently shuttered online black market.

But within a few moments, Price switched his story, according to the affidavit. “Price stated that people hire him to do things for their companies,” the document stated. “Price elaborated stating he would write Trojan software to penetrate network systems.” He also told investigators “he had been hired by numerous foreign governments to develop penetration software.”

He said the numbers discovered by investigators were tied to bitcoin accounts. And Price, the documents say, explained he had developed software that essentially let him pick the digital pocket of bitcoin users.

“Price state that he purchased incomplete software from a vendor on Alpha Bay for approximately $50,” the complaint said. After tweaking the software, Price was able to come up with a program that would divert funds into his own accounts. “Price’s software recognizes the similar characters in another wallet and replaces it with Price’s acquired wallet,” according to the complaint.

“Because the bitcoin wallet address is a legitimate address, the user does not realize that bitcoin transaction is being diverted into a wallet other than theirs.” 

Price told police one of his bitcoin accounts contained $34.6 million, with millions more spread among other accounts. Court records indicate the total number might be between $40 and $50 million.

If he’s telling the truth, Price’s bitcoin scam would be one of the top five digital currency heists of all time, Emin Gun Sirer, a Cornell University computer science professor, told the Morning Call last week. In 2014, hackers yanked $436 million from Mt. Gox, a Japanese-based bitcoin exchange, following by a $127 million heist at Silk Road and a $56.4 million hit on the Sheep Marketplace exchange in 2013. But unlike Price’s heist, all the earlier big dollar hacks were largely the work of anonymous actors.

But if Price did have millions in bitcoin, as the Morning Call wondered, why was he so cash-broke he was stealing laptops and hocking $30 jewelry? The hacker told investigators he wasn’t able to cash out his bitcoin without drawing attention to himself; he also said he was planning on hiring a private jet to take him to England right before his arrest. He boasted of having a fake passport under the name “Jeremy Renner,” the same name as the actor featured in the “Avengers” movies, according to the complaint.

“The evidence in this case is strong,” a court document requesting Price remain in custody stated last week. “When approached by authorities, Price admitted that he had defrauded others of over $40 million in bitcoin, and that he currently possesses sole access to that currency.” They withdrew, at least for the moment, a charge of bitcoin theft.


Bitcoin falls to near one-month low with $12 billion wiped off value since record high 30 days ago

Bitcoin hit a near one-month low on Wednesday and has seen more than $12 billion wiped off its value in the last 30 days, amid nervousness in the cryprocurrency market.

The price of bitcoin fell to $2,272.32, its lowest level since June 15, when it slumped to $2,185.96, according to data from CoinDesk. The price did recover on Wednesday slightly to a high of $2,354.41.

It’s also significantly off the $3,025.47 all-time high reached on June 11, just over a month ago. In this timeframe, its market capitalization or value has fallen by $12.2 billion.

A major pullback is taking place at the moment in the cryptocurrency world after huge rallies. When bitcoin hit its record high in June, it had seen a more than 600 percent rally since the start of the year. Even with Wednesday’s fall, it is still up nearly 450 percent year-to-date.

That has raised concerns about the frothiness in the market at the moment, which could be part of the reason for the pullback. Richard Turnill, BlackRock’s global chief investment strategist, earlier this week warned about a potential bubble in cryptocurrencies.

“I look at the charts, and to me that looks pretty scary,” Turnill said, according to a Reuters report.
Cryptocurrency traders are also uncertain with some unsure about the future trading pattern for bitcoin.

“I’m waiting for more downside before I rebuy, but frankly I’m even having trouble telling what it’s going to do, which probably reflects the uncertainty in the market itself,” cryptocurrency trader Jason Hamilton, told CNBC via Twitter.

Roy Sebag, who is the CEO of GoldMoney, a platform to let people buy and trade the precious metal, is also a notable investor in cryptocurrencies. But the entrepreneur told CNBC via a Twitter exchange that he sold most of his bitcoin holdings because the market has reached the top.

The bitcoin community is also nervous about a planned change to the underlying code of the cryptocurrency’s protocol. Bitcoin transactions are taking longer than ever to process because the size of transactions on the blockchain, which is the technology that underpins the cyrptocurrency, is limited.


Hackers steal Bitcoin funds from Bithumb exchange traders

One of the world’s largest cyber-currency exchanges is under investigation after it acknowledged that one of its employee’s PCs had been hacked.

South Korea-based Bithumb has said that it believes personal details of more than 30,000 of its customers were stolen as a result.

It appears the data was subsequently used to fool users into letting thieves steal funds from their accounts.

Bithumb has promised compensation.

But the Korea Internet and Security Agency, a local government-empowered watchdog, has launched an inquiry into the matter, according to the Yonhap news agency.

Bithumb allows its members to buy and sell the virtual currencies Bitcoin and Ethereum. It is South Korea’s biggest cryptocurrency exchange, based on recent trading volumes, and one of the five largest in the world.

The breach is reported to have occurred in February, and is said to have involved an employee’s home PC rather than computer servers at the firm’s headquarters.

Bithumb is reported to have discovered the breach only on 29 June and reported it to the authorities the next day.

Although a notice posted to the company’s site said the leaked data did not contain passwords, dozens of customers have reported receiving follow-up scam calls and texts in June that persuaded them to share their accounts’ authentication codes.

Bithumb has promised initially to cover losses of up to 100,000 won ($86; £67) per customer, and to add to this once it has been able to verify individual losses.

But it is unclear whether victims will be compensated in full.

An unverified local report said one member claimed to have lost 1.2bn won ($1.04m; £806,000).

At present, virtual currencies are not regulated by South Korea’s financial authorities and efforts to address the matter have made little progress.

Arizona Bitcoin Trader Charged With Money Laundering

A bitcoin trader and advocate in Arizona has been charged with operating an unlawful money transmission business.

Thomas Costanzo, who runs a bitcoin services website that offers sales for bitcoin mining equipment and ATMs, was arrested in late April and initially charged with the unlawful possession of a firearm, which resulted from a previous conviction.

A new superseding indictment, unsealed this week, reveals that the government is pressing charges against Costanzo related to his digital currency activities. Costanzo was accused of exchanged $166,000 with undercover agents between May 2015 and April 2017, funds that were “represented by a law enforcement officer to be proceeds of specified unlawful activity”, according to the indictment.

Court documents show that another individual, Peter Steinmetz, is also being charged. Costanzo and Steinmetz were each charged for running an illegal money transmission business. Costanzo was additionally charged with money laundering and felony possession of a firearm.

In April, local and federal law enforcement officials raided Costanzo’s residence and later had him held following an initial hearing. Police records published at the time showed that officials included bitcoin and digital currency-related items in their warrant, suggesting at the time that they might press for charges beyond the gun-related one.

The court case is the latest in the US to involve a bitcoin trader or seller who is charged with unlawful money transmission. In some of those instances, undercover investigators would purchase bitcoins from those targeted in the sting operations.



GOLDMAN SACHS: Bitcoin is looking ‘heavy’

Bitcoin has had a blistering start to 2017. It’s up about 180% so far this year. However, its near-term outlook isn’t looking so hot, according to a note released on Monday by Goldman Sachs head of technical strategy Sheba Jafari.

“The market has come close (enough?) to reaching its extended (2.618) target for a 3rd of V-waves from the inception low at 3,134,” Jafari wrote. “It’s on track to forming a bearish key day reversal if today’s close settles below 2,749.”

Bitcoin hit a lifetime high of nearly $3,000 a coin on Monday, but was unable to hold onto those gains. The cryptocurrency finished the day at $2,599, well below the key technical threshold of $2,749 that was singled out by Jafari.

Now, traders should be paying close attention to $2,475 on a weekly basis, as a close below there would cause even more damage to the technical picture, according to Jafari. “Both daily/weekly oscillators are diverging negatively. All of this to say that the balance of signals are looking broadly heavy.”

Jafari isn’t alone in calling for at least a near-term top in the cryptocurrency. “I think it’s in a bubble,” tech billionaire Mark Cuban tweeted last Tuesday. “I just don’t know when or how much it corrects. When everyone is bragging about how easy they are making $=bubble.” Cuban did not say how far he thought bitcoin would fall.

So where will bitcoin go from here? “Wary of a near-term top ahead of 3,134, Jafari concludes. “Consider re-establishing bullish exposure between 2,330 and no lower than 1,915.”




US Army Guardsmen Convicted for Bitcoin Credit Card Fraud

Two members of the US Army National Guard have been convicted of running a credit card fraud scheme involving bitcoin.

According to the US Attorney’s Office in the District of Maryland, the two individuals, James Stewart and Vincent Grant, were indicted for using bitcoins to purchase stolen credit and debit card numbers of individuals and businesses from foreign websites. The two were first prosecuted last year, as previously reported by CoinDesk.

The defendants were accused of using magnetic strip re-encoding tools to apply stolen numbers to dummy cards, after which they would buy merchandise from Army and Air Force Exchange Service stores at US military bases, as well as other locations in Maryland and elsewhere.

The federal jury found Stewart guilty on charges of wire fraud, conspiracy to commit wire fraud and aggravated identity theft. Grant was also convicted for conspiracy to commit access device fraud and aggravated identity theft.

A total of five Army National Guard members were arrested and charged.

Of the other three in the case, Derrick Shelton and Quentin Stewart previously pleaded guilty for committing wire fraud and aggravated identity theft, while Jamal Moody pleaded guilty to conspiracy to commit access device fraud and aggravated identity theft.

Shelton and James and Quentin Stewart face a maximum sentence of 20 years in prison, while Grant and Moody are subject to a maximum seven-and-half year sentence. A mandatory minimum of two years in prison for aggravated identity theft, on top of any other sentence, also apply to all five involved.