Panama Papers: US files first criminal charges over money laundering scheme

By Will Fitzgibbon

United States authorities have charged four men, including two former Mossack Fonseca employees, with money laundering and fraud, the Department of Justice announced today.

The charges are the first in the U.S. following the Panama Papers investigation, which was first published in 2016 by the International Consortium of Investigative Journalists, Süddeutsche Zeitung and more than 100 global media partners.

Ramses Owens and Dirk Brauer, two former senior employees of the Panama-headquartered law firm, were charged with a string of offenses “in connection with their alleged roles in a decades-long criminal scheme,” the DOJ said in a statement.

Authorities also charged Boston-based accountant Richard Gaffey, and former U.S. taxpayer Harald Joachim Von Der Goltz with tax evasion, wire fraud and money laundering.

A statement from the DOJ alleges that the four men “defrauded the U.S. government through a large scale, intercontinental money laundering and wire fraud scheme.”

“These defendants went to extraordinary lengths to circumvent U.S. tax laws in order to maintain their wealth and the wealth of their clients,” said U.S. Attorney Geoffrey S. Berman.

“For decades, the defendants, employees and a client of global law firm Mossack Fonseca, allegedly shuffled millions of dollars through offshore accounts and created shell companies to hide fortunes.”

U.S. authorities partnered with enforcement agencies around the world to arrest Brauer in Paris, France, and Von Der Goltz in London, United Kingdom. Gaffey was arrested in Boston on Tuesday. Panamanian citizen Owens remains at large.

“These efforts reflect the commitment of U.S. law enforcement to follow that trail and apprehend these criminals regardless of where they are in the world.”

The men are presumed innocent until proven guilty.

According to the DOJ, Mossack Fonseca employees deliberately created bank accounts in tax havens to hinder enforcement investigations and advised U.S. taxpayers to secretly repatriate money. The names of the real owners of shell companies “generally did not appear” on offshore company paperwork.

The Panama Papers investigation was based on a trove of 11.5 million files from inside Mossack Fonseca that were leaked to reporters Bastian Obermayer and Frederik Obermaier at German newspaper Süddeutsche Zeitung, and shared with ICIJ. The investigation, done in collaboration with more than 370 reportersworking for 100 media outlets, exposed the offshore holdings of world political leaders, links to global scandals, and details of the hidden financial dealings of fraudsters, drug traffickers, billionaires, celebrities, sports stars and more.

German-born Von Der Goltz, who lived in the U.S. from 1984, allegedly evaded taxes through shell companies and offshore bank accounts.

The DOJ alleged that Von Der Goltz falsely claimed his mother, who lived in Guatemala and is now 102, owned companies and bank accounts. Von Der Goltz denied wrongdoing, according to a 2016 report from ICIJ media partner The New York Times.

Gaffey allegedly helped Von Der Goltz and another unnamed U.S. taxpayer evade taxes, the DOJ alleged.

“The charges announced today demonstrate our commitment to prosecute professionals who facilitate financial crime across international borders and the tax cheats who utilize their services,” said Assistant Attorney General Brian A. Benczkowski.

Police raid Deutsche Bank headquarters as part of Panama Papers money laundering investigation

By David Rising & Frank Jordans

BERLIN (AP) — German authorities raided Deutsche Bank’s headquarters Thursday amid suspicions that its employees helped clients set up offshore companies that were used to launder hundreds of millions of euros.

About 170 police officers, investigators and prosecutors swooped in on the bank’s offices in Frankfurt and premises in nearby Eschborn and Gross-Umstadt at 10 a.m. (0900 GMT), seizing electronic and paper records.

The investigation emerged from an analysis of documents leaked from tax havens in recent years, including the 2016 “Panama Papers,” said Frankfurt prosecutors’ spokeswoman Nadja Niesen.

It is focused on two Deutsche Bank employees, aged 50 and 46, and possibly other still unidentified suspects, she said. At least one site raided was a suspect’s home.

Analysis of the Panama Papers and other documents “gave rise to suspicion that Deutsche Bank was helping clients set up so-called offshore companies in tax havens and the proceeds of crimes were transferred there from Deutsche Bank accounts” without the bank reporting it, Niesen said.

In 2016 alone, more than 900 customers are alleged to have transferred some 311 million euros ($351 million) to one such company set up in the British Virgin Islands, she said.

The suspects, both German citizens, are accused of failing to report the suspicious transactions even though there was “sufficient evidence” to have been aware of it.

Deutsche Bank confirmed the search and said “the investigation has to do with the Panama Papers case.”

“More details will be communicated as soon as these become known. We are cooperating fully with the authorities,” the bank said.

Money laundering has become a growing problem in Europe, where a series of scandals has exposed lax regulation.

And it’s not the first time Deutsche Bank has run into trouble over the flow of dirty money.

It was fined more than $600 million by U.S. and U.K. authorities in January 2017 for allowing customers to transfer $10 billion out of Russia in what regulators said was “highly suggestive of financial crime.”\

The Panama Papers are a trove of documents from a law firm that handled shell companies for thousands of rich and powerful clients around the world. While owning a shell company is not illegal, it is used to hide the beneficial owner of a company or transfer, making it important for the handling and laundering of dirty money.

Several other institutions besides Deutsche Bank have been fined by authorities in the U.S. and Europe for not properly checking up on the beneficial owners of shell companies that send money through their accounts.

Analysts say that because these transactions can be lucrative and punishments are lax, banks have few incentives to do more than the minimum required by law to check on the identity of a bank.

“Even in the most egregious cases, banks are often only required to pay a monetary penalty for engaging in criminal activity, which is merely the cost of doing business,” said Jimmy Gurule, a former undersecretary for enforcement for the U.S. Treasury Department.

“The failure to hold banks accountable for money laundering encourages such criminal activity, including laundering hundreds of millions of dollars in Panama and other money laundering havens,” said Gurule, now a professor at Notre Dame Law School.

Most recently, Denmark’s biggest bank, Danske Bank, admitted that some 200 billion euros ($235 billion) in suspicious money had flown through its Estonian branch from 2007 to 2015. Whistleblower and former employee Howard Wilkinson has indicated that Danske Bank’s management was aware of what was going on at the branch, which was among the bank’s most profitable units. He has also alleged that family members of Russian President Vladimir Putin and Russia’s spy agency were using the bank for money laundering. The bank’s CEO has since stepped down over the scandal.

Another Baltic state, Latvia, has also emerged as a major hub of money laundering, with a 2014 leak showing that tens of billions of dollars were funneled from Russia in 2010-14. Some of the money reportedly went through Deutsche Bank and ended up in major capitals like London, according to The Organized Crime and Corruption Reporting Project.

There was no indication that Thursday’s raid was linked to that scandal, though Deutsche Bank says that it has since stopped providing dollar transactions in some countries, including Latvia.

Venezuela’s ex-treasurer sentenced to 10 years for South Florida money-laundering scheme

By Jay Weaver

A former national treasurer in the socialist government of Venezuelan President Hugo Chávez was sentenced to 10 years in prison Tuesday by a U.S. judge for his central role in a $1 billion bribery and money-laundering scheme that enabled him to acquire luxury real estate and other assets in South Florida.

Alejandro Andrade, 54, sold access to the Venezuelan government’s lucrative foreign-currency exchanges both before and after Chávez’s death in 2013, enriching himself and an elite circle of other senior officials and a prominent businessman, according to court records.

U.S. District Judge Robin Rosenberg imposed the maximum sentence for Andrade’s money-laundering conspiracy conviction in West Palm Beach federal court, rejecting a proposal by his defense attorneys to give him seven years in prison for accepting responsibility for his crime in a plea deal. The judge did not impose a fine because Andrade has no money to pay one. He was allowed to surrender to prison on Feb. 25 instead of immediately because he has been assisting federal authorities in the massive corruption and money-laundering investigation.

Andrade apologized to the judge, his family and the Venezuelan people for his crime, and then described how he became involved in a “movement” led by Chávez that he believed would benefit his country. Soon, however, the national treasurer acknowledged that he betrayed the public’s trust.

“I made some very bad choices when I was treasurer, and for that I am very sorry from the bottom of my heart,” said Andrade, who served as the top financial official in Venezuela’s government from 2007 to 2010 before moving with his family to South Florida in 2014. “To this day, I am convinced the decision I made [to cooperate] is the right one.”

Before his sentencing, Andrade owned several properties in the wealthy equestrian community of Wellington in the western part of Palm Beach County. In a $1 billion forfeiture judgment, the U.S. attorney’s office and Homeland Security Investigations have begun the process of taking those tainted properties, along with his vast collection of high-priced cars, show-jumping horses and watches.

At Tuesday’s sentencing, federal prosecutor Vanessa Snyder said Andrade conspired with three other key players in the money-laundering ring by giving them access to the Venezuelan government’s favorable dollar-to-bolivar currency exchange. Snyder said the scheme generated about $2.4 billion in illicit profits for Andrade’s three co-conspirators and they agreed to share half of their money with Andrade while keeping it in European and U.S. banks.

“Mr. Andrade abused the trust of the people of Venezuela,” Snyder said, describing how his crime contributed to the longstanding economic crisis in the South American country. “The amount of money he agreed to receive was staggering.”

But Andrade’s defense attorneys, Curtis Miner and Bob Martinez, said the co-conspirators controlled the bank accounts and that their client received about $70 million in bribes — not $1 billion.

Andrade, who pleaded guilty to a money-laundering conspiracy charge last December, has provided insider information to Snyder and fellow prosecutor Michael Nadler to assist them in building a sprawling criminal case against some of Venezuela’s richest people. Among them: TV network tycoon Raúl Gorrín, 50, who was indicted last Monday, one day before the case against Andrade was unsealed in federal court in West Palm Beach.

The indictment charges Gorrín, a politically connected Caracas businessman, with conspiring to bribe Venezuelan officials and commit money laundering by hiding embezzled government funds in South Florida and New York real estate over the past decade.

The international money-laundering scheme allegedly led by Gorrín transpired over a period of extreme economic hardship for everyday Venezuelans. Oil rich and once wealthy, Venezuela is staggering under an economic collapse that has led to hyperinflation and food and medicine shortages. More than three million people have fled the country in recent years, according to the United Nations.

The national political coordinator for Venezuela’s opposition Voluntad Popular party, Carlos Vecchio, said Andrade’s web of corruption is tied directly to current President Nicolás Maduro and his wife, Cilia Flores.

“All of them are responsible for the deep crisis that Venezuela is living through,” Vecchio said in a statement, adding that the one billion dollars that Andrade amassed “is money that was stolen from the Venezuelan people.”

The South Florida probe of Andrade was first reported by the Miami Herald and el Nuevo Herald in March. Andrade, a former Chávez bodyguard who rose to become national treasurer, faced up to 10 years in prison under his plea agreement — substantially less prison time than Gorrín now faces as a fugitive wanted by federal authorities in Miami.

Andrade was staying at his equestrian farm in Wellington while assisting the feds in the case against Gorrín and others. In mid-November, federal agents seized his Wellington properties, including 17 prized show horses.

The warmblood horses, with names like Bonjovi, Hardrock Z and Tinker Bell, were imported from various parts of Europe, court records show. Andrade’s son, Emanuel, used them to compete in show-jumping events in South Florida and other parts of the world.

Agents also seized Andrade’s fleet of luxury vehicles, from a 2017 Mercedes-Benz GLS 550 to a 2015 Bentley Continental Convertible, along with numerous U.S. and Swiss bank accounts, and a vast collection of high-end watches.

Andrade, Gorrín and other associates in Venezuela’s government, banking and business sectors are accused of enriching themselves by capitalizing on favorable foreign currency exchanges and concealing their staggering profits in European and U.S. bank accounts and investments, according to Gorrín’s indictment. Andrade used his official position to give Gorrín access to the government’s preferred exchange rates to maximize profits on currency transactions. The funds to fuel the scheme were generated by the national treasury’s issuance of bonds.

Gorrín is accused of paying hundreds of millions of dollars in bribes to Andrade and another former high-ranking official in the national treasury office by funneling the money to them through a Venezuelan banker in the Dominican Republic. The banker, Gabriel Arturo Jimenez Aray, 50, controlled the Dominican bank with Gorrín.

Jimenez was charged with conspiracy to commit money laundering earlier this year, pleaded guilty in March and awaits sentencing on Thursday as he cooperates with federal authorities. He faces up to 10 years in prison. His defense attorney, Marissel Descalzo, declined to comment.

In addition to wiring millions through Swiss and U.S. banks to those two former high-ranking Venezuelan treasury officials, Gorrín paid for an array of lavish expenses for Andrade, including three jets, a yacht, champion show horses and high-end watches, according to Gorrín’s indictment and other court records. He even paid some of Andrade’s veterinarian bills.

Gorrín’s indictment and the cases against Andrade and Jimenez are unrelated to a $1.2 billion South Florida money-laundering case filed in July that charged nine defendants, including some close to President Maduro, with embezzling vast sums of money from Venezuela’s national oil company and washing it through foreign currency exchanges to inflate profits. Millions in ill-gotten funds were invested in South Florida’s real estate market, including luxury high-rise condos and waterfront mansions in the Cocoplum section of Coral Gables.

Two defendants in that case — Gorrín’s personal banker Matthias Krull and former Venezuelan national oil-company executive Abraham Ortega — have pleaded guilty to money-laundering conspiracy charges and are cooperating with the U.S. Attorney’s Office and Homeland Security investigations.

Gorrín, owner of the Globovisión network in Caracas, has not been charged in that case. He is suspected of steering $600 million from the country’s state-owned oil company, PDVSA, to a European bank to enrich himself, Maduro’s three stepsons and other members of Venezuela’s political elite, according to court records and multiple sources familiar with the federal probe in Miami.

Maduro’s stepsons and the president himself are also under investigation in that case.

House Democrats May Investigate Alleged Trump Ties to Russian Money Laundering

By Dan Friedman

Rep. Adam Schiff (D-Calif.), the incoming chairman of the House Intelligence Committee, has signaled plans to use his newly won subpoena power to aggressively investigate whether Russian interests laundered money through Donald Trump’s businesses and used the connection as leverage over the president, a line of inquiry sure to enrage Trump.

Schiff and other committee Democrats have recently said they do not intend to launch an entirely new Russia probe but will instead pursue investigative angles that other inquiries have not delved into. Schiff has repeatedly asserted that the question of whether Trump’s businesses relied on laundered Russian funds tops that list.

“No one has investigated the issue of whether the Russians were laundering money through the Trump Organization and this is the leverage that the Russians have over the president of the United States,” Schiff said at a Brookings Institution panel discussion last month, before Democrats regained control of the House in the midterm elections. He reiterated that sentiment in an NPR interview on Wednesday.

In a report issued in March after Republicans abruptly ended the Intelligence Committee’s Trump-Russia probe, committee Democrats said they want to gather more information on Trump’s past financing by Deutsche Bank, which in 2017 was hit with $630 million in fines from US and UK regulators over its involvement in a $10 billion Russian money-laundering scheme. “We have only begun to explore the relationship between President Trump and Deutsche Bank, and between the bank and Russia,” the lawmakers wrote. They said they hope to ask: “Did the Russian government, through business figures close to the Kremlin, seek to court Donald Trump and launder funds through the Trump Organization; and did candidate Trump’s financial exposure via Deutsche Bank or other private loans constitute a point of leverage that Russia may have exploited and may still be using?”

Trump and his defenders have asserted that investigating the president’s businesses prior to his presidential run should be out of bounds for investigators. In a news conference Wednesday after Democrats captured control of the House, Trump said he would assume “a warlike posture” if Democrats investigate his finances and political dealings. He threatened to use the GOP controlled Senate to launch competing investigations of Democrats, though Senate Republicans have not indicated they’d cooperate. “If the Democrats think they are going to waste Taxpayer Money investigating us at the House level, then we will likewise be forced to consider investigating them for all of the leaks of Classified Information, and much else, at the Senate level, ” Trump tweeted Wednesday.

Schiff has also said that he plans to pursue perjury charges against witnesses suspected of lying in interview with the panel. The committee can do this by sending referral letters to Special Counsel Robert Mueller or by voting to turn over to Mueller still-unreleased interview transcripts of witnesses believed to have provided false testimony. Prosecutors could then use any information they have gathered that contradicts the witnesses’ claims to pursue perjury charges.

Democrats have said they suspect that Erik Prince, the founder of the controversial private military contracting firm Blackwater and brother of Education Secretary Betsy DeVos, former Trump campaign adviser Carter Page, and longtime Trump adviser Roger Stone, were not truthful in testimony to the Intelligence Committee. Schiff on Wednesday singled out Stone, whose possible contacts with WikiLeaks have come under intense scrutiny from Mueller. Schiff told NPR that recently released emails, “if authentic,” show that “some of [Stone’s] answers before our committee are highly suspect.”

The New York Times reported this month that Stone had emailed in October 2016 with Steve Bannon, then the head of Trump’s presidential campaign, regarding what Stone suggested was his inside knowledge of WikiLeaks’ plans for releasing hacked Democratic emails. Stone has told reporters that he never communicated with the Trump campaign about WikiLeaks. Schiff’s statement suggests Stone may have made a similar claim under oath, though it is not clear what the congressman meant. A Schiff spokesman declined to comment. Stone did not respond to inquiry.

Intelligence Committee Democrats have previously flagged a number of areas where they say their Republican colleagues failed to pursue obvious leads. For example, the GOP-led panel failed to follow up after the White House stonewalled a request for records related to President Trump’s May 12, 2017 suggestion that he may possess “tapes” of his conversations with former FBI Director James Comey. The White House merely pointed to tweets in which Trump walked back his claim about tapes. But Democrats said in March that they have “reason to believe that the White House does in fact possess” records related to the meeting.

In public remarks, Schiff has repeatedly mentioned that he wants to look into a phone call that Donald Trump Jr. received from a blocked number while Trump Jr. was arranging the June 2016 Trump Tower meeting where he hoped to receive damaging information on Hillary Clinton he believed Russia was offering. Democrats are likely to subpoena records aimed at determining if the blocked number belonged to his father, a step committee Republicans declined to take. “That’s obviously pivotal in terms of the president’s involvement in any potential collusion or conspiracy to seek Russian help, illegal Russian help, during the campaign,” Schiff recently said.

Democrats have named more than 40 witnesses who the GOP-led committee declined to question, but who the committee may seek to interview under Democratic control. They include Kellyanne Conway, who appears to have been in touch during the campaign with a Republican political operative, Peter Smith, who attempted to get in contact with Russian hackers he believed were in possession of emails that Hillary Clinton deleted from the private server she used while Secretary of State. Smith committed suicide last year before news of his activity broke. The list of possible witnesses also includes White House aide Stephen Miller, former White House spokesman Sean Spicer, former White House Chief of Staff Reince Priebus, and many more.

Democrats could also subpoena Dimitri Simes, a former Nixon aide and CEO of the Center for the National Interest, which hosted an April 27, 2016 foreign policy speech by Trump at Washington’s Mayflower Hotel. Democrats in their March memo said that the committee “has reason to believe that Mr. Simes played a central role in drafting portions of the speech related to Russia.” Simes maintained close contact with Maria Butina, the Russian gun rights enthusiast indicted and jailed for acting as an unregistered foreign agent. Democrats have said they want Simes’ correspondence with the Trump campaign and with people close to the Russian government.

The Intelligence Committee will work to protect the Mueller’s investigation, Schiff says. Trump on Wednesday ousted Attorney General Jeff Sessions and announced the installation of Sessions’ chief of staff, Matt Whitaker, as acting attorney general, with responsibility for overseeing the Special Counsel. In past radio and TV appearances before joining the Justice Department, Whitaker has attacked Mueller’s probe and stated that there was no evidence to support the fact that Russia had intervened in the 2016 election.

“Interference with the Special Counsel’s investigation would cause a constitutional crisis and undermine the rule of law,” Schiff said in a statement last week. “If the President seeks to interfere in the impartial administration of justice, the Congress must stop him. No one is above the law.”

https://www.motherjones.com/politics/2018/11/house-democrats-may-investigate-alleged-trump-ties-to-russian-money-laundering/

FATF to review Myanmar over money laundering concerns

By THOMAS KEAN | FRONTIER

YANGON — An assessment of Myanmar’s efforts to tackle money laundering and terrorist financing has found significant weaknesses, including a failure to recognise the “serious” money laundering risks that the country faces.

The Asia/Pacific Group on Money Laundering released the Mutual Evaluation Report on October 22, three months after it was adopted at the APG annual meeting in July.

The “poor results” on the evaluation mean Myanmar will automatically be reviewed by the International Co-operation Review Group of the Financial Action Task Force, and may be placed on a black or grey list following that review.

Myanmar was removed from the FATF’s list of high-risk and monitored jurisdictions in 2016 following some limited reforms.

Major improvements needed

The Mutual Evaluation Report found that despite Myanmar being exposed to “a large number of very significant” money laundering threats, the authorities did not demonstrate a “credible understanding” of the risks.

Myanmar needed to make “major improvements” in a range of areas, including investigation and prosecution of money laundering and terrorist financing, and confiscation of the proceeds of crime.

Money laundering investigations are “not prioritised” and typically occur only after the successful prosecution of a related offence, such as drug trafficking, in order to identify and confiscate assets, the report said. As a result, only a tiny proportion of overall proceeds of crime are confiscated, and investigations are not pursued beyond Myanmar’s borders.

Myanmar was also taken to task for its failure to pursue international cooperation, particularly in regard to money laundering, but the country fared somewhat better in regard to tackling terrorist financing.

The evaluation was based on information provided by Myanmar and gathered by an evaluation team during a visit to Myanmar in late 2017.

The APG is one of nine regional bodies that work with the FATF to combat money laundering, the financing of terrorism and the financing of the proliferation of weapons of mass destruction.

Myanmar spent more than a decade on an FATF blacklist for non-cooperative states until 2016. In June of that year it was removed due to the “significant progress” it had made in establishing the legal and regulatory framework to meet commitments regarding the strategic deficiencies identified by the FATF in February 2010, the organisation said.

The decision to remove Myanmar followed a brief field visit, the Myanmar Times reported at the time, but the Mutual Evaluation Report is a more rigorous assessment of whether the country is tackling money laundering and terrorist financing.

Crime a US$15 billion business

By Myanmar’s own estimate, proceeds of crime are likely to total around US$15 billion a year, or around 24 percent of GDP.

A national risk assessment drafted with International Monetary Fund support as part of the mutual evaluation process estimated that 63 percent of this figure was derived from tax and excise evasion, environmental crime, and corruption and bribery.

Almost 50 percent of proceeds were generated by activities carried out by transnational crime groups and another 35 percent by domestic organized crime, the assessment estimated. Between 30 and 40 percent of the proceeds of crime is believed to flow out of Myanmar each year, with China and Thailand thought to be the main destinations.

The national risk assessment acknowledged that law enforcement agencies were “not very effective” at conducting money laundering investigations, and were hampered not only by a lack of resources and training, but also a perception that officers could be bribed.

The Mutual Evaluation Report said Myanmar’s risk assessment appeared to “under-rate the significance of drug production and trafficking, as well as the role of corruption in predicate crimes and money laundering”. There was also no analysis of how proceeds of crime are laundered within Myanmar, it noted.

Improvements from a low base

Of the 40 counter-measures against money laundering recommended by the Financial Action Task Force, Myanmar was deemed to be in compliance with only six, largely compliant with 10, partially compliant with 18 and non-compliant with six.

It was evaluated as non-compliant on a recommendation concerning money and value transfer services, largely due to the lack of regulation in relation to the informal remittance network known as hundi.

Similarly, Myanmar was deemed non-compliant on a recommendation concerning Designated Non-Financial Business or Professions, partly because of the operations of unlicensed casinos.

Jurisdictions that are deemed to have achieved “poor results” on the evaluation by meeting at least one of four criteria – for example, being non-compliant or partially compliant on 20 or more of the 40 recommendations – are automatically referred to the ICRG for review. Myanmar met three of four criteria for review.

If Myanmar is prioritised by the ICRG, it will have to agree on an action plan with the group requiring it to take actions to rectify deficiencies and report directly to the FATF on the progress made within a specified time frame. It may then be added to the FATF’s list of high-risk and other monitored jurisdictions, which presently includes only North Korea and Iran.

However, the 2018 Mutual Evaluation Report still represented a significant improvement on Myanmar’s last evaluation in 2008, when it was compliant or largely compliant on only four recommendations.

Among the steps that Myanmar has taken are the introduction of a revised money laundering offence in 2014 and a revised terrorist financing offence the following year. Organisational changes to a number of government bodies has led to “changes and some improvements”, the evaluation noted.

However, the Mutual Evaluation Report said most of the reforms undertaken to address money laundering and terrorist financing risks appeared to be “ad hoc” and aimed at being removed from the FATF black list rather than addressing identified money laundering risks.

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/

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

Money Laundering Tactics Adapting to Colombia Cocaine Boom

By Parker Asmann

A new investigation says that record cocaine production in Colombia is causing criminal groups to diversify the ways in which they launder their money, reflecting the fragmented state of the country’s criminal world.

Criminal groups in Colombia are increasingly diversifying their traditional money laundering techniques involving real estate and large public works contracts, as well as new laundering methods involving cryptocurrencies and non-profit organizations, according to a report from the country’s national anti-money laundering body, the Financial Investigations and Analysis Unit (Unidad de Información y Análisis Financiero – UIAF), El Tiempo reported.

Such changes are occurring amid record cocaine production in the Andean nation.

The article reports that 40 trillion Colombian pesos (around $13 billion) of illicit money have been generated in Colombia, without specifying a time frame. Furthermore, every year 16 trillion pesos (around $5 billion) are moved through different money laundering schemes, according to the UIAF.

El Tiempo also received information that traffickers returning to Colombia and to drug-related activities after serving prison time in the United States have been increasing investment in rural properties since 2016.

The real estate boom that major urban centers like Medellín and Colombia’s capital city of Bogotá saw in the past has now moved on to smaller cities near major coca growing areas, such as Pasto in Nariño, southwest Colombia — the department with the most cocaine — and Popayán in the nearby Cauca department. Property records have grown by 300 percent in Pasto and Popayán alone, according to El Tiempo.

In 2017, Nariño department accounted for more than a quarter of the 171,000 total hectares used for coca cultivation last year, according to the United Nations Office on Drugs and Crime (UNODC). The UNODC also found that the number of coca hectares in Cauca department increased by 55 percent between 2016 and 2017.

On average, each hectare of coca produces 6.9 kilograms of cocaine, with one kilogram of cocaine selling for around 5 million pesos (about $1,600) in Colombia, meaning that a single hectare of coca could produce up to 35 million pesos in illicit earnings (about $11,500), according to El Tiempo.

While there are no official reports linking the real estate boom in Nariño and Cauca with the illicit money derived from increased cocaine production, Colombia’s outgoing superintendent of Notary and Registry (Notariado y Registro), Jairo Mesa, says he has no doubt about the links between what he calls the country’s “new urbanism” and illegal drug proceeds.

The shift in money laundering techniques used by criminal groups in Colombia is likely tied to the departure of the now largely demobilized Revolutionary Armed Forces of Colombia (Fuerzas Armadas Revolucionarias de Colombia – FARC) and the increasingly fragmented criminal landscape that the guerrillas’ exit ushered in.

The more localized makeup of criminal groups in Colombia and the large profits that are coming in amid record cocaine production may help explain the diversification of money laundering techniques and the substantial uptick in property records observed in smaller municipalities in departments that are strategic to the cocaine trade, such as Nariño and Cauca.

“The Mexicans are full of cash and paying quickly for cocaine, so these more regional groups in Colombia are likely looking for places close to their centers of operation to put their money,” Adam Isacson, a senior associate at the Washington Office on Latin America (WOLA) think tank, told InSight Crime.

This is in line with the historic behavior of Colombia’s most notorious drug trafficking organizations, such as the Norte del Valle, Medellín and Cali cartels, according to Douglas Farah, president of the national security consulting firm IBI Consultants.

“Colombian crime groups have traditionally loved to operate in areas where they know the terrain, have family, and know officials and their vulnerabilities,” Farah said. “As you go from large transnational groups to smaller regional groups, there’s not much protection for them in big cities.”

As Colombia’s criminal landscape continues to take shape, it appears that traffickers are adapting their money laundering strategies to best suit the current dynamics of the cocaine trade.

EU to Act on Visa-For-Sale Schemes After Warnings of Money Laundering Risks

BY FRANCESCO GUARASCIO

BRUSSELS (Reuters) – The European Commission said on Wednesday it will provide guidance to EU states on how to manage national schemes to sell passports and residency permits to wealthy foreign citizens, as campaigners and lawmakers warned of money laundering risks.

Government schemes to trade citizenship or residence rights for large investment are currently applied in 13 EU countries: Austria, Cyprus, Luxembourg, Malta, Greece, Latvia, Portugal, Spain, Ireland, Britain, Bulgaria, the Netherlands and France. Hungary has terminated its program.

“If you have a lot of money that you acquired through dubious means, securing a new place to call home far away from the place you stole from isn’t just appealing, it’s sensible,” Naomi Hirst of rights group Global Witness said.

She said checks on individuals that bought EU citizenship or residency permits were not satisfactory and exposed countries to corruption and money laundering risks.

The joint report by Global Witness and Transparency International urged the European Union to set standards for managing the schemes and to extend anti-money laundering rules, applied so far to banks or gaming firms, to all those involved in the visa-for-sale industry.

The European Commission will publish a report on schemes in EU countries by the end of the year, commissioner Dimitris Avramopoulos said on Wednesday. He said the report would offer guidance to member states on managing the programs, “including on necessary background checks for applicants”.

Acquiring these documents costs on average 900,000 euros, but Cyprus’ passport could cost up to 2 millions, the report said.

Cyprus has raised 4.8 billion euros ($5.51 billion) from its scheme, while Portugal could earn nearly a billion euros a year, according to figures cited in the report, called “European Getaway – Inside the Murky World of Golden Visas”.

EU states generated around 25 billion euros in foreign direct investment in a decade from selling at least 6,000 passports and nearly 100,000 residency permits, the report said using what it called conservative estimates.

“Money must not be the criterion for citizens’ and residents’ rights in the EU,” said EU lawmaker Sven Giegold, who sits on the assembly’s special committee on financial crimes.

“The trade in passports and visas by EU states must be stopped as soon as possible. These programs are a gateway to criminal money,” he added, echoing the view of other EU lawmakers.

The report said in Malta, which has raised 718 million euros from its scheme, applicants who have criminal records or are under investigation could still be considered eligible “in special circumstances”.

“Poorly managed schemes allow corrupt individuals to work and travel unhindered throughout the EU and undermine our collective security,” Laure Brillaud, anti-money laundering expert at Transparency International, said.

All the countries who run these schemes, except Britain, Cyprus, Ireland and Bulgaria, are part of the Schengen free-movement area which comprises 26 European states.

($1 = 0.8708 euros)

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