Feds Posed as Drug Cartel to Send N.J. Man, Texas Doomsdayer to Prison for Money Laundering

By Joe Brandt

Anthony Romano thought he was meeting a man with ties to a Colombian drug cartel.

They made a deal: the man would give Romano cash proceeds from the drug trade in exchange for a check for that amount, minus a fee. Romano and the man met multiple times in Cape May and Atlantic counties.

In truth, the “cartel” man was actually a federal agent looking to nab money launderers, U.S. Attorney Craig Carpenito said in a news statement Monday.

In September, Romano, 53, of Springfield, admitted his role in the scheme – conspiring to launder $590,000 in late 2017.

After several early meetings with the agent, Romano mentioned a friend down south who could help the “cartel” launder even bigger sums. He introduced him to John Eckerd, a developer in McKinney, Texas who was working on a massive development an hour outside of Dallas: a combination doomsday bunker, resort, golf course, and spa.

The $320 million development, called Trident Lakes, barely got under construction. The local CBS affiliate showed shots of a field mostly empty, except for an ornate fountain.

Carpenito said the development was pitched as “a five-star doomsday escape for the wealthy with DEFCON 1 preparedness” that was “capable of withstanding catastrophic events ranging from viral epidemics to nuclear war.”

And Eckerd was prepared to use it to launder Colombian drug money.

In January 2018, after several four- and five-figure transactions, the agent met Romano somewhere in New Jersey to give him $100,000 cash. Eckerd then wired money to a “cartel” account.

The next month, Romano accepted a backpack containing $100,000 cash after meeting the agent and giving him a tour of the development site in Fannin County, Texas. Eckerd then handed the agent a check.

Besides admitting to the money laundering scheme, Romano also pleaded guilty to a 2014 robbery of The Pawn Shop in Union, acknowledging that conspirators, in that case, had a gun during the incident.

U.S. District Judge Renee Marie Bumb, in Camden, sentenced him to 54 months in prison.

Eckerd, who admitted to conspiring to launder $200,000, was sentenced to 15 months in prison Monday in Bumb’s courtroom.

Carpenito credited FBI agents and detectives from the Union County Prosecutor’s Office for their investigation.

https://www.nj.com/atlantic/2019/11/feds-posed-as-drug-cartel-to-send-nj-man-texas-doomsdayer-to-prison-for-money-laundering.html

‘El Chapo’ renews U.S. law enforcement concerns about money laundering via prepaid cards

By Brett Wolf

NEW YORK (Thomson Reuters Regulatory Intelligence) – The recent trial of Mexican drug lord Joaquin “El Chapo” Guzman has reignited U.S. law enforcement officials’ concerns about the use of prepaid cards to launder proceeds of crime.

The purported abuse of prepaid cards by Guzman’s organization to move drug proceeds out of the United States, as depicted in the trial, was “definitely not shocking,” John Tobon, a senior official with Homeland Security Investigations (HSI), told Regulatory Intelligence.

While prepaid card providers are required to have anti-money laundering programs{here} and must report suspicious activity, there remains no requirement that individuals moving cards loaded with cash report the funds when crossing U.S. borders.

In 2011, the U.S. Treasury Department proposed a rule{here.pdf} aimed at forcing those moving prepaid cards loaded with more than $10,000 in or out of the country to declare the funds – just as a similar amount of cash or traveler’s checks would have to be disclosed under existing rules.

But Treasury’s Financial Crimes Enforcement Network (FinCEN), facing industry pushback, has not finalized the rule{here}.

During Guzman’s trial last month, the jury heard testimony that the Sinaloa Cartel led by Guzman used prepaid cards to move drug proceeds from New York to South America to pay for cocaine. The cards, loaded with proceeds of narcotics sales in the United States were transported overseas and the cash was withdrawn at ATMs, the jury heard.

The jury convicted Guzman of money laundering conspiracy and other crimes, and the money laundering witness testimony served as a reminder to law enforcement that FinCEN has not issued a reporting requirement.

U.S. law enforcement officials with Homeland Security Investigations (HSI), which probes cross-border money laundering schemes, consider FinCEN’s failure to enact a prepaid card cross-border reporting requirement problematic.

“I’ve been really fighting, getting into shouting matches with FinCEN personnel because it’s one of those things where the industry has really gone out of their way to thwart these rules,” HSI’s Tobon said.

FinCEN, which in 2016 told Regulatory Intelligence that the effort to develop a cross-border reporting rule for prepaid cards was “not dead,” did not respond to a request for comment for this story.

HSI continues to see prepaid cards used to launder money and the lack of a FinCEN rule on cross-border transport of the cards is “a significant vulnerability,” Kevin Tyrell, assistant special agent in charge with HSI in Miami, told Regulatory Intelligence.

While HSI officials are concerned about transnational organized crime rings smuggling cards loaded with dirty cash out of the country, such schemes do not always involve “mules” who carry the cards. In some cases, criminals simply mail prepaid cards with impunity, Tyrell said.

If U.S. authorities conduct an “outbound inspection” of packages at a mail facility and discover a package full of traveler’s checks, they can seize the instruments and investigate whether required reporting occurred, Tyrell said.

“But if they find a package full of prepaid cards, they still can’t do anything, they just have to let them go,” Tyrell said.

British Columbia’s money laundering is an emergency. The public deserves an inquiry.

By David Moscrop

In June 2018, former Royal Canadian Mounted Police officer Peter German released his report into money laundering in British Columbia. His independent review found that more than $75 million (or 100 million Canadian dollars) had been laundered through the province’s casinos. Canada’s westernmost province is home to about 4.8 million people, so that’s a hefty sum per capita.

In January, we learned that German’s figure was probably low — very, very low — given that an international report put the total amount laundered at more than 1 billion Canadian dollars per year. (The Canadian government knew this, evidently, but didn’t share with British Columbia in the summer.) The new report also includes details about sources of gangsterism not found in the German report. Now, British Columbia is undertaking two parallel processes to better understand what’s happening: a second German report, this time focused on real estate, horse racing and luxury vehicles, and a Department of Finance review.

All of that is perfectly fine — and perfectly inadequate.

Wise and wily governments survive in the long run because they can anticipate and manage crises. Journalist John Ibbitson calls it the “Rhodes Maxim,” citing Paul Rhodes, a former Progressive Conservative press secretary in Ontario, who once told him that the government he served handled controversies by asking itself “How will this end?” and then going there. Smart.

The maxim comes to mind today, with demands in British Columbia for a public inquiry into money laundering in the style of Quebec’s 2011 Charbonneau Commission, which probed public works corruption. That commission’s findings led to millions of dollars in fines, the resignation of politicians and a handful of high-profile arrests — alongside 60 reform recommendations. British Columbia’s largest union, the Government and Service Employees’ Union, is leading the call for a deep dive into the dark cave of misdeeds that hide links to fentanyl trafficking, out-of-control real estate prices and, almost surely, corrupt, complicit and incompetent public officials past and present.

As public pressure mounts on the government to launch an inquiry, the city of Vancouver — a central site for money laundering — has joined the call, as has Richmond, B.C., and the province’s capital city, VictoriaSo has the B.C. Green Party, whose support is critical for the government in the legislature. British Columbians already overwhelmingly support the idea, with 76 percent in favor and 73 percent expecting that an inquiry would expose the truth about what’s been going on in the province’s shadows for all these years — and what it has cost British Columbia in dollars, reputation (the scheme has become known as the Vancouver model), real estate prices, cost-of-living challenges and even lives (money laundering is linked to fentanyl trafficking, which has killed thousands in the province since 2012).

The entire thing is an emergency. Recently, a federal case — known as the E-Pirate investigation — related to money laundering in British Columbia resulted in stayed charges when the RCMP botched the case by exposing the identity of an informant. The investigation reads like something out of a crime novel. As investigative journalist Sam Cooper, perhaps the top journalist on this file, summarized it, “The E-Pirate investigation found loan sharks allegedly connected to drug-traffickers in China used legal and illegal Metro Vancouver casinos to wash drug cash, helping ultrawealthy high-rollers from China buy Vancouver real estate, and fund fentanyl imports into Canada.”

The truth must come out. And it looks like there’s lots to out.

So far, B.C. Premier John Horgan has been noncommittal and prone to temporizing. That’s unwise. He cites cost, time and existing fact-finding efforts as reasons to wait, as well as concerns that such an inquiry could interfere with developing prosecution efforts.

Please. A wide-ranging, long-term commission is critical to exposing the truth and rooting out corruption in the province. And it’s well worth the money (as a member of the Charbonneau Commission has said) — it might even pay for itself in fines and funds saved through reforms. Moreover, findings from a commission, which can compel witnesses to appear before it and require them to testify under oath, can be used in prosecutions. Meanwhile, every day without an inquiry is an extra day for thugs and crooks to get away with illicit acts that harm citizens and residents of the province.

The public is tired of waiting and already deeply suspicious of the province after years of inadequately addressing money laundering and its attendant issues under the previous government. Now, Canada and the world are watching and waiting. The premier and cabinet ought to recognize this fact now and follow the Rhodes Maxim by starting out where this issue will inevitably end and saving everyone the time, energy and frustration from the political posturing that will precede an eventual capitulation.

The province, first under the Liberals and now the New Democrats, has already wasted too much time waiting to get serious about organized crime. The delay is undermining governance in the province and destroying the lives of innocent people. Everyone knows what the right thing to do is. All that’s left is to do is get to it.

Former Ohio City nightclub owner pleads guilty to drug, money laundering charges

By Eric Heisig

CLEVELAND, Ohio — A former Ohio City nightclub owner arrested by the FBI as part of a large-scale investigation pleaded guilty Monday to federal drug and money-laundering charges.

Emad Silmi, 44, the owner of Global Auto Body & Collision in Cleveland’s Puritas-Longmead neighborhood, acknowledged to a federal magistrate judge that he ran a drug ring out of his shop that spread large amounts of marijuana, cocaine and a designer drug similar to “molly” throughout Northeast Ohio.

His arrest came after a federal investigation that lasted more than a year and also resulted in charges against 25 other people. It is the second time the North Olmsted resident, who previously owned the popular club Moda, was caught trafficking drugs.

He was sentenced in 2006 to 57 months in federal prison for similar charges.

Silmi said little more than “yes, your honor” during his plea hearing in front of Magistrate Judge Jonathan Greenberg. A bald, gray-bearded man in an orange jumpsuit, he has been in the custody of the U.S. Marshals Service since his arrest in December 2017. He acknowledged his crimes to the judge as Assistant U.S. Attorney Matthew Cronin read them aloud from a plea agreement.

His lawyer Craig Weintraub said after the hearing his client is looking at a likely sentence of about 10 years in federal prison. Silmi also agreed to forfeit more than $54,000 and a gun, and federal prosecutors agreed to drop several charges in exchange for his plea.

U.S. District Judge Christopher Boyko will sentence Silmi on April 29.

The FBI dubbed the investigation “Operation Snow Globe.” Agents discovered that drugs were shipped through the mail, FedEx and UPS. The drug money was laundered through auto shops throughout Cleveland and in Parma. Agents listened in on phone calls and read text messages, according to court records.

Silmi obtained large amounts of cocaine from Cleveland resident Samer Abu-Kwaik, prosecutors said. He also obtained large amounts of designer drugs from Huron resident Anthony Quinn Greenelee, who obtained it from China.

He sold all the drugs out of his shop and disguised drug payments as business expenses to launder the money.

Others netted in the FBI’s investigation were also caught shipping and selling heroin, fentanyl and the synthetic opioid U-47700 from Puerto Rico, court records said.

Prior to his recent arrest, Silmi was likely best known as the owner of his West 25th Street nightclub, which in its day was frequented by stars such as LeBron James, Shaquille O’Neal, the rapper 50 Cent, Mötley Crüe drummer Tommy Lee and hip-hop mogul Russell Simmons.

The Ohio City club was shuttered in 2006, and its former building now houses the Mitchell’s Homemade Ice Cream shop.

Weintraub described Silmi’s charging and plea as a “fall from grace” for a once-successful businessman.

“That was the club in Cleveland for a while,” the attorney said of Moda. He said Global Auto Body & Collision is still open and is run by Silmi’s wife.

Federal prosecutors accuse multiple Colorado restaurants of drug money laundering

By Trevor Reid

GREELEY — Almansitas Mexican Food restaurant in Greeley is one of 17 restaurants implicated in a federal drug trafficking and money laundering investigation, with each of those restaurants having their accounts frozen and assets seized by federal authorities.

The original court filing from Nov. 13, has been sealed, but court filings in response to the charges from Almansitas owner Ana Cejudo hint at the allegations.

Cejudo in her response says the restaurant has never served as a drug trafficking front, nor has it laundered money, according to federal court filings.

But the response also refers to Drug Enforcement Administration databases and two safe deposit boxes seized by federal authorities containing more than $805,000.

The response also touches on money laundering operations, including a reference to layering — in which criminals use complex financial transactions to hide illegal sources of cash.

The case against Cejudo and Almansitas could also sweep up other Mexican restaurants, including Taco Star, with locations across Colorado, as it appears many of the same people are involved, and those people also appear to share a bank account, according to court filings.

Taco Star, a 24-hour Mexican fast food restaurant with drive-through service, has locations in Longmont, Northglenn, Aurora and Colorado Springs.

Despite the similarities between Almansitas and Almanzas — both 24-hour Mexican food restaurants with similar menus, signs and food — the restaurants are listed under different owners, the latter belonging to a Tomas Lopez Alamilla, according to Secretary of State business filings.

In Cejudo’s response, she asserts that Almansitas and Almanzas are separate entities owned by different people.

Taco Star is filed under a registered agent named Carolina Almanza, who shares a mailing address with Almansitas, according to business filings. But no one with the surname Almanza is listed as a defendant in the case.

In her response, Cujedo admits Cosme Gutierrez, another defendant listed in the court filing, is an owner of Taco Star. Cujedo also admits she, Gutierrez and Almansitas are the claimants for a single bank account, according to court records.

Gutierrez claims to be one of the owners of Almansitas in his response to the initial filing and is listed as a founder of the restaurant in its 2014 articles of organization. Cujedo, Gutierrez, Almansitas and Taco Star are being represented by Thomas Fleener, a Wyoming and Colorado criminal defense attorney based in Laramie.

The responses reference analyses of seized accounts dating back to October 2015. The responses also reference a section of the original filing titled “Connections between Jose Aguilar and Narcotics Trafficking.” The same Aguilar appears to own a bank account also associated with a business called El Potosino Foods, LLC, prosecutors asserted in the original filing.

When asked over a Friday evening phone call about the federal case, an Almansitas employee spoke with a man working at the restaurant before responding that they can’t give any information out.

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.

California woman sentenced for money laundering in local meth ring

By Jeff Reinitz

WATERLOO – A California woman has been sentenced to prison for running a money laundering operation as part of her husband’s drug ring that shipped meth into Iowa.

Judge Leonard Strand sentenced Janeth Amelia Pineda, 36, of Chula Vista, to three years in prison on Wednesday following a plea to one count of conspiracy to commit money laundering. She will be on supervised release for two years after she completes her prison sentence.

Her husband, Michael Pineda, 34, has pleaded guilty to money laundering and meth conspiracy charges and is awaiting sentencing.

Others indicted include Brandon Neil Harders, formerly of Waterloo; Samuel Arias, Michael Pineda’s stepfather; Robert Lewis of Janesville and Jeffery “Slim” Westberg, and authorities sought to seize Harders’ rural Gladbrook home as part of the investigation.

Authorities said Michael Pineda’s operation shipped ice methamphetamine from California hidden in auto accessory parcels destined for Iowa.

Janeth Pineda, instructed by her husband, opened accounts at Wells Fargo Bank that the Iowa meth customers would use to deposit drug money they owed the husband. The operation moved more than $370,000 worth of drug money in less than two years, according to prosecutors.

Court records state Michael Pineda traveled to Coralville in 2014 to deliver meth and met with Harders. After the meeting, police stopped Harders when he was traveling back to Waterloo and found about 3 pounds of meth.

In August 2018, Harders was sentenced to 11 years in prison following a plea, and Westberg was sentenced to seven years in October. A jury found Lewis guilty of meth charges conspiracy charges following a trial in August.

Baton Rouge man indicted for international money laundering in connection with drug business

By Rachel Thomas

BATON ROUGE, LA (WAFB) – A Baton Rouge man has been indicted by a federal grand jury for allegedly aiding and abetting a conspiracy to distribute drugs, international money laundering, and other charges related to these activities.

Donovan Barker, 59, made his initial court appearance on October 25 and pleaded not guilty.

According to the indictment, Barker owned and operated several businesses (Quantum Information Technologies, Caring Partners 1, llc, Don Western Sky, llc, Life Positive Services, llc, and Healthy Life 1, llc.), which sold and distributed green tea extracts and herbal supplements, but was actually working with others to import schedule IV drugs into the U.S. in order to repackage and distribute those drugs to people who had purchased them online. Barker was also reportedly accepting payments from these buyers and transmitting money to others operating outside the country.

The Department of Justice says from October of 2012 to February of 2016, Barker received more than $4.6 million in payments from people all over the country who had bought drugs and other substances online. Barker reportedly wired a majority of the money to various foreign bank accounts in the Philippines, India, China, and Canada. Barker is alleged to have been operating a money transmitting business without the proper license and without complying with applicable federal registration requirements.

The indictment also alleges that on May 24, 2016, Barker knowingly and intentionally possessed tramadol, a controlled dangerous substance.

“This indictment demonstrates the lengths to which international drug traffickers will go to deliver drugs and the efforts my office will make to stop them. We are committed to eliminating the international financial network used by drug dealers to bring drugs to our country and launder their illegal proceeds. I want to thank our prosecutors and our federal, state, and local partners for their extraordinary efforts in this case,” said U.S. Attorney Brandon Fremin.

Barker is indicted on charges of aiding and abetting a conspiracy to distribute tramadol and carisoprodol, international money laundering, unlawful money transmitting, and possession of tramadol.

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.”

How The Unexplained Wealth Order Combats Money Laundering

The UK is a haven for dirty money; more than £90 billion is estimated to be laundered through the country per year. The size of the UK’s financial and professional services sector, its open economy and the attractiveness of the London property market to overseas investors all make it unusually exposed to international money laundering risks. As part of new measures to tackle asset recovery and money laundering, the UK government introduced Unexplained Wealth Orders (UWOs) in January, which are being hailed as the cure to Britain’s dirty money problem.

What is an Unexplained Wealth Order?

UWOs require the owner of an asset worth more than £50,000 to explain how they were able to afford that asset. Introduced primarily to target Russian and Azerbaijan laundromats, UWOs have wide-ranging applications to all situations where the National Crime Agency (NCA) believes wealth was acquired illicitly, including tax evasion.

The game-changing nature of UWOs lies in the power they give UK law enforcement to prosecute. Formerly, little could be done to act on highly suspicious wealth unless there was a legal conviction in the country of origin. In cases where the origin country is in crisis or the individual holds power within a corrupt government, this is unlikely to be achieved. Where previously law enforcement agencies needed to prove in court that an asset was purchased with laundered funds, UWOs shift the burden of proof away from prosecutors and on to the asset’s owner.

Preventing Financial Crime with Unexplained Wealth Orders

The first successful use of a UWO since its implementation is the recent case of Zamira Hajiyeva, who owns millions of dollars in properties in London through offshore companies. Her husband, Jahangir Hajiyev, was convicted and sentenced to 15 years in prison for fraud and misappropriation of public funds, and authorities were able to identify a clear disparity between his income and the couple’s apparent wealth.

With corruption watchdog Transparency International estimating that £4 billion of UK property has been purchased with the proceeds of crime, it is hoped that this successful implementation of a UWO will herald a clampdown on overseas criminals laundering via the property market.

The success of this UWO has been fundamental in beginning to reduce the appeal of the UK as a destination for illicit income. In June, mortgage brokers were already reporting that Russian purchases of prime real estate in London had slowed as a result of both government pressure and a tightening of anti-money laundering rules.

There are, however, reasons to be wary of perceiving the introduction of UWOs as a cure-all for the UK’s money laundering problems. These court orders are ineffective as soon as a defendant can provide an explanation for the source of their wealth. In the absence of evidence to the contrary, they then win the argument. Legal difficulties and costs are other factors that can lead to delays in the UK’s fight against money laundering, while information obtained via a UWO cannot be used in criminal proceedings against the respondent. For UWOs to have credibility, authorities will need to ensure the first uses of them continue to be successful in order to serve as a useful deterrent going forward.

Further, money laundering covers a wide range of criminal activity and consequently can’t be solved by a single approach. Fragmented supervision and anonymous ownership of property in British Overseas Territories and Crown Dependencies are just two areas where Transparency International is still advocating for change to improve the UK’s asset recovery and anti-money laundering regime.

How Can We Continue to Fight Money Laundering?

It is clear that UWOs have the potential to act as powerful tools for law enforcement but are not yet being used frequently enough— more action is required if real change is to come. We need further action from the government to restrict property ownership and levy realistic local taxes.

With UWOs beginning to lead to the identification of criminals, questions will be asked of the financial institutions who facilitated the individual’s money management. To better equip themselves for the fight against money laundering, banks need to overhaul outdated AML systems to suit the complexity of the schemes perpetrated by criminals. They need to combat problems by employing entity resolution and network analysis techniques to understand vast data networks and identify hidden money.

https://www.forbes.com/sites/vishalmarria/2018/10/25/how-the-unexplained-wealth-order-combats-money-laundering/#26a904a54703