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/

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.

Accenture Ventures links up with AI firm Quantexa to tackle money laundering, credit risk

John Davis and Sean McMahon

Accenture Ventures has taken a minority stake in data analytics firm Quantexa. The investment will spur Quantexa’s artificial intelligence-based network analytics and entity resolution technology. The solution will integrate with Accenture Applied Intelligence to aid Accenture clients in finding new, actionable insights. The collaboration will also enable the detection of financial crime.

Accenture plans to combine its own technology with Quantexa’s network analytics technology to develop AI-enabled solutions to detect money laundering, credit risk and provide customer insights. Accenture will use its Financial Crime Analytics Utility to refine Quantexa’s network analytics modeling.

“Accenture is committed to employing innovative techniques to help our clients tackle complex issues such as money laundering,” said Adam Markson, managing director, Accenture Finance & Risk Services. “By investing in Quantexa and combining our expertise, we are equipping our clients with new technologies and approaches to solving the most pressing data issues. Furthermore, the strategic alliance further enhances our Financial Crime Analytics Utility, which will help prevent the movement of illicit funds that enable real world issues, including human trafficking and drug crime.”

London-based, Quantexa applies leading-edge analytics and big data to identify difficult-to-detect customer connections and behavior. Quantexa’s technology has successfully detected potential money-laundering activity via the analysis via network analysis.

“We are delighted to be working with Accenture to deliver and scale our technology to help solve our clients’ biggest data challenges,” said Quantexa CEO Vishal Marria. “Creating context is critical in investigations to help clients connect the dots in their data, allowing them to see the complete picture and make better decisions.”

International anti-money laundering reforms and Iran

By Aaron Arnold

At its October meeting, the Financial Action Task Force—an intergovernmental body that promotes international anti-money laundering and counter-terrorism financing standards—decided that it will not call on its members to apply countermeasures against Iran. (In the world of such intergovernmental bodies, the word “countermeasures” has a very specific meaning: taking action to block Iran. Meanwhile, “measures” merely refers to enhanced scrutiny.) But the organization did say that countries should tightly watch over Iranian transactions even if not going so far as to terminate certain types of banking networks with Iran.

Why is this distinction important? Because in essence, the organization’s decision gives Iran an additional four months to enact anti-money laundering reforms that are in line with international standards—and gives the European Union that much more political wiggle room in its effort to try to salvage the nuclear deal with Iran.

The tortured history of anti-money laundering reforms in Iran. Such reforms are crucial if Iran is to get relief from sanctions. Although enacting new, anti-money laundering legislation is not a condition of the Joint Comprehensive Plan of Action—the agreement between Iran and the P5+1 (the United States, United Kingdom, France, Russia, China, and Germany) that curbed Iran’s nuclear program in exchange for sanctions relief—doing so is necessary for Iran to reintegrate into the global financial system. Foreign investment in Iran, for example, would be stymied if banks perceived the country’s financial system to be high-risk. This is why the Financial Action Task Force’s original decision, back in June 2016, to suspend countermeasures against Iran was so consequential: The decision provided the political space necessary for Iran to begin implementing new anti-money laundering rules and regulations. At least, that was the plan.

That plan changed in May this year, when the Trump administration decided to unilaterally withdraw from the Iran deal and reimpose US financial and economic sanctions. The US Treasury Department gave companies two separate 90-day and 180-day deadlines to end ties with Iran, otherwise known as “wind-down periods.” This week marks the end of the final wind-down period, whereby the United States reimposes sanctions on Iran’s financial, energy, shipping, and insurance sectors. Remarks by US Treasury Secretary Mnuchin suggest that the United States is even prepared to sanction SWIFT—the Belgium-based financial messaging service that handles the bulk of global transactions—if the company does not disconnect Iranian banks from its services. A move like that would not only intensify the dour state of relations with the European Union, but potentially invite significant blow-back against US banks.

In June 2016, Iran committed to implementing an action plan addressing its money-laundering and counter-terrorist financing deficiencies. Although Iran has since moved several reform efforts forward, they still fall short of international standards. Specifically, the Financial Action Task Force noted that Iran had failed to adequately address nine out of ten commitments from the country’s action plan. For example, Iran’s counter-terrorist financing legislation includes exemptions for groups “attempting to end foreign occupation, colonialism, and racism”—a rather glaring loophole. Iran also still lacks appropriate mechanisms and authorities to identify and freeze terrorist-linked assets in line with relevant UN resolutions. And it lacks rules and regulations to ensure adequate customer due diligence requirements. These are just a few of the many places where Iran has failed to measure up to international standards in this area—in some cases, for as long as a decade.

Since 2008 the country has made overtures to join the Financial Action Task Force, and promised to adopt a range of anti-money laundering and counter-terrorist financing reforms. But each year it has fallen short of making any meaningful progress.

Most recently, Iran’s President Hassan Rouhani and his supporters have called for new rules and regulations that would put Iran on track with international standards. Ayatollah Khamenei and hard liners, on the other hand, have expressed opposition to the Financial Action Task Force’s standards, citing concerns that the reforms were instruments of the West. (To be fair, it took Pakistan more than four years to come into compliance with FATF standards after committing to an action plan.)

By February 2019, the Financial Action Task Force expects Iran to implement all of its commitments or else the task force will “take further steps to protect against the risks emanating from deficiencies in Iran’s AML/CFT regime.” Whether this means a recommendation that countries take countermeasures against Iran or perhaps another delay is entirely up to Iran.

Is Iran getting a pass? Since May, EU leaders have been scrambling to keep the Iran nuclear deal intact. Leading proposals include establishing a “special purpose vehicle,” which would essentially act as an intermediary between EU businesses and Iran that would help transactions avoid US sanctions.

In other words, this means the establishment of an alternative payment system that avoids the US financial system. Anticipating such a move, Secretary Mnuchin  has already threatened to sanction the “special purpose vehicle” should EU companies use it to avoid US sanctions. For its part, in August, the European Council had tried to prepare for the effects of such a US move by updating its own “Blocking Statute,” which gives EU businesses a legal avenue to recoup damages from US secondary sanctions.

But it would be difficult (if not impossible) for European leaders to continue trying to salvage the JCPOA while also telling its banks that they must employ countermeasures against Iranian transactions as a result of the Financial Action Task Force’s designation of Iran as a “high risk and non-cooperative” jurisdiction.

Although it remains to be seen whether or not the Iran nuclear deal is salvageable, there are few incentives left for Iran to implement anti-money laundering reforms. For better or worse, the Financial Action Task Force and the future of the JCPOA have become politically intertwined as a consequence of US unilateral sanctions. On one hand, the task force has given EU leaders the political latitude to push back against US sanctions—at least for the next four months, during which the European Union will not require its banks to take active countermeasures against Iran. On the other hand, the decision sends the wrong signal to the international community—that international norms and standards are taking a backseat to geopolitics.

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.

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

Capital One Bank Fined $100 Million Over Money-Laundering Controls

Capital One Financial Corp. COF -1.69% has paid a $100 million fine over regulatory deficiencies in its anti-money-laundering program, federal regulators said Tuesday.

The Office of the Comptroller of the Currency levied the fine, saying the bank had several weaknesses in its compliance programs and risk assessment and failed to file some suspicious activity reports flagging potentially problematic transactions. The civil penalty came after the OCC initially cited deficiencies at Capital One in July 2015.

The bank has paid the fine to the U.S. Treasury, according to the OCC.

A Capital One spokeswoman said that the issue resulting in the fine was related to “prior banking relationships with certain check cashing service providers.” The bank said it left the business in 2014. The fine is part of resolving the consent order, she said.

“Since that time, we have worked diligently with our bank regulators to strengthen our processes and internal controls to ensure we address any concerns” regarding compliance with federal anti-money-laundering laws, the Capital One spokeswoman said.

https://www.wsj.com/articles/capital-one-fined-100-million-over-anti-money-laundering-program-1540318983

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

Feds indict Parkites on money laundering, drug charges

By Bubba Brown

Federal prosecutors indicted two Parkites on drug and money laundering charges, accusing them of using money from marijuana sales to operate a popular Salt Lake City concert venue and purchase property in Park City.

The 13-count indictment, announced Monday, names Gabriel Seth Elstein, 33, and his wife Angela Christina Elstein, 32, both of Park City, as well as St. George resident Scott Dale Gordon, 48. Prosecutors say they used multiple suppliers and drivers over a period of several years to transport more than 2,000 pounds of marijuana from California to Salt Lake City, Minnesota, Illinois and Wisconsin. Dumbles Holdings, LLC was also listed in the indictment.

Prosecutors accuse the trio of using $1.3 million from marijuana sales to build The Complex music venue, describing regular payments of $50,000 of cash in shrink-wrapped bags to the foreman of the construction project. The Elsteins and Gordon laundered at least $5 million through the venue and a music promotion business Bondad Productions, the indictment states.

The indictment also alleges that the defendants used laundered money to help purchase two properties in the Snyderville Basin, one on the 7000 block of Tall Oaks Circle in Pinebrook and the other on the 4000 block of Hilltop Drive in Jeremy Ranch.

In March, more than 600 grams of marijuana, packaged in five vacuum-sealed bags, as well as a digital scale and packaging material, were found in the Elsteins’ home on the 4000 block of Hilltop Drive, prosecutors say.

Prosecutors are seeking the forfeiture of both Snyderville Basin properties, as well as The Complex. A press release from the U.S. Attorney for Utah, John Huber, noted that the music venue will remain open.

The defendants on Friday were arraigned in federal court, where they pleaded not guilty to the charges, according to the release. They face a sentence of 10 years to life in prison if convicted on a count of conspiracy to distribute marijuana.

Gabriel Seth Elstein and Gordon were charged in February and released on pre-trial conditions. Angela Christina Elstein was added to the indictment last month and released Friday. A trial has been set for Dec. 14.

Attorneys for the defendants did not immediately respond to requests for comment.

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