A&D Forensics Brief, January 17, 2025

Upbit Faces South Korea Ban Over Crypto AML and KYC Violations

South Korea’s FIU has notified Upbit of possible penalties, including a six-month suspension of new user registrations, due to alleged KYC violations and transactions with unregistered crypto service providers. Upbit reportedly breached 500,000 to 600,000 KYC protocols, with potential fines reaching $34.3 billion. Upbit has until Jan. 20 to respond, with a final decision due Jan. 21.

US consumer finance watchdog sued for treating digital wallets like banks.

Tech trade groups TechNet and NetChoice are suing the U.S. Consumer Financial Protection Bureau (CFPB) over a new rule expanding oversight to payment apps like Apple Pay, PayPal, and Venmo. Filed on Jan. 16, the lawsuit claims the rule is an overreach, duplicating state-level regulations and threatening innovation. The CFPB argues the rule enhances consumer protections by reducing fraud and safeguarding data, but plaintiffs label it "arbitrary and capricious."?

BitMEX fined additional $100 million for regulatory violations of the Bank Secrecy Act.

A U.S. federal judge sentenced BitMEX's parent company, HDR Global Trading Limited, to two years of unsupervised probation and a $100 million fine for violating the Bank Secrecy Act (BSA). The Jan. 15 ruling follows BitMEX's guilty plea for operating without an AML program. BitMEX called the charges “old news” but expressed disappointment over the penalty.

$2.2 million stolen by fake job scammers.

New York Attorney General Letitia James has filed a lawsuit against scammers who defrauded victims through fake job offers requiring cryptocurrency deposits. Victims were tricked into transferring funds to scam wallets and faced additional fees when attempting to withdraw. One victim lost over $100,000. The NYAG has seized $2.2 million in Tether and will serve notice of the lawsuit via NFT, marking a first for government regulators.

Robinhood to pay $45M in civil penalties to settle SEC charges

Robinhood has settled with the SEC for $45 million over securities law violations, including inaccurate trading reports, failure to report suspicious activity, and cybersecurity lapses. Robinhood Securities will pay $33.5M, and Robinhood Financial $11.5M. The settlement follows prior regulatory issues, including a $3.9M crypto-related settlement with California. Despite the penalty, Robinhood’s shares saw minimal impact.

South Korea reported its first crypto ‘pump and dump’ case under the new law.

South Korean authorities have indicted suspects for a "pump and dump" scheme under the Virtual Asset User Protection Act, which took effect in July 2024. The suspects allegedly inflated cryptocurrency prices by placing buy orders and then dumped assets, earning hundreds of millions of Korean won. This marks the first case under the new law, which requires virtual asset service providers to report abnormal transactions.

Wolf Capital co-founder pleaded guilty to $9.4 million crypto Ponzi scheme.

Wolf Capital co-founder Travis Ford has pleaded guilty to wire fraud conspiracy for his role in a Ponzi scheme that defrauded 2,800 investors of approximately $9.4 million. Ford promised returns of 547% annually, claiming he could generate 1-2% daily returns. Between January and August 2023, Ford attracted investors through the firm's website and social media, but instead of investing the funds as promised, he diverted them for personal gain.

Ethereum DeFi Protocol UniLend Finance Exploited for Nearly $200,000

UniLend Finance was exploited for nearly $200,000 on January 12 due to a vulnerability in its smart contract. The attackers siphoned off assets including ETH and ERC-20 tokens. UniLend responded quickly, acknowledging the breach and engaging security experts for an investigation. The incident highlights security risks in DeFi platforms, emphasizing the need for stronger protective measures to safeguard user funds.

Bank of Namibia granted provisional licenses to two crypto exchanges.

Namibia’s central bank granted provisional licenses to two cryptocurrency exchanges, Mindex Virtual Asset Exchange and Landifa Bitcoin Trade, under the Virtual Assets Act. These licenses, valid for six months, allow the companies to set up operations and infrastructure but not to offer public services until final approval is granted. The companies must meet all regulatory requirements to obtain final approval, which may be granted earlier if the setup is completed before the six-month period ends.

U.S. IRS to Require Third-Party Reporting for Crypto Transaction in 2025.

Starting in 2025, U.S. cryptocurrency exchanges and brokers will be required to report digital asset transactions for tax purposes, according to new IRS regulations. This move aims to ensure accurate tax filings and address noncompliance. However, it may push users toward decentralized platforms like Uniswap or PancakeSwap, where tax enforcement is challenging.