A&D Forensics Brief, July 28, 2023
A&D Forensics
Financial and Blockchain Intelligence Consulting, Blockchain Forensics, Crypto Investigations and Training Firm.
The House Financial Services Committee has advanced two significant crypto bills to the House floor.
The House Financial Services Committee has advanced two significant crypto bills to the House floor. The Clarity for Payment Stablecoins Act aims to regulate stablecoin issuers, while the Keep Your Coins Act is seen as positive for crypto self-custody. Both bills aim to provide regulatory frameworks for payment stablecoins and ensure users can maintain custody of their assets in self-custodial wallets. The passage of these bills is considered a "historic week" for crypto regulation, according to Coinbase Chief Policy Officer Faryar Shirzad.
The U.S. Department of the Treasury has released its semi-annual regulatory agenda, including updates on the AML Act and Corporate Transparency Act. The final beneficial ownership use and access rule will be published in September, and it remains to be seen if changes will be made in response to industry feedback. FinCEN plans to issue a Notice of Proposed Rulemaking in November to reconcile current beneficial ownership requirements with the Corporate Transparency Act, which goes into effect on January 1, 2024. Additionally, FinCEN plans to issue a Notice of Proposed Rulemaking in December on how financial institutions should incorporate national priorities into their AML program. The regulatory agenda also covers other areas such as customer due diligence requirements, pilot programs on sharing suspicious activity reports, and requirements for transactions involving convertible virtual currency or digital assets.
South Korea has established an interagency investigation unit, the Joint Investigation Centre for Crypto Crimes, to combat the rising number of illegal activities in the cryptocurrency market and protect investors. The unit consists of personnel from judicial, financial, tax, and customs agencies. The move comes in response to a surge in cryptocurrency-related crimes, which increased by 118% in the past five years to 1.02 trillion won ($797.81 million) in damages in 2022. The investigations will target cryptocurrencies with high price volatility or de-listing, focusing on illegal trading practices, tax evasion, unauthorized foreign exchange transfers, concealment of criminal profits, and money laundering. The establishment of this unit aims to address the lack of legal protections for investors in the cryptocurrency market until comprehensive regulations are put in place.
Las Vegas woman, Haiyan Liao, has pleaded guilty to money laundering and immigrant smuggling charges. She helped others fraudulently obtain visitor visas for immigrants from China to enter the U.S. She submitted applications with false statements to the U.S. Consulate in Guangzhou, and if approved, she accompanied them to New York. Families paid thousands of dollars to Liao for this service, and she made nearly $100,000 from these transactions. She faces up to five years in prison for unlawfully bringing aliens into the U.S. and up to 20 years for money laundering conspiracy. Liao will be sentenced on December 8th.
Cryptocurrency lending platform Nexo is joining the Association of Certified Sanctions Specialists (ACSS) to enhance its compliance efforts amid increasing regulatory scrutiny. Nexo will require its compliance staff to be ACSS certified, demonstrating their expertise in policy, due diligence, screening, compliance, and investigations. The move follows Nexo's acquisition of an American Institute of Certified Public Accountants certificate and completion of a Service and Organization Controls 2 Type 2 Compliance audit for client data protection. The company's focus on compliance comes after facing regulatory challenges and penalties related to its Earn Interest product in the United States. Other cryptocurrency exchanges and service providers are also facing regulatory scrutiny and working on compliance measures in different jurisdictions worldwide.
The New York couple, Ilya Lichtenstein and Heather Rhiannon Morgan, who were charged with attempting to launder $4.5 billion in bitcoin stolen in a 2016 Bitfinex hack, are expected to plead guilty.? They are scheduled for separate arraignments and plea hearings on August 3. The specific charges in the information have not been made public yet. The couple had previously pleaded not guilty to money laundering conspiracy and conspiracy to defraud the United States. The case has been ongoing since their arrest in February 2022, and prosecutors had previously stated that they were in plea negotiations with the defendants.?
The BC Securities Commission (BCSC) is holding a hearing against Core Capital Partners, a Vancouver-based merchant banking firm, and six individuals, including the Thindal brothers from Langley and Surrey. The BCSC alleges that Core Capital ran a "pump and dump scheme," artificially raising the stock prices of three firms between 2015 and 2018. The respondents are accused of issuing misleading news releases and promotional materials to inflate the companies' value. Core Capital denies the allegations, stating they are "without merit." The scheme involves Reliq Health Technologies, and the respondents allegedly controlled a significant portion of its stock and made false claims about its financial performance.
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Genesis Market, a criminal online marketplace selling stolen account credentials, was targeted in a coordinated international operation resulting in arrests and takedown actions in 17 countries. While the marketplace has been disrupted, some servers may still be functional, and administrators are reportedly looking to transfer ownership to a buyer. Genesis Market mainly dealt in digital items and amassed nearly $8 million in revenue between February 2018 and May 2022. The market relied on a third-party payment processor, making the takedown effort more challenging. The disruption of Genesis may lead to authorities targeting payment processors and could potentially trigger the emergence or growth of other illegal online marketplaces in the cybercrime ecosystem.
Hong Kong and the Kingdom of Saudi Arabia are expanding their financial collaboration with a focus on tokenization and payments infrastructure agreements. The Saudi Central Bank (SAMA) and the Hong Kong Monetary Authority (HKMA) held a bilateral meeting to enhance the integration of financial services between the two countries. They discussed initiatives such as financial infrastructure development, market connectivity, and sustainable development. Additionally, they signed a memorandum of understanding (MoU) to promote joint discussions on financial innovation. The authorities also shared expertise in tokenization, payment infrastructure, and supervision technologies. The collaboration aims to foster economic and trade cooperation and enhance financial and fintech relations between the two regions.?
A Reddit user lost over $3,000 worth of Bitcoin from their supposedly secure paper wallet, which was generated on an offline computer. The hacker likely waited for a considerable amount of funds to be deposited into the wallet before stealing them, as evidenced by an outgoing transaction after more than 12 months of the initial deposit.The user used the wallet creation tool walletgenerator.net, which has been known for vulnerabilities.?
Charlie Shrem, co-founder of BitInstant and one of the first bitcoin millionaires, served jail time for crimes related to crypto. Now, he advises crypto startups to prioritize compliance and avoid corporate misconduct. The Justice Department viewed Shrem's case as a way to push the crypto industry towards regulation and compliance, rather than being associated with criminals and terrorists. Shrem's experience highlights the evolving landscape of the crypto sector, with some companies striving to establish robust compliance programs to gain broader acceptance and avoid legal troubles.
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