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Common Types of Crypto Laundering Fraud

  • Crypto laundering fraud has become a common offense whereby criminals take advantage of virtual exchanges to perpetrate an online fraud.
  • Losses from fraud, misappropriation, hacks, and thefts totaled $4.5 billion in 2019, leading federal agencies to increase their efforts in prosecuting companies suspected of engaging in frauds involving the crypto sphere.
  • Because of the anonymity, speed, and overall preference of using digital assets as an exchange of value for goods and services, criminals have increasingly utilized crypto exchanges to launder digital assets into the economy.
  • Federal governmental agencies have recognized the imperative of ramping up enforcement efforts and have recently announced new regulations designed to target crypto frauds.
  • Consider hiring an attorney skilled in handling complex crypto laundering fraud cases to advise you on the legal and regulatory consequences of such an offense.

Experienced Defense Team

If you are being investigated or have been charged in connection with a crypto laundering fraud, now is the time to take prompt action in your defense.

The federal government has ramped up prosecutions of cybercrimes such as crypto laundering fraud and other frauds involving cryptocurrencies. Losses from fraud, misappropriation of funds, hacks, and thefts totaled $4.5 billion dollars in 2019—a significant increase from $1.7 billion in 2018 and $169 million in 2017.

Because of this, federal agencies are aggressively seeking to hold companies accountable for these cyber frauds and regularly use public prosecutions as an example for future fraudsters. Do not fall prey to a protracted government prosecution.

Crypto laundering fraud is a relatively complex topic due to the digital assets, cyber space, and blockchain issues involved in the transactions.

If you need help preparing a defense strategy or would like to receive legal advice concerning a crypto laundering allegation, contact our office today.

Our attorneys include former FBI agents, former U.S. attorneys, and former prosecutors. We are trained in cryptocurrency regulation and qualified to defend our clients against unwarranted and unsubstantiated allegations of crypto laundering fraud.

Do not wait to get in touch with an experienced defense attorney today. Put Oberheiden, P.C. on your side to fight for your freedom.

Crypto Laundering Fraud

Definition of Crypto Frauds

Crypto fraud is a broad term, referring to the deceptive or deceitful practice of using one’s cryptocurrencies, digital currencies, or other crypto assets to induce another into transferring you their cryptocurrencies, digital currencies, or other crypto assets.

As businesses gradually utilize cryptocurrency exchanges to transact their business online, the potential for those exchanges to be used as a conduit to engage in crypto laundering fraud has increased. Criminals doing business on the dark web are often paid in virtual currency, which has become the preferred and easy way to launder funds.

The Rise in Crypto Laundering Fraud

Money laundering fraud of crypto currencies and other digital assets has become commonplace, increasing exponentially in 2018 for example. Because transactions in the crypto sphere can be relatively anonymous, fraudsters are given multiple possibilities for committing crypto money laundering.

Crypto laundering fraud is both difficult to trace and detect. Individuals engaging in crypto fraud often seek the services of professionals such as accountants and other financial experts to conceal the trail of criminal activities and make their transactions appear legitimate. The crypto currency, Bitcoin, has made it practically impossible to trace fraudulent transactions, as the “Dark Wallet” of Bitcoin is both encrypted and untraceable.

Further, crypto laundering fraudsters have been one step ahead of federal regulators, causing the government to rethink its enforcement strategies and ramp up prosecutions.

Examples and Stages of Crypto Laundering Fraud

Crypto currencies and other digital assets can be implicated in any of the following stages and examples of crypto laundering fraud:

  • Initial stages of crypto fraud such as raising funds via illegal means through the selling of illegal goods or services in exchange for crypto currencies or other digital assets.
  • Converting the illegally received crypto currencies or other digital assets into the traditional fiat currencies and making them look legitimately received.
  • Layering crypto assets in a money laundering scheme, meaning the splitting of the crypto assets into smaller sums or through clean wallets that are then converted into fiat currencies.
  • Layering fiat currencies through a series of multiple transfers or movements to further distance these transactions from the initial illegal digital source.
  • Broadly, any movement, conversion, or placement of illegal funds.
  • Integrating the illegally obtained funds into the legitimate marketplace economy by either selling, investing, or purchasing other assets.

The Department of Justice—working independently or collaboratively with the FBI or SEC—can bring charges of crypto laundering fraud in conjunction with other crypto frauds such as those relating to wire fraud, bank fraud, mail fraud, computer hacking, identity theft, tax evasion, and even conspiracy, as some examples.

Laws Regulating Crypto Transactions

Cryptocurrency exchanges in the United States must comply with various money transmitter licensing requirements and must have in place an effective anti-money laundering compliance program.

Below is a list of the laws, requirements, and guidance for companies transacting with crypto assets:

  • Bank Secrecy Act (“BSA”) and the Financial Crimes Enforcement Network (“FinCEN”): The BSA requires a money service business (“MSB”) to comply with the federal anti-money laundering regulations of the FinCEN. FinCEN is a bureau of the Treasury Department that analyzes financial transactions to combat money laundering and other financial crimes, including crypto crimes. In 2018, FinCEN issued anti-money laundering requirements for issuers engaging in initial coin offerings (“ICO”). The failure of an MSB to comply with the anti-money laundering requirements of FinCEN may result in civil and criminal prosecution. Crypto frauds are be punishable by up to 20 years in prison.
  • The Internal Revenue Service (“IRS”) authority: the IRS has the authority to analyze MSBs regarding whether they are compliant with FinCEN’s regulations on anti-money laundering.
  • Financial Action Task Force (“FATF”): FATF is an intergovernmental organization that develops policies to fight money laundering and recommends various anti-money laundering standards. In 2019, the FATF provided recommendations regarding virtual asset service providers, which will likely result in FinCEN imposing additional anti-money laundering requirements in the future regarding cryptocurrencies and other digital assets.
  • Requirements for money services business (“MSB”): Cryptocurrency exchanges and other cryptocurrency businesses must register as an MSB with FinCEN. An MSB that is a money transmitter is required to conduct a risk assessment of its potential exposure to money laundering and to implement an effective anti-money laundering program based on the results of the risk assessment. The MSB must also report suspicious activities of its customers for certain transfers taking place that are over $2,000 in a single day.

The above list represents just some of the more recent laws and regulations imposed upon MSBs regarding their operations and management of digital assets.

While regulation of the crypto sphere is inconsistent due to the novelty of virtual currencies, the laws regulating crypto assets can nevertheless be very complicated.

If you need assistance understanding the legal ramifications of crypto asset transactions or would like advice regarding a crypto laundering charge, you will need the services of an attorney trained in crypto regulation.

Need Advice Concerning Crypto Fraud?

Crypto frauds have been on the rise in the past few years. Despite the lack of uniformity in federal regulation, the U.S. government has made it their mission and top priority to investigate companies suspected of engaging in money laundering involving crypto currencies.

If you are under investigation or need advice regarding how to proceed in connection with crypto frauds such as crypto laundering fraud, do not wait to get in touch with one of our defense attorneys.

The attorneys at Oberheiden, P.C. are skilled in handling complex crypto laundering fraud cases from the initial government investigation to defending cases at trial. We have the experience needed to successfully prepare and defend your case against crypto fraud allegations.

Call or contact our office today for a free consultation to help resolve these legal challenges.

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