Crypto Fraud Defense – NCET Defense Attorneys

Federal Criminal Crypto Fraud Defense Attorneys for Investigations and Prosecutions Nationwide

Federal agencies including the Securities and Exchange Commission (SEC) and the U.S. Department of Justice (DOJ) are aggressively targeting individuals and organizations suspected of issuing fraudulent initial coin offerings (ICOs) and engaging in other forms of cryptocurrency fraud. Fraudulent ICOs, cryptocurrency investment scams, marketing scams, and other unlawful activities are attracting intense scrutiny, and federal investigations are leading to a wide range of charges carrying the potential for substantial fines and long-term imprisonment.

Despite the meteoric rise of new digital currencies, exchanges, and banking platforms, cryptocurrencies are still a relatively new phenomenon. As a result, while efforts are underway to enact laws and regulations specific to the cryptocurrency market, in the United States cryptocurrency fraud is currently prosecuted under laws of general applicability. Due to implications for the financial and securities sectors, cryptocurrencies, exchanges, banking platforms, and other digital currency properties are subject to a bevy of statutory and regulatory sources of authority, and individuals and organizations accused of cryptocurrency fraud can face charges ranging from money laundering and tax evasion to Bank Secrecy Act and Securities Exchange Act violations. Securing the services of an experienced cryptocurrency fraud defense lawyer will be key in protecting your rights.

What is a Cryptocurrency?

A cryptocurrency is a type of digital asset used to regulate units of assets and verify a transfer of assets. “Crypto” means secret or hidden. Therefore, cryptocurrencies utilize encryption techniques to regulate the flow of digital assets.

While there are many types of cryptocurrencies, the most well-known is the Bitcoin.

Payment via cryptocurrency is the preferred choice, especially among the young generation due to its anonymity and accessibility to everyone. Because they are dependent upon sophisticated algorithms and blockchains, cryptocurrencies are a secure means of asset transfer.

Therefore, companies have increasingly adopted the cryptocurrency as a payment method, which is overall a simple means of asset transfer.

Cryptocurrencies were largely unregulated prior to President Trump’s new executive order on creating a task force for investigating cryptocurrency frauds. Now there is an increase in federal government efforts and cooperation to prosecute companies suspected of engaging in fraudulent activities involving cryptocurrencies.

Put our highly experienced team on your side

Dr. Nick Oberheiden

Founder

Attorney-at-Law

John W. Sellers

Former Senior Trial Attorney
U.S. Department of Justice

Local Counsel

Joanne Fine DeLena

Former Assistant U.S. Attorney

Local Counsel

Joe Brown

Former U.S. Attorney & Former District Attorney

Local Trial & Defense Counsel

Amanda Marshall

Former U.S. Attorney

Local Counsel

Aaron L. Wiley

Former Federal Prosecutor

Local Counsel

Roger Bach

Former Special Agent (OIG)

Michael Koslow

Former Supervisory Special Agent (FBI)

Chris Quick

Former Special Agent (FBI & IRS-CI)

Kevin M. Sheridan

Former Special Agent (FBI)

Ray Yuen

Former Supervisory Special Agent (FBI)

Timothy Allen

Former Senior Special Agent

What are Cryptocurrency Crimes?

Cryptocurrency crimes are crimes committed with the use of a cryptocurrency or in the cryptocurrency sphere. They occur most often in connection with a company’s initial coin offering (ICO).

Cybercriminals most often resort to the Bitcoin for these crimes. Bitcoin is the most popular virtual asset of exchange and has increased in usage exponentially within the past few years. Using cryptocurrency is also much easier than laundering large amounts of cash.

Federal agencies have recently prosecuted companies for conducting their ICOs by utilizing fraudulent techniques. Companies have also been prosecuted for stealing money from people’s electronic wallets and from transacting or using unverified exchanges and questionable servers.

Common devices used to launder cryptocurrency include ATMs, gaming sites, prepaid cards, and unregulated exchanges.

Criminals engage in cryptocurrency fraud by first purchasing the crypto assets from online trading exchanges. The initial purchase of crypto assets is a legitimate transaction. They then use a type of anonymizing service to hide the blockchain as well as the fund’s source. This severs the connection between the crypto transactions. Now the crypto transaction can no longer be traced to the crime.

Often, because these transactions cannot be traced, criminals can easily make the crypto transactions appear as legitimate, legal income. In fact, federal agencies have a hard time finding an improper motive in such cases.

These crimes are nevertheless on the rise. Numbers estimate that losses from cryptocurrency crime were up about 160% compared to 2018’s losses of about $1.74 billion. Investor losses due to cryptocurrency fraud and misappropriation in 2019 increased five times.

Are You Under Federal Investigation or Facing Charges for Cryptocurrency Fraud?

For individuals and organizations facing federal cryptocurrency fraud investigations, hiring experienced defense counsel during the investigation is critical to mitigating the risk of an indictment. If you have already been charged, you need to speak with an NCET defense lawyer immediately. At Oberheiden, P.C., our team of federal defense lawyers has extensive experience in all phases of federal prosecutions, from fending off SEC and DOJ investigations to appealing convictions in federal district court.

While cryptocurrency presents some novel issues, ultimately, the same enduring principles that govern other types of federal criminal cases will dictate the outcomes of cryptocurrency fraud cases as well. In order to protect yourself, you need to execute a proactive defense, and you need to have a comprehensive and in-depth understanding of the laws and constitutional principles that apply. With our attorneys’ notable experience in federal criminal cases – including extensive experience prosecuting fraud charges on behalf of the DOJ – we are well-positioned to effectively defend individuals and organizations charged with cryptocurrency fraud in federal jurisdictions across the country.

Federal Statutes with Potential Implications for Cryptocurrency Fraud Cases

Cryptocurrency fraud allegations can trigger charges under a variety of different federal statutes. As effective cryptocurrency defense lawyers we represent company owners and executives, coders, investment firms, investment advisors, and other entities and individuals facing all types of charges in connection with alleged cryptocurrency fraud schemes. This includes charges under:

• 18 U.S.C. § 1030 (Computer Fraud and Abuse)
• 18 U.S.C. § 1341 (Mail Fraud)
• 18 U.S.C. § 1343 (Wire Fraud)
• 18 U.S.C. § 1344 (Bank Fraud)
• 18 U.S.C. § 1349 (Conspiracy to Commit Mail Fraud or Wire Fraud)
• 18 U.S.C. § 1956 (Money Laundering)
• 26 U.S.C. § 7201 (Tax Evasion)
• Bank Secrecy Act
• Commodity Exchange Act
• Securities Act of 1933
• Securities Exchange Act of 1934

Our attorneys are available to represent clients in federal cases involving Bitcoin, Litecoin, Ethereum, XRP, EOS, Tether, Monero, and all other cryptocurrencies.

This is Why You Are in Good Hands

Common Allegations in Federal Cryptocurrency Fraud Investigations

1. Unregistered and Fraudulent Initial Coin Offerings

Initial coin offerings typically involve the issuance of cryptocurrency as a means of raising capital for a new business venture. An ICO is similar in many respects to an initial public offering (IPO) involving company stock; and, as explained by the SEC, “ICOs, based on specific facts, may be securities offerings, and fall under the SEC’s jurisdiction of enforcing federal securities laws.” Selling coins, or tokens, in an unregistered ICO constitutes a form of securities fraud, and the SEC and DOJ have been aggressive in targeting individuals and organizations that have unlawfully promoted and sold tokens to individual investors.

2. Fraudulent Cryptocurrency Investment Scams

While many investigations target the unlawful sale of cryptocurrency, federal authorities are targeting individuals and organizations for other types of cryptocurrency-related fraud scams as well. For example, in March 2019 the DOJ publicized, “one of the first [cases] in which an individual has pleaded guilty to securities fraud involving a cryptocurrency in U.S. federal court.” The defendant, a 30-year-old Texas resident, raised approximately $4.25 million from investors who believed that they were investing in a new cryptocurrency called AriseCoin, when in reality the defendant was simply converting their funds for personal use. Charged with securities fraud, the defendant faced up to 20 years in federal prison.

3. Fraudulent Investment Advice Concerning Cryptocurrencies

Cryptocurrency investing can be a dangerous area for investment advisors as well. Similar to all other investments, when advising clients regarding ICOs and purchases of cryptocurrencies, investment advisors must provide suitable investment recommendations that reflect the client’s interests and the advisor’s thorough understanding of the risks involved with investing. Failing to provide suitable investment advice, withholding material information, overconcentrating investors’ portfolios in cryptocurrencies, charging excessive fees, churning investors’ portfolios in order to generate excess commissions, and other forms of investment fraud involving cryptocurrencies can all lead to civil or criminal fraud charges.

4. Money Laundering with Cryptocurrency

The DOJ and the Money Laundering and Transnational Criminal Enterprises Unit of the U.S. Attorney’s Office have recently been targeting individuals and criminal organizations for allegedly using cryptocurrency for money laundering purposes. Due to the pseudonymous nature of cryptocurrency and the limited records that are generated and stored with respect to cryptocurrency transactions, profits from fluctuations in the value of cryptocurrency can be difficult (but not impossible) to trace. This means that engaging in a high volume of cryptocurrency transactions can potentially be used as a means to launder revenue from illegal sources. However, the DOJ, the U.S. Attorney’s Office, the Internal Revenue Service (IRS), and other agencies have begun subpoenaing cryptocurrency exchanges and using other means to gather information about the parties involved in cryptocurrency transactions.

Examples of Cryptocurrency Crimes

As mentioned, Bitcoin is the most common cryptocurrency used to commit cryptocurrency fraud. They are many ways and many forms that a Bitcoin transaction can be used to perpetrate a crime:

• laundering dirty money
• defrauding investors
• purchasing illicit goods
• demanding Bitcoin ransom payments
• procuring or threatening funding
• using ransomware software
• scamming victims

This list represents some examples of the types of charges that a federal investigator can bring against your company. This may seem dauting, but we are here to help. Call Oberheiden, P.C. today to start planning your defense.

Federal Penalties for Cryptocurrency Fraud

Since cryptocurrency fraud investigations can lead to charges under multiple federal statutes, determining the potential penalties in a cryptocurrency fraud case requires identification of the specific statute (or statutes) involved. It is also necessary to determine whether the investigation is civil or criminal in nature, as some statutes include provisions for both civil and criminal penalties. In civil cases, prison time is off of the table; however, fines, restitution, and other financial penalties can easily reach into the millions of dollars. In criminal cases, in addition to substantial fines, defendants can also face prison terms including:

• Bank Secrecy Act Violations – 5 years per count
• Computer Fraud – 10 years per count
• Mail Fraud – 20 years per count
• Money Laundering – 20 years per count
• Securities Fraud – 20 years per count
• Tax Evasion – 5 years per count
• Wire Fraud – 20 years per count

Note that these are the prison sentences per count, and that federal prosecutors will often pursue multiple counts of multiple charges in cryptocurrency fraud investigations. In some cases, the maximum prison sentences can be extended beyond those stated above as well (for example, a repeat computer fraud offender can face a 20-year prison term for a single count), again reiterating the need for experienced and dedicated cryptocurrency fraud defense lawyers for your defense strategy.

How Cryptocurrency Crime Investigations Work

Cryptocurrency regulations are complicated. They have traditionally been an unregulated area. Anti-money laundering laws impose requirements for crypto assets but are also inconsistently regulated.

Nevertheless, enforcement efforts have increased over the past several years.

The DOJ is the agency responsible for investigation and charging companies in connection with cryptocurrency crime. It often organizes its enforcement efforts with other federal agencies and departments such as the Department of Treasury’s Office of Foreign Assets Control and the FBI.

This involves coordinated investigations and the sharing of uncovered information about your company.

In addition to prosecutions, the Office of Foreign Assets Control and DOJ could impose sanctions on companies engaged in cryptocurrency crime.

States also contain their own state regulations on cryptocurrencies and blockchains, which could involve additional penalties beyond the federal realm.

Strategic Defense for Federal Cryptocurrency Fraud Investigations, Grand Jury Proceedings, and Trials

In our federal defense practice, we take a proactive and strategic approach to protecting our clients against the substantial penalties that can be imposed for all types of cryptocurrency fraud. We work closely with our clients to understand the facts involved, and we utilize our defense attorneys’ experience to effectively communicate with federal prosecutors and work toward a favorable pre-trial resolution. If you contact us while your investigation is pending, we will focus our efforts on resolving the investigation without charges being filed. Depending on the nature and the current status of your cryptocurrency fraud case, our services may include:

1. Prompt Intervention in the Government’s Investigation

If your investigation is still ongoing, we will make contact with the agents and prosecutors handling your case right away. We have extensive experience in DOJ, SEC, and other federal agency investigations, and we can utilize our experience as former federal prosecutors to your advantage. We will determine the scope and nature of the allegations against you, we will ensure that you are not disadvantaged by violations of your constitutional rights, and we will work quickly to build a strategic and custom-tailored defense.

2. Aggressive Pursuit of a Pre-Charge Resolution

We have an extensive track record of helping our clients avoid charges in federal civil and criminal investigations. Once we discern precisely why you are under investigation, we will focus on challenging every element of the government’s case in order to convince the prosecutors involved that any charges would be unlikely to lead to conviction at trial.

3. Grand Jury Subpoena Defense

Federal grand jury proceedings are unique from almost every other aspect of civil and criminal defense. If you receive (or you have already received) a federal grand jury subpoena, we will guide you through the process of responding and preparing your testimony. We will also assess all potential grounds for challenging the subpoena and protecting you against an indictment.

4. Pre-Trial Practice and Plea Negotiations

If an indictment is unavoidable, we will utilize the pre-trial stage of your case to its fullest potential. While we challenge the admissibility and sufficiency of the prosecution’s evidence in court, we will concurrently negotiate with the U.S. Attorney’s Office to secure a favorable result before trial.

5. Trial Representation

Our attorneys have extensive experience in civil and criminal federal trials. If we believe it is in your interests to present a defense in court, we will meticulously prepare a comprehensive trial defense and fight for your freedom at trial.

How to Respond If You’ve Been Charged/Arrested in Connection with Cryptocurrency Crime

A charge of cryptocurrency crime can result in substantial criminal penalties and jail time. An unsuccessful ruling could also impose permanent injunctions, disbarments, and disgorgement orders. Not to mention the needless time, expense, and host of other challenges for your business and personal life involved with an investigation.

The federal criminal process can be very lengthy, sometimes spanning months or years. You worked too hard to let your company go to waste because of over-zealous prosecutorial discretion.

Do not divulge any information to a federal agent without first discussing with your attorney and having your attorney present. Understand your rights and protect yourself. Get an attorney on your side to defend you.

The cryptocurrency crime defense attorneys at Oberheiden, P.C. have the experience needed to prepare your defense to fight these accusations.

DOJ Establishes National Cryptocurrency Enforcement Team (NCET)

In response to ongoing concerns regarding cryptocurrency fraud, in 2021 the DOJ announced the establishment of a new National Cryptocurrency Enforcement Team (NCET). As stated by the DOJ, the NCET’s role is to, ” tackle complex investigations and prosecutions of criminal misuses of cryptocurrency, particularly crimes committed by virtual currency exchanges, mixing and tumbling services, and money laundering infrastructure actors.”

In February 2022, the DOJ announced the appointment of the National Cryptocurrency Enforcement Team’s first Director, Eun Young Choi. Following her appointment, Choi stated, “The NCET will play a pivotal role in ensuring that as the technology surrounding digital assets grows and evolves, the department in turn accelerates and expands its efforts to combat their illicit abuse by criminals of all kinds.” Under Choi’s leadership, the NCET will work with other offices and division’s including the DOJ’s Computer Crime and Intellectual Property Section and the FBI’s Virtual Asset Exploitation Unit to target all types of cryptocurrency-related fraud.

According to the DOJ, the NCET will place particular emphasis on targeting individuals and organizations that abuse cryptocurrency platforms for profit. This includes, but is by no means limited to, entities that offer fraudulent cryptocurrency ICOs and other fraudulent cryptocurrency investments, entities that attempt to manipulate cryptocurrency markets, and entities that deploy ransomware in an effort to collect cryptocurrency from their targets. Beyond prosecuting cryptocurrency-related crimes, the NCET will also be involved in, “tracing and recovery of assets lost to fraud and extortion, including cryptocurrency payments to ransomware groups.”

DOJ NCET Joins IRS CI in Prioritizing Cryptocurrency Fraud Enforcement

In this regard, the NCET will likely be working closely alongside the IRS’s Criminal Investigation division (IRS CI). In 2021, IRS CI seized $3.5 billion in cryptocurrency assets—accounting for 93% of the division’s asset seizures during the year. In its 2021 Annual Report, IRS CI states that it is joining the DOJ in bolstering its resources for prosecuting cryptocurrency-related crimes, reporting that it has already, “prioritized training and the deployment of cryptocurrency, blockchain, and open-source intelligence (OSINT) technologies to unravel complex cyber-financial criminal schemes.” IRS CI’s 2021 Annual Report also states:

“To ensure CI’s capabilities continue to evolve with the online and digital payment landscape, CI plans to launch an Advanced Collaboration & Data Center (ACDC) in the Northern Virginia area in 2022. The focus of the center will be to bring together data, technology, and specialized personnel from across Treasury and government to work on high impact solutions to protect the integrity of our tax and financial systems [against cryptocurrency-related fraud and other crimes].”

With the DOJ and IRS CI both devoting additional resources to combatting cryptocurrency fraud, we expect the number of investigations and prosecutions in this area to increase significantly in 2022 and beyond—and we are seeing anecdotal evidence of this already. Individuals and entities that are involved with the cryptocurrency industry in any capacity need to take notice, and they need to be prepared to defend themselves in the event that they become the target of an NCET or IRS CI investigation.

Speak with our Crypto Fraud Defense & NCET Defense Attorneys at Oberheiden, P.C.

If you are under investigation or facing charges in the U.S. for cryptocurrency fraud, we urge you to contact us promptly to discuss your case with a cryptocurrency fraud defense lawyer. Call 888-680-1745 or request a free consultation online now.