In line with its leadership role in the investigation and enforcement of offenses involving cryptocurrencies and other digital assets, on June 30, 2022, the US Department of Justice (DOJ) announced four measures to separate applications related to cryptocurrency fraud and other offenses, such as: is summarized below.1 In particular, all four lawsuits involve alleged cross-border misconduct in the Digital Asset Area that has been prosecuted under lengthy fraud-based laws.
These enforcement actions reflect the DOJ’s continued awareness of a number of cross-border offenses in the digital asset space.
- Money laundering and electronic fraud: IN USA vs. Le Ahn TuanThe DOJ has accused a Vietnamese citizen of conspiracy to commit electronic fraud and money laundering in connection with his alleged role in the execution of a fraudulent investment scheme involving the non-fungible token (NFT) “Baller Ape”.2 The DOJ claims that the defendant and his accomplices launched a fraudulent investment scheme that purported to allow investors to buy Baller Ape NFTs, but after the investors transferred their cryptocurrency to the defendant and his accomplices, the defendant and his accomplices. -conspirators terminated the investment program prematurely and stole investors’ assets.3 Subsequently, the defendant allegedly participated in “chain-hopping”, which involves converting one type of cryptocurrency to another to hide the source of funds and may constitute a form of money laundering.4
- Securities fraud, bank fraud and international money laundering: IN USA v. Emerson Pires, et al.The DOJ has accused Brazilian and US citizens of conspiracy to commit securities fraud, wire fraud and international money laundering as part of a “global cryptocurrency-based Ponzi scheme.”5 The defendants have allegedly promoted their cryptocurrency investment platform through, among other things, false claims of a proprietary trading robot and their ability to generate guaranteed returns and operate a Ponzi scheme that paid former investors with money obtained from later investors.6 The DOJ also claims that the non-US accused laundered investors’ funds through a foreign cryptocurrency exchange. The DOJ proclaimed its use of blockchain analysis to aid the investigation.seven
- Securities fraud: IN USA vs. StolleryThe DOJ claims that a US citizen committed securities fraud through an initial currency offering (ICO) for a cryptocurrency investment platform.8 Among other things, the defendant is alleged to have made false statements regarding the platform’s alleged clientele, including several well-known US companies and financial institutions such as the Federal Reserve.9 To carry out the scheme, the defendant allegedly created a new cryptocurrency token, BAR, which he claimed would enable “holders… [to] attend [the platform’s] future earnings and appreciation of the value of BAR’s digital assets.ten The DOJ claims that the defendant “obtained approximately $ 21 million in various digital assets, such as Ether and Bitcoin, and money from dozens of investors located in at least 18 states, including California and abroad, who bought BAR”.11
- Commodity fraud and electronic fraud: IN USA vs. David SaffronThe DOJ has accused a U.S. citizen of conspiracy to commit commodity fraud, wire fraud and related charges.12 The accused and his accomplices have allegedly obtained at least about $ 15 million in funds from investors by fraudulently promoting various cryptocurrency trading schemes, including a scheme to trade option contracts on various cryptocurrencies and fiat currencies through an unregistered pool of goods.13 The accused and his accomplices also claimed to use an artificial intelligence (AI) trading bot, which they claim could perform 17,500 trades per hour on various cryptocurrency exchanges and regularly generate between 500% and 600% returns.14
The enforcement measures recently announced by the DOJ suggest several key elements of the Agency’s enforcement approach.
- Regulation upon application: The DOJ noted that even in the light of the “relative novelty of digital currency”, the Agency is “dedicated[d] to use all available tools to protect consumers and investors from fraud and tampering.15 These recent enforcement actions reflect the Agency’s growing efforts in collaboration with the Securities and Exchange Commission, Commodity Futures Trading Commission and other federal agencies to control digital asset fraud, despite the lack of specific legislation and regulatory guidance on these issues. .
- Public-private partnerships: The actions also reflect the role that the private sector can play in the fight against cryptocurrency fraud. As mentioned above, due to the “novelty” of digital assets as a new technology, malicious actors may seek to exploit the reputation and financial insight of prominent companies to inform their schemes.16 Here, the DOJ pointed out that these actions were “exemplary[y] the importance of public-private partnerships “and the Agency’s” strong relationships with industry partners “, which provided” information that led to [the] investigation and final indictment[s]. “17
- Cross-border application: The acts are notable for their international reach, with two of the acts involving transnational arrangements and targeting defendants outside the United States. This may reflect the DOJ’s broader recognition that “criminal schemes involving digital assets” are often “transnational”. [in] nature.”18 As a result, the DOJ pointed out that “[c]Cross-border cooperation is essential “for an effective framework for the detection, investigation and prosecution of criminal activities involving digital assets.19
1 Press Release, US Department of Justice, Department of Justice Announces Enforcement Measures for Six Persons for Cryptocurrency Fraud in Cases Involving Over $ 100 Million in Intentional Losses (June 30, 2022), https://www.justice.gov/opa/ pr / justice-department-annonce-une-action-enforcement-billurant-six-individus-crypto-moine-fraude.
2 Indictment § 1, USA vs. Le Ahn TuanNo. 2: 22-cr-273-JLS (CD Cal), https://www.justice.gov/criminal-vns/case/file/1516756/download.
3 Identifier. ¶¶ 2-3, 32.
4 Identifier. ¶¶ 10, 34.
5 Press Release, United States Department of Justice, over footnote 1.
8 Indictment ¶¶ 1, 9-10, USA vs. StolleryNo. 2: 22-cr-207-JLS (CD Cal), https://www.justice.gov/criminal-vns/case/file/1516766/download.
9 Identifier. § 21 (a) – (d).
ten Identifier. ¶¶ 17-18.
11 ID. ¶ 22.
12 See general indictment, USA v SafranNo. 2: 22-cr-276-DSF (CD Cal), https://www.justice.gov/criminal-vns/case/file/1516761/download.
13 ID. ¶¶ 18, 52.
14 Identifier. ¶¶ 20, 23.
15 Press Release, United States Department of Justice, over footnote 1
18 Report at 9, US Dep’t of Justice, How To Strengthen International Law Enforcement Cooperation for Detecting, Investigating and Prosecuting Criminal Activity Related to Digital Assets, (June 6, 2022), https://www.justice.gov/ag/ side / fil / 1510931 / download.
19 Identifier. to 1.