In this issue:
• Crypto Firms Make Acquisitions, Integrate Products; New Crypto Index Launches
• Distillery Sells Rare Whisky Collection Using AI and Blockchain Technology
• Pig Butchering Cryptocurrency Scam Results in Bank Failure
• FinCEN Analysis Addresses Crypto Use in Child Exploitation, Human Trafficking
• DOJ Targets Crypto Tax Evasion, AML Failures; NY Adds to Crypto Fraud Case
• UN Reportedly Investigating DPRK Crypto Hacks; NIST Cites Wallet Vulnerability
Crypto Firms Make Acquisitions, Integrate Products; New Crypto Index Launches
By Robert A. Musiala Jr.
According to a recent press release, a major U.S. fintech company has announced an agreement to acquire a major digital asset custody provider. According to the press release, after the acquisition closes, the U.S. fintech company and its subsidiaries will collectively hold “a New York BitLicense, nearly 40 money transmitter licenses across the U.S., a Major Payment Institution License from the Monetary Authority of Singapore, and a Virtual Asset Service Provider registration with the Central Bank of Ireland.”
Another recent press release announced that Telefonica, a major Spanish telecommunications company, has integrated with blockchain startup Chainlink Labs. According to the press release, the “integration enables the verification of data from various sources by using Chainlink Functions with GSMA’s Open Gateway SIM SWAP API” and “introduces an extra layer of security to blockchain transactions by enabling smart contracts to now make information requests to the API, ensuring that a device’s SIM card has not undergone any unauthorized changes.” The press release further notes that “[u]sing the GSMA Open Gateway API via Chainlink also mitigates risk beyond transaction security, addressing two-factor authentication (2FA) and fraud detection in Web3 dApps and DeFi services.”
In another product integration, according to recent reports, cryptocurrency wallet provider Ledger has integrated with a major U.S. exchange to streamline the process of transferring digital assets between the exchange and Ledger’s self-custodial wallet. And in a final notable item, digital asset over-the-counter desk Wintermute and The Block, a cryptocurrency information services provider, recently announced the launch of a new company, GMCI, that will publish the GMCI 30 index to “track[] the price and performance of the top 30 crypto assets.”
For more information, please refer to the following links:
Distillery Sells Rare Whisky Collection Using AI and Blockchain Technology
By Lauren Bass
A Scotland-based distillery recently announced plans to sell bottles of its ultra-rare 50-year-old whisky through an online marketplace that uses non-fungible tokens and blockchain to create digital certificates of authenticity and ownership.
According to reports, the distributor also used generative AI to create the unique labels for each of the 12 bottles in the collection, each of which reportedly represents one of the 12 essential elements that helped create the vintage: Air, Angel Share, Barley, Cooper, Copper, Distiller, Earth, Fire, Heritage, Time, Water and Wood.
The collection is set to be released for sale at the end of February, at a price point of €40,000 ($43,000) each.
For more information, please refer to the following links:
Pig Butchering Cryptocurrency Scam Results in Bank Failure
By Keith R. Murphy
According to an evaluation report recently issued by the Office of the Inspector General (OIG) for the board of governors of the U.S. central bank, the failure and subsequent closure of Heartland Tri-State Bank in Kansas City in July 2023 was due to alleged fraudulent activity undertaken by Heartland’s CEO in connection with an apparent “pig butchering” cryptocurrency scheme. In a pig butchering scheme, victims are tricked into sending funds to scammers for investment in fraudulent cryptocurrency investment opportunities. According to the OIG report, the CEO exhausted the bank’s sources of liquidity by sending multiple wire transfers totaling about $47.1 million to his accounts at cryptocurrency exchanges in connection with the scheme.
Significant factors noted in the report as enabling the fraud included the breakdown of internal controls, such as senior bank employees circumventing the bank’s wire policy and daily limits, as well as the CEO’s influence as a dominant management figure, who reportedly had prominent roles in the bank, the Kansas banking community and the local community. As stated in the report, the fraudulent wire transfers greatly impaired the bank’s capital and liquidity, causing it to become insolvent and resulting in the appointment of a receiver.
For more information, please refer to the following links:
FinCEN Analysis Addresses Crypto Use in Child Exploitation, Human Trafficking
By Robert A. Musiala Jr.
The U.S. Financial Crimes Enforcement Network (FinCEN) recently published a Financial Trend Analysis (FTA) “reflecting an increase in Bank Secrecy Act (BSA) reporting associated with the use of convertible virtual currency (CVC) and online child sexual exploitation (OCSE) and human trafficking” based on BSA reporting filed between January 2020 and December 2021. According to a FinCEN press release, key findings in the FTA include the following:
- The total number of OCSE- and human trafficking-related BSA reports involving CVC increased from 336 in 2020 to 1,975 in 2021.
- BSA filers specifically reported child sexual abuse material (CSAM) or human trafficking and CSAM in 95 percent of the OCSE- and human trafficking-related BSA reports involving CVC.
- BSA reports overwhelmingly identified bitcoin as the primary CVC used for purported OCSE- and human trafficking-related activity; however, this does not necessarily mean that other types of CVC are not used for such crimes.
- FinCEN identified four typologies (i.e., the use of darknet marketplaces that distribute CSAM, peer-to-peer exchanges, CVC mixers and CVC kiosks) that describe common trends within BSA reports related to OCSE and human trafficking.
For more information, please refer to the following links:
DOJ Targets Crypto Tax Evasion, AML Failures; NY Adds to Crypto Fraud Case
By Robert A. Musiala Jr.
According to a recent press release by the U.S. Department of Justice (DOJ), “[ federal grand jury indicted a Texas man … with filing false tax returns and structuring cash deposits to avoid currency transaction reporting requirements.” The press release notes that the DOJ alleged the defendant “between 2017 and 2019 … filed false tax returns that underreported or did not report the sale of $4 million worth of bitcoin in which he had substantial gains.” According to the press release, DOJ alleges the defendant “used the proceeds from the sale of approximately $3.7 million worth of bitcoin to purchase a residence,” “filed a false 2017 tax return that inflated the price he originally paid for the bitcoin,” “failed to report his sales of bitcoin on his 2018 and 2019 tax returns,” and “after selling some of his bitcoin to an individual in exchange for cash … made a series of bank deposits of the cash in amounts less than $10,000 each to avoid triggering currency transaction reporting requirements.”
Another recent DOJ press release announced that “the Chief Executive Officer (CEO) of Digitex Futures Exchange (Digitex Futures), was charged in federal court with willfully causing Digitex Futures to violate the Bank Secrecy Act by failing to establish and implement an anti-money-laundering program.” According to the press release, the defendant “illegally operated Digitex Futures … as an unregistered futures commission merchant” and “willfully failed to establish, implement, and maintain an adequate anti-money-laundering program, including an adequate know-your-customer program.”
A recent press release by the New York State Attorney General (OAG) announced that New York Attorney General Letitia James has filed an amended complaint in an ongoing enforcement action by the OAG against multiple well-known cryptocurrency firms alleging fraud in relation to those firms’ involvement with a cryptocurrency “earn” program on a major U.S. exchange. According to the press release, “The OAG’s continued investigation revealed that … additional investors were … defrauded and provided with false assurances that their funds were safe when in fact they were not, leading to an additional $2 billion in assets that were lost.” According to the OAG, in total the defendant companies “defrauded more than 230,000 investors out of more than $3 billion.”
For more information, please refer to the following links:
UN Reportedly Investigating DPRK Crypto Hacks; NIST Cites Wallet Vulnerability
By Christopher W. Lamb
According to recent reports, an unpublished United Nations report indicates that the United Nations sanctions monitors are “investigating 58 suspected DPRK cyberattacks on cryptocurrency-related companies between 2017 and 2023, valued at approximately $3 billion, which reportedly help fund DPRK’s WMD development.” According to the reports, North Korean hacking groups that work under Pyongyang’s primary foreign intelligence agency – Reconnaissance General Bureau (RGB) – continue to commit a high number of cyberattacks, targeting defense companies, supply chains and infrastructure.
Other recent reports indicate that an agency of the U.S. Department of Commerce – the National Institute of Standards and Technology (NIST) – is analyzing an older version of a popular cryptocurrency wallet app related to a vulnerability that may allow cyberattackers to steal funds from the wallet. According to the reports, in a specific version of the wallet, the NIST has found that a trezor-crypto library is misused to generate location-specific mnemonic words that can be systematically generated for each time stamp within a particular time frame and linked to specific wallets, allowing the cyberattacker to steal cryptocurrency funds.
For more information, please refer to the following links:
[View source.]
