No More Hiding Behind the Crypto Curtain
May 18, 2022

No More Hiding Behind the Crypto Curtain
The DOJ has charged its first criminal case involving the use of cryptocurrency to evade sanctions – perhaps not a surprise in this environment.

The case was disclosed by a federal judge in Washington, D.C., in an memorandum opinion unsealed on May 13. Magistrate Judge Zia M. Faruqui approved the DOJ’s criminal complaint against an American citizen accused of using an online payments platform designed to evade U.S. sanctions. The underlying case remains sealed, but the implications are clear, especially on the heels of the creation of the National Cryptocurrency Enforcement Team and the arrest of a crypto-laundering couple in New York. Our deep dive on that case is here

The unnamed platform handled more than $10-million worth of bitcoin transfers between the U.S. and the sanctioned country. Invoking the classic McLaughlin Group show, Judge Faruqui wrote: “Issue One: virtual currency is untraceable? WRONG. ... Issue Two: sanctions do not apply to virtual currency? WRONG.”

Crypto is not going to enable sanctions evasion or money laundering the way some may have thought it could. In this most recent case, law enforcement was able to “follow the money” using blockchain analysis tools – a process that Kyle Freeny, a partner at Greenberg Traurig, explained on a panel about crypto enforcement at the ABA’s White Collar Crime Institute. Our coverage is here.

On the SEC side, lawyers who handle crypto transactions have expressed frustration. At the White Collar Crime Institute at the New York City Bar last month, Stu Alderoty, general counsel at Ripple Labs, warned that any discussion can be a lead generator for the SEC, and that the agency is pursuing politics ahead of policy. Paul Grewal, chief legal officer of Coinbase, said talking to the SEC about crypto is like “talking to a stone wall.”

What are your worries about this brave new world of currency and its compliance challenges? Please drop us a line to let us know. 

Rebecca Hughes Parker
Global Editor-in-Chief

 
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