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CipherTrace Crypto Advisory | Breaking News: $2B Exit Scam

$2B Exit Scam? | FATF & the Future of Crypto | Coinbase’s Wall Street Entrance | FinCEN Funding | Digital Dollars Making Sense | DOJ Charges Hackers | AML Regs Expand | and more


  • $2 Billion Exit Scam from Turkish Exchange?
  • FATF Hears Industry Input on Crypto Recommendations
  • Coinbase Hits Wall Street as First Major Crypto Exchange to Go Public
  • Joe Biden Pushes to Increase FinCEN Budget by 50%
  • CDBC Projects Pick Up Steam Across the Globe
  • U.S. Department of Justice Charges North Korean Hackers with Crypto Fraud
  • Anti-Money Laundering Regulations Expand Across the Globe
  • Cloud Security Alliance Releases Crypto-Asset Exchange Security Guidelines
  • Quick Reads: New Korean Crypto Laws, US Sanction Russia for Election Interference, Turkey Restricts Exchange of Crypto, Customers Wants Banks to Get Onboard


We are honored to announce CipherTrace’s membership in the Ransomware Task Force–over 60 software companies, government agencies, cybersecurity vendors, financial services companies, non-profits, and academic institutions working together on a comprehensive framework of actionable solutions. Learn more and register for the April 29th launch event: 


Turkish Police Detain 62 Over Purported $2 Billion Exit Scam

On April 22, Istanbul’s chief prosecutor’s office announced it had opening a probe into cryptocurrency exchange Thodex amidst allegations of an exit scam affecting roughly $2 billion in user funds after the exchange’s owner left the country as user withdrawals halted.

In a message on the Thodex website homepage, owner Faruk Fatih Özer has confirmed that he left Turkey for Albania while denying the alleged exit scam, claiming he is visiting foreign investors.

According to Turkish news outlets, police have since raided Thodex central offices, resulting in the arrest of 62 people.

This story is ongoing.

Read more here:


Third FATF Meeting in April Focuses on Money Laundering and Terrorist Financing Risks

Global AML watchdog the Financial Action Task Force continued its series of meetings this week with an April 20 session dedicated to exploring the money laundering and terrorist financing risks of virtual assets. FATF is currently working on an update to its 2019 guidance on cryptocurrencies, which included the introduction of the crypto Travel Rule. Dave Jevans, CipherTrace CEO, has been in active participant in the FATF meetings in April.

Read our analysis of FATF’s proposed changes to their 2019 guidance:


Wall Street’s Latest Listing Marks Keystone Moment For Crypto

On April 14, Coinbase became the first major cryptocurrency exchange to be listed directly on the NYSE. Shortly after listing, shares soared to $381, a sharp increase from the $250 reference price set by Nasdaq, signifying major demand from investors looking to own a piece of the crypto titan. Valued at $99.6 billion, Coinbase immediately aligned themselves with other financial giants.

As an exchange Coinbase is incredibly profitable, bringing in over $322 million last year and $800 million in Q1 2021, earning more revenue from trades than the Nasdaq and NYSE parent company ICE.

Exchanges are often publicly scrutinized for their anti-money laundering and counterterrorism financing abilities, and becoming a publicly traded company will only enhance this scrutiny for Coinbase. As such, Coinbase claims to stay on the cautious side of AML, citing their strict compliance measures as the main reason for large amounts of crypto moving away from their platform and onto less strict competitors. As of December 31, 2020, over 15% of Coinbase’s full-time employees were dedicated to legal, compliance, finance, and security according to the company’s S-1 registration statement.

Why It Matters: Coinbase IPO a big moment for the world of cryptocurrency because highlights the institutionalization of cryptocurrencies. It instantly allows traditional investors and retail traders who may not be familiar with cryptocurrency to gain exposure to the crypto market. Due to the size of the company, Coinbase will most likely be included in various index funds, expanding the indirect exposure to crypto even more profoundly.

Read more here:

President Joe Biden Calls for Increased Funding for FinCEN to Combat Illicit Finance

According to the latest discretionary budget request, US President Joe Biden is seeking a $64 million increase in funding for the Financial Crimes Enforcement Network (FinCEN) budget to combat illicit finance. Totaling $191 million, FinCEN says that the additional funds will be used to end “loopholes in financial reporting requirements” by establishing a database that monitors the ownership and control of certain organizations and companies. We should expect to see a finalized version of the proposed increase when the discretionary budget is officially drafted by congress later this year.

Why it matters: FinCEN proposed a rule change in December 2020 that would require financial institutions to keep records on un-hosted wallet transactions over $3000. As cryptocurrency usage continues to become more widespread, we can expect FinCEN and other agencies to impose more strict regulations meant to combat illicit finance. It’s safe to assume that a budget increase will be leveraged, at least in part, towards the implementation of cryptocurrency regulations like those previously proposed.

Read more here:


CBDC Momentum Continues to Build 

Central Bank Digital Currency (CBDC) projects from all over the world are gaining traction. The Bank of Japan announced that they have officially launched their first proof of concept CBDC, with a targeted completion date of March 2022. They are currently undergoing technical feasibility testing around payments, distribution and other basic functions. Though their plans have been pushed out from their original timeframe of October 2021, the bank states that they have no issuance plans as yet.

China’s digital yuan continues to spark conversation from global leaders. US President Joe Biden stated that his administration would be keeping a close eye on the project, stressing the importance of understanding the impending political implications. Even though some officials believe that a digital yuan could be used to topple the US dollar’s dominance as the world’s global reserve currency, the Biden administration’s focus will be on understanding the CBDC’s functions and uses. Galaxy Digital CEO Mike Novogratz forecasts an “existential crisis” if the US is unsuccessful in creating its own digital dollar.

Why it matters: The political impact of these developments is immense, especially for the United States. The US dollar’s current dominance in the global economy gives the US Treasury the ability to block businesses or even countries from accessing the global financial network. This would all change if USD is dethroned, stripping the United States of the political advantages that come with printing the world’s default reserve currency.

Read more here:


North Korean Hackers Charged for Stealing Over $100 Million from Crypto Firms

According to Assistant Attorney General John Demers, the three North Korean actors charged were the world’s leading bank robbers, stealing upwards of $100 million from a number of different crypto merchants. The three men were allegedly tied to the Lazarus Group, a notorious cybercrime ring accused of stealing over $1.3 billion as a part of a broader financial conspiracy that included the hack on Sony Pictures Entertainment in 2014. Following the indictment, the FBI, Cybersecurity and Infrastructure Security Agency (CISA) and Department of Treasury published a joint advisory about crypto malware produced by North Korea called AppleJeus.

Why it matters: Last week, the United Nations made a bold allegation that North Korea was using money stolen from hacked cryptocurrency exchanges to fund their nuclear weapons program. Hackers are believed to have targeted investors in the United States, Canada, Brazil, Argentina, Australia, New Zealand, India, China, Russia, Israel, Saudi Arabia, South Korea, and over a dozen other countries.

Read more here:


Global AML Regulation and Enforcement Increasing

Following the lead of the United States, more and more countries are establishing concrete efforts to combat money laundering and other financial crimes. Over the past 12 years, fines and fees worth $46.3 billion have been issued against financial institutions for money laundering violations, with the US as the primary driver of enforcement. Recent developments include the creation of the Fifth Money Laundering Directive (AMLD5) in the EU last year as well as countries like Hong Kong and Singapore recently adopting stricter AML enforcement. Other countries have also begun to account for a greater percentage of the total fines levied, with France issuing 11.2% of fines, Malaysia 8.4%, and Australia 3.1% between 2008 and 2020.

The size of fines overall has also been increasing. Last year, Goldman Sachs was fined $2.9 billion for their role in Malaysia’s 1MDB corruption case. The largest fine to date was levied against BNB Paribas in 2015 when the bank paid $8.9 billion for accepting funds from countries under US sanctions.  

Why it matters: As certain jurisdictions enact more strict regulations and enforcement, we can expect criminals to migrate to less closely-monitored jurisdictions. Countries under increased surveillance by the Financial Action Task Force this year include Cayman Islands, Ghana, Morocco, Pakistan, Panama and Senegal.

Read more here:


Crypto-Asset Exchange Security Guideline

On April 13, 2021, the Cloud Security Alliance (CSA) Blockchain/Distributed Ledger Working Group released the Crypto-Asset Exchange Security Guidelines—a set of guidelines and best practices for crypto-asset exchange (CaE) security. The set of guidelines were created to help educate users, policymakers, and cybersecurity professionals on the pros and cons of further securing Virtual Asset Service Providers, from centralized exchanges and hosted wallet providers to decentralized exchanges (DEXs) and cryptocurrency swap services.

CipherTrace CEO Dave Jevans was a contributing author of the guidelines. An extract of the first chapter can be found on our blog: 


New South Korean Real-Name Crypto Laws Come into Force

In March 2020, the South Korean government passed a law requiring real-name accounts be used by crypto exchanges, an AML measure that took effect last month. The Act on Reporting and Using Specified Financial Transaction Information, also known by the acronym FTRA, puts significant new administrative requirements in place for exchanges, including registration with the Financial Intelligence Unit. The government has announced a three-month “special enforcement period” is now in effect.

Read more:


US President Joe Biden Declares Russian Cyberattacks a National Emergency

On April 14th, President Biden ordered an expansion of sanctions against the Russian state for meddling in the 2020 election. In response, OFAC added 28 cryptocurrency addresses to its sanctions list. The sanctions list includes Russian officials, proxies, and intelligence agencies linked to the Internet Research Agency (IRA)—a Russian “troll farm” known to use crypto to fund influence operations around the world on behalf of Russian political interests. Many of these sanctioned addresses are attributed to deposit addresses at regulated exchanges, including two popular off-shore exchanges and one US-based exchange.

Read our analysis:


Turkey Passes Broad Ban on Crypto

Turkey announced plans to restrict the exchange of cryptocurrency, effective April 30th. The Turkish central bank stated that payment providers will no longer be allowed to offer fiat-to-crypto onramps. Crypto users will also be barred from using their digital assets as payments. Banks are excluded from the regulation and will be able to be used as lira on-ramps via wire transfer to exchanges.

Read more:


Consumers Signal Desire for Banks to Get Into Crypto

A December 2020 survey by Cornerstone Advisors found that while 80% of banks continue to be leery of cryptocurrency investing, crypto-savvy consumers are ready for banks to broaden their offerings. Fifteen percent of Americans now own crypto and of those, 60% said they would use crypto investing services through their banks if offered, with another 32% saying they “might” be interested.

Read more: 


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