January 18, 2021

CipherTrace

IronKey Still Best Bitcoin Protection | FinCEN Extends Comment Periods | HSBC Blocks Crypto Transfers | Lights Out for DarkMarket

$220M in Bitcoin May Be Encrypted Forever on IronKey
FinCEN Extends Comment Period for NPRM
UK Crypto Transactions to Be Blocked by HSBC
Well-Known Dark Web Market Officially Shut Down
Quick Reads:
- Exchange Owner Sentenced to a Decade in Prison
- Crypto Firm Gets the OCC Nod
- Brian Brooks Steps Down from the OCC
- US Representatives Introduce Crypto Anti-Terror Bill

The World’s Most Secure Flashdrive Stands Between a Man and His Money

Stefan Thomas is two failed password attempts away from losing the private keys to $220 million worth of bitcoin forever. Thomas holds the private keys to his bitcoin wallet in an IronKey. Known as “The World’s Most Secure Flash Drive,” his IronKey would rather die than give up its secrets, thanks to a series of built-in protections. IronKey was funded by the US Department of Homeland Security in 2006 and co-founded by Dave Jevans, CEO of CipherTrace.

Read more about this story, including the transcript of a now-deleted Twitter exchange between Dave and former Facebook CISO Alex Stamos, here: https://ciphertrace.com/220m-in-bitcoin-encrypted-forever-on-ironkey/

FinCEN Extends Two Comment Periods for Proposed Unhosted Wallet Rule Change

On January 14, FinCEN announced they would be extending the comment period for their latest proposed rule change for certain cryptocurrency transactions to unhosted wallets. FinCEN is providing an additional 15 days for comments on the proposed reporting requirements regarding information on crypto transactions greater than $10,000, which is similar to current cash transaction reporting.

FinCEN provided an additional 45 days for the rest of the NPRM to reconsider provisions on the collection of transaction hashes and physical addresses of recipients.

Why it matters: The shorter extension for comments on the $10,000 threshold may indicate that FinCEN is likely to pass this aspect of the rule change but is still open to modifying aspects of the remaining record keeping requirements.

Read the press release: https://www.fincen.gov/news/news-releases/fincen-extends-comment-period-rule-aimed-closing-anti-money-laundering

UK Crypto Traders and Investors Can No Longer Transfer Their Digital Funds to HSBC Accounts

HSBC, one of the world’s largest financial institutions, announced that it will not allow its United Kingdom customers to transfer funds from crypto exchanges into their bank accounts. The United Kingdom has long had a harsh stance on crypto-assets stemming from money laundering and terrorist financing concerns. Since the Financial Conduct Authority (FCA) became the AML/CTF supervisor of crypto firms in January 2020, exchanges are now required to register with the FCA. While a temporary registration regime was set up in December, many applications are still being assessed. Despite the FCA issuing a temporary list of crypto firms approved to continue business without regulatory repercussions, it appears many banks don’t share the same risk tolerance as other UK banks have reportedly also taken steps towards preventing customers from using debit and credit cards to purchase cryptocurrencies on exchanges.

Why it matters: Rather than completely prohibiting customers from transferring funds to and from cryptocurrency exchanges, banks can benefit from integrating cryptocurrency AML software from CipherTrace to identify suspicious transactions and ensure compliance with AML regulations. In light of rising cryptocurrency prices—most notably, bitcoin—interest from retail and institutional investors will continue to grow. Adapting to this new reality will be key to financial institutions’ future success.

Europol Takes Down DarkMarket World’s Largest Online Dark Market

DarkMarket, the world’s largest online marketplace on the dark web, has officially been taken down through an operation that included six European countries and the United States. Before it was taken offline, DarkMarket had about 500,000 users who collectively sent an estimated 4,650 bitcoin transfers and made 12,800 Monero transactions. In total, about €140 million worth of cryptocurrency passed through its payment network. The vendors on this marketplace mostly sold drugs, malware, SIM cards, and stolen credit card details.

An Australian man living in Germany, suspected to be the head of DarkMarket, was arrested. The German Cybercrime Unit was able to switch off the site’s servers, some of which were located in Moldova and Ukraine. The police are hopeful that the information stored on these servers will provide more insight into who else was involved, including vendors and buyers.

Europol, the law enforcement agency of the European Union, was able to provide the German authorities with analytics and coordination with other countries. Through their European Cybercrime Centre, Europol established a Dark Web team so countries across Europe could be better equipped to investigate and later prosecute those involved in Dark Web crimes. They are also looking to provide training initiatives as well as awareness campaigns as an educational tool.

Why it matters: It’s notable that Monero was used more often than bitcoin on DarkMarket, a potential harbinger of a switch in preference for darknet marketplaces from bitcoin. Monero’s privacy-enhanced features continue to be a concern for regulators and law enforcement, as privacy coins are more difficult to trace than bitcoin. CipherTrace has filed two patents for Monero tracing.

Bulgarian Crypto Exchange Owner Sentenced to Ten Years’ Imprisonment

The owner of RG Coins has been sentenced by a federal jury in Kentucky to ten years’ imprisonment. Rossen Iossifov was earlier found guilty of money laundering and conspiracy to commit racketeering. RG Coins defrauded over 900 Americans and conducted money laundering operations for an eastern European cybercrime syndicate; 17 of the 20 principal actors in the scheme have been arrested, charged, and found guilty to date. Iossifov’s associates used advertisements for expensive (and non-existent) cars and other luxury goods on auction sites to lure unwary buyers; Iossifov then laundered the ill-gotten cash into crypto.

Read the DOJ press release: https://www.justice.gov/opa/pr/owner-bitcoin-exchange-sentenced-prison-money-laundering

Anchorage Trust Company Receives OCC National Trust Bank Charter

The cryptocurrency firm is the first organization of its type to receive such recognition from the U.S. Office of the Comptroller of the Currency. The company plans to rebrand as Anchorage Digital Bank, N.A.

Acting Head of the OCC Steps Down

Brian Brooks, acting Comptroller of the Currency, stepped down on Thursday. COO Blake Paulson will take over Brooks’ duties until American President-elect Joe Biden appoints a successor. Brooks formerly served as the chief legal officer for Coinbase and has been a champion for cryptocurrency’s potential as a transformative financial instrument.

US House of Representatives May Consider Crypto Anti-Terrorism Bill

A bi-partisan group of legislators led by North Carolina Representative Ted Budd introduced HB296 on Wednesday. If passed, the bill would provide for the formation of a task force dedicated to combatting the use of cryptocurrencies as a source of financing by terrorist groups.