July 31, 2020

CipherTrace

OCC Allows Banks to Hold Crypto Assets for Customers

Visa, Mastercard And PayPal Change Their Stance on Crypto
South Korea Implements New Discriminatory Crypto Trading Tax
DJ Khaled-Touted Cryptocurrency Company Implicated in $25 Million Scam
New GMERA Malware Targets MacOS Users to Steal Cryptocurrency
Texas Man Charged with Fraud for Buying $1 Million of Crypto with PPP Loans

OCC Issues Statement Allowing Banks to Hold Crypto Assets for Customers

On July 22, the Office of the Comptroller of the Currency (OCC) issued a statement that gives a green light to banks’ ability to hold crypto assets for their customers. The new guidance affirms that bank custody services, which include holding digital assets, can extend to cryptographic keys and other crypto-related assets.

Jonathan Gould, senior deputy comptroller and chief counsel, wrote, “We conclude a national bank may provide these cryptocurrency custody services on behalf of customers, including by holding the unique cryptographic keys associated with cryptocurrency.” He also reaffirmed the OCC’s position that “national banks may provide permissible banking services to any lawful business they choose, including cryptocurrency businesses, so long as they effectively manage the risks and comply with applicable law.”

Why It Matters: As advancements are made in the financial technology sector, banks must adapt to the changing landscape to provide the necessary services that their customers require. According to the OCC, “as the financial markets become increasingly technological, there will likely be an increasing need for banks and other service providers to leverage new technology and innovative ways to provide traditional services on behalf of customers. By providing such services, banks can continue to fulfill the financial intermediation function they have historically played in providing payment, loan, and deposit services.”

CipherTrace Armada helps traditional banks understand and manage their cryptocurrency risks. Learn more: https://ciphertrace.com/virtual-currency-aml-risk-mitigation-for-banks-and-financial-institutions/

Major Fintech Companies Change Their Tune on Bitcoin and Crypto

Payments giants Visa, Mastercard and PayPal have recently released statements in support of digital currencies—a departure from their previous stance.

In 2018, after Bitcoin’s colossal run and eventual fall, all three companies publicly criticized Bitcoin and its legitimacy. Now, with other corporations like Facebook and JPMorgan embracing crypto, Visa, Mastercard, and PayPal are beginning to endorse crypto development and adoption, with Visa saying, “We believe that digital currencies have the potential to extend the value of digital payments to a greater number of people and places. As such, we want to help shape and support the role they play in the future of money.”

Raj Dhamodharan, Mastercard’s executive vice president for digital asset and blockchain products and partnerships, said, “The cryptocurrency market continues to mature, and Mastercard is driving it forward, creating safe and secure experiences for consumers and businesses in today’s digital economy.” This comes after Mastercard signed with London-based Wirex—making it the first crypto platform to gain principal membership on Mastercard’s network.

PayPal will reportedly begin offering cryptocurrency purchases on its platform, joining a group of crypto-friendly financial applications that includes Cash App, Square, and Robinhood.

Why It Matters: With companies like Square reporting $306 million in bitcoin revenue garnered via Cash App in its latest earnings report, crypto services are becoming harder to ignore.

Meltem Demirors, chief strategy officer of digital asset investment firm CoinShares, believes “As more publicly listed companies showcase the results they’re having by adding crypto capabilities, more companies will be incentivized to announce their plans and to engage with this high growth segment that could drive significant top line and bottom-line growth. This is an affirmation that crypto has become too big for corporations to ignore, and will be integrated into many of the products and services people are already using.”

South Korea Targets Crypto Traders with New Tax

On July 22, the South Korean government unveiled its new crypto tax proposal. According to the proposal, traders earning over $2,100 a year are set to pay a 20% tax on their earnings—a considerably lower threshold than what is imposed on stock market traders, who are not taxed on earnings up to $42,000 from investments in KOSDAQ-listed companies.

Tax authorities also issued a warning to those who may attempt to bypass tax measures by trading on overseas-based exchanges. Undeclared traders will face an additional 20% tax bill on undisclosed trades.

Read more in CryptoNews here: https://cryptonews.com/news/s-korea-to-discriminate-crypto-traders-against-stock-traders-7188.htm

Centra Tech Inc. Co-Founder Implicated in $25 Million Scam

On July 13, Sohrab “Sam” Sharma, the co-founder of Centra Tech Inc., officially changed his plea to guilty for his involvement in a scam that stole more than $25 million from investors through an Initial Coin Offering (ICO) that his company promoted with the help of celebrities, including boxer Floyd Mayweather and musician DJ Khaled.

Robert Farkas and Raymond Trapani, Centra Tech’s other co-founders, have already pleaded guilty to the charges that they lied to investors about having developed “Centra Card”—a purported debit card that allowed customers to use crypto to make Visa– and Mastercard-backed purchases.

The trio is also accused of having falsely claimed that they had a Harvard-educated CEO with more than 20 years of business experience, partnerships with large companies including MasterCard and Visa, and licenses in 38+ states. Prosecutors allege that they touted these falsehoods to solicit investors to pour more money into the fraudulent Centra Token scam.

Mac Trading Applications Packed with GMERA Malware Steal Crypto from Users

A new trojan attack using malware called GMERA is targeting cryptocurrency traders who use trading applications on Apple’s macOS. GMERA malware was first discovered in September of 2019 when the security firm Trend Micro found it hidden on Mac computers as the stock investment application “Stockfolio.” According to another security company, ESET, the GMERA malware comes integrated into legitimate-looking cryptocurrency or stock trading applications and is designed to steal users’ crypto funds directly from their wallets.

ESET found the malware operators have used the legitimate macOS cryptocurrency trading application Kattana as the foundation for their copycat applications—Cointrazer, Cupatrade, Licatrade and Trezarus. They have also copied the website of the company and are using Kattana marketing strategies to push their own fraudulent products. The fake websites are a virtual copy of Kattana, but the download button links to a malware-included version of the app. According to ESET, these applications have full support for trading functionalities.

Federal Authorities Charge Man for Buying $1 Million of Crypto with PPP Loans

A Texas man named Joshua Argires received nearly $1 million from the federal Paycheck Protection Program (PPP) to purportedly help support 51 employees at his “Texas Barbecue” restaurant through the COVID-19 crisis. According to federal authorities, however, “Texas Barbecue” had no employees and its website does not have any products currently for sale. The Justice Department alleges that Argires instead sent the $956,250 he received in PPP loans to his virtual wallet at Coinbase via a series of five wire transfers.

The criminal complaint filed by the Justice Department expands on the bizarre nature of Argires’s PPP application, which said he would pay 51 Texas Barbecue’s employees an average of $90,000 a month. The complaint notes that “such a high average salary for a barbecue operation raises further suspicion.”

Another red flag raised in the complaint is between Argires and the Houston credit union that administered the PPP funds. In one conversation, a credit union staffer asked Argires what he thought about Coinbase—a crypto exchange that does not offer payroll services. Argires allegedly responded, “I don’t manage that aspect of it, but I believe it pays out employees, like, through that.” In reality, Argires kept the funds in his Coinbase account, likely as an attempt to profit from the post-COVID price dip.

Read the DOJ Press Release: https://www.justice.gov/opa/pr/texas-man-charged-covid-relief-fraud-0