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March 12, 2020

  • Two Chinese nationals sanctioned by OFAC and charged by DOJ for laundering cryptocurrency stolen by North Korean hackers
  • Secretary Mnuchin meets with key players in cryptocurrency space
  • CipherTrace sits down with SEC Commissioner Peirce for broad-ranging discussion
  • Pamela Clegg talks VASP onboarding best practices at ACAMS event in San Francisco
  • Famed Hollywood actor and “Zen master” settles with SEC for touting Bitcoin ICO
  • Modern Consensus names CipherTrace CEO one of the 100 Most Influential People in Crypto

Chinese Nationals Added to OFAC SDN List and Charged by DOJ for Laundering $100 Million in Cryptocurrency Stolen by North Korea

On March 2, the U.S Treasury’s Office of Foreign Assets Control (OFAC) added two Chinese nationals to the Specially Designated Nationals List (SDN) for their roles in laundering stolen cryptocurrency from a 2018 exchange hack. The two, Tian Yinyin and Li Jiadong, are purportedly associated with the Lazarus Group—North Korean state-sponsored cybercriminals believed to have been behind the Sony breach and WannaCry malware attacks, and $2 billion in thefts from banks and crypto exchanges.

According to the Treasury press release, Tian and Li received approximately $100.5 million worth of stolen crypto from North Korean controlled accounts. Tian ultimately moved more than $34 million worth of these illicit funds through a bank account linked to his crypto exchange account. Li moved an additional $33 million through linked accounts at nine different banks.

As a result of these sanctions, all property belonging to Tian and Li in the US or in the possession or control of US persons and entities must be blocked and reported to OFAC. In addition, persons that transact with Tian or Li, or with their sanctioned addresses, may find themselves penalized for sanctions violations or placed on the SDN list.

In parallel, the US Attorney for the District of Columbia has brought a Verified Complaint for Forfeiture in Rem against 113 virtual currency accounts linked to the theft and money laundering process. “Today’s actions underscore that the Department will pierce the veil of anonymity provided by cryptocurrencies to hold criminals accountable, no matter where they are located,” said Assistant Attorney General Benczkowski of the Justice Department’s Criminal Division.

Why it matters:

While the identities of virtual currency address owners are pseudonymous, these sanctions demonstrate how law enforcement can identify the owner of a particular cryptocurrency address by applying advanced blockchain analytics such as CipherTrace cryptocurrency intelligence. The use of accurate tools with high-quality attribution can not only reveal additional addresses controlled by the same individual or entity but also ensure that a financial institution or its customers are not transacting with sanctioned entities. Tian and Li’s use of bank accounts linked to their crypto exchange accounts also demonstrates the importance of banks being able to detect crypto-related transactions in their payment networks.

Read the blog: https://ciphertrace.com/chinese-linked-dprk-laundering-analysis/

Treasury Secretary Convenes Meeting of Virtual Currency Thought Leaders

On March 2, the U.S. Treasury Department convened a meeting of industry thought leaders and compliance experts in Washington to discuss supervisory and regulatory challenges facing convertible virtual currencies.

“The U.S. welcomes responsible innovation, including new technologies that may improve the efficiency of the financial system,” said Secretary Steven T. Mnuchin in an official press release following the meeting. “We must ensure that we balance innovation with the need to protect our national security and maintain the integrity of our financial system.”

The release also said that Treasury is focused on preventing the misuse of virtual currencies by money launderers, terrorist financiers, and other bad actors. “The United States will continue to be at the forefront of regulating entities that provide cryptocurrency, and will not tolerate the use of cryptocurrencies in support of illicit activities.”

At a Senate Finance Committee hearing in February, the Secretary had already made clear that Treasury, in collaboration with the country’s financial intelligence unit, had been focusing on AML regulation. “We will be rolling out new regulations to be very clear on greater transparency so that law enforcement can see where the money is going and that this isn’t used for money laundering,” said Mnuchin in reply to a Senator’s question.

CipherTrace Joins SEC Commissioner Peirce for Fireside Chat

On March 2, CipherTrace Chief Financial Analyst, John Jefferies, sat down for an intimate panel discussion with Securities and Exchange Commission (SEC) Commissioner Hester Peirce. The venue was a CryptoMondays event held in San Francisco and was sponsored by CipherTrace.

Peirce, also known in virtual currency circles as the “crypto mom” for her favorable stance toward blockchain innovation and tokens, discussed the outlook for regulation of cryptocurrency in 2020. The panel discussion covered a broad range of topics. Among them were her dissenting opinions in a long string of disapproval orders that the SEC has issued regarding bitcoin ETF products, and her recent proposal for a three-year safe harbor period for crypto token sales.

Read Peirce’s full token safe harbor proposal: https://www.sec.gov/news/speech/peirce-remarks-blockress-2020-02-06

The CryptoMondays event video is available here: https://ciphertrace.wistia.com/medias/snt3v0tkhm

CipherTrace Speaks at ACAMS FinTech Regulatory Summit

CipherTrace’s Pamela Clegg spoke on utilizing digital identity to support FinTech quality assurance and risk mitigation at the March 4 ACAMS FinTech Regulatory Summit in San Francisco. The panel covered adapting the latest FATF guidance to achieve a solid onboarding and verification process, and how companies like CipherTrace have continued to lead the way in accurately monitoring and risk-rating VASPs to aid institutions with onboarding crypto entities.

The FATF Draft Guidance on Digital Identities makes several recommendations, such as asking government authorities to review existing requirements and determine any need for clarification on digital identities.

With the deadline for FATF Travel Rule compliance quickly approaching, panel participants also stressed the value of partnership between financial institutions and FinTechs. And while the industry works to establish standards and technical solutions for Travel Rule compliance (such as TRISA), answers are still needed to governance questions such as who owns KYC.

“Above the Law” Actor Steven Seagal Receives Big Fine for Violating for Anti-Touting Law

The SEC recently settled charges against actor, director, and renowned martial artist Steven Seagal for failing to disclose payments he received for promoting an initial coin offering (ICO). According to the Cease and Desist administrative action, Bitcoiin2Gen (B2G) promised to pay Seagal $250,000 in cash and $750,000 worth of B2G tokens in exchange for his promotion of its offering.

In a press release promoting the ICO—in which tokens were to be issued on the Ethereum blockchain—B2G announced that Seagal would endorse the offering. He was quoted as saying “I endorse this opportunity wholeheartedly . . . I am excited about the management, and especially about the secure blockchain, underlying mining technology, and safeguards.” However, the release did not disclose that he was being paid for the promotion. Seagal subsequently promoted the ICO on social media, such his Facebook account, which posted a link to the press release on B2G’s newsroom page titled “Zen Master Steven Seagal Has Become the Brand Ambassador of Bitcoiin2Gen.”

Without admitting or denying the agency’s findings, Seagal, who currently lives in Russia, agreed to pay disgorgement, prejudgment interest and a civil money penalties in the amount of $330,449 to the SEC. According to the order, Seagal is also banned for a period of three years from promoting any security, digital or otherwise.

Read the full order here: https://www.sec.gov/news/whatsnew/2020/wn022720.shtml

Who’s Who in Crypto This Year?

CipherTrace CEO Dave Jevans made Modern Consensus’s list of 100 Most Influential People in Crypto 2020. According to the website, the slate of influencers contains “the individuals moving, shaking, and shaping cryptocurrencies and blockchain technology right now.” They range from this year’s obvious newsmakers like Mark Zuckerberg to less-than-household names like Jay Clayton, Chairman of the SEC. Among the top 100 influencers are also CipherTrace customers and investors, such as Changpeng “CZ” Zhao, Binance CEO, and Mike Novogratz, Founder, Chairman, and CEO of Galaxy Digital, both of whom made the top 10.

The recurring theme of this year’s leading voices reflects a maturing industry. “Coming up with a list of the 100 most influential people in crypto and blockchain is hard in any year,” said the editors. “But doing it in 2020 is particularly rough. That’s because the industry didn’t just advance last year, it went mainstream.”

The announcement explained the editors are no longer looking for who is getting funded by VCs or who has the most Twitter followers, but rather who is getting things done with the blockchain and cryptocurrencies. For example, an unlikely number two on the list is China’s President Xi Jinping who “lit a rocket under the industry by saying he wanted China to become the world’s blockchain leader,” according to the announcement. “Then came word that China has been working on a central bank digital currency.” Another example of someone taking crypto mainstream is number-five-ranked Jack Dorsey. The CEO of Twitter and Square Crypto “jumped into cryptocurrency and blockchain with both feet in March 2019 with Square Crypto—the crypto-focused part of his payments company.”

Check out the full list here: https://modernconsensus.com/crypto-power-lists/the-modern-consensus-100-most-influential-people-in-crypto-2020/

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