criminal charges - Pwim.Net

Telegram Hit With $18.5 Million SEC Fine and Set to Return $1.2 Billion to Investors as it Dissolves TON Project

Pavel Durov’s grand crypto dreams for his Telegram crypto project are coming to an end with the civil settlement with the SEC and a promise to return billions to investors.

Telegram, the world’s leading social messaging app, has agreed to pay an $18.5 million in a civil penalty to resolve criminal charges over an unregistered digital token offering. The company has also promised to return over $1.2 billion to investors, which remains unspent from the $1.7 billion that it raised through its ICO (initial coin offering) in 2018.

The regulator turning up the heat

On Friday, the US SEC (Securities and Exchange Commission) said that it had received court approval of the settlements with Telegram and its owned subsidiary TON Issuer Inc., to resolve charges over the company’s unregistered offering of digital tokens commonly identified as grams that violated the federal securities laws.

Now Telegram has up to four years to pay investors and 30 days to pay SEC’s penalty. As part of that agreement, the UK-based company must also notify the SEC in case it wants to issue another digital coin within the next three years.

The settlement between the Telegram and the SEC brings to an end the months of a long legal battle between the two parties, which started when the SEC filed a legal complaint with Telegrams back in October 2019.

The rise and fall of Gram crypto project

Telegram officially abandoned the Telegram Open Network (TON) cryptocurrency project on May 12, 2020. The firm unveiled the project with its ICO in 2018 in an effort to monetize the messaging platform that has over 400 million global users.

In October 2019, the SEC sued Telegram alleging that the firm had raised capital through the sale of 2.9 billion Gram tokens to finance its business. However, Telegram lawyers tried to defend the ICO by arguing that the firm was not selling gram cryptocurrency, but was rather planning to issue grams that would be minted within the company’s network. In March, the US District Court for The South District of New York sided with the SEC at all steps preventing Telegram from launching its TON network.

So far, Telegram has no luck and this explained the reason why the company went ahead and stopped the TON project. Although the official TON network is inactive, community developers and validators unveiled a fork of TON known as Free TON in the previous month.

This case and settlement could have greater implications for other simple agreement for future tokens (SAFT) raise, particularly for those projects that have yet to launch.

US Justice Department Charges John McAfee with Cryptocurrency Fraud

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The US Department of Justice has charged antivirus software entrepreneur John McAfee with money laundering and fraud offences stemming from two crypto schemes. The Justice Department charged McAfee, 75, and his bodyguard, Jimmy Gale Watson Jr,40, in a newly unsealed indictment in Manhattan federal court on Friday, February 5.

The prosecutors described Jimmy Gale Watson Jr as an executive adviser who served as the head of MacAfee’s cryptocurrency team.

Detectives arrested Watson in Texas on Thursday, February 4, and he would make an initial appearance on Friday next week before a federal magistrate judge in Dallas.

The authorities accused McAfee and Watson of exploiting McAfee’s large Twitter following to artificially inflate prices of cryptocurrencies through a pump and dump scheme and concealing payments that McAfee obtained from startup businesses to promote initial coin offerings. According to the US Department of Justice, McAfee and his cohorts made over $16.9 million by fooling investors zealous over the emerging crypto market.

However, lawyers representing McAfee and Watson could not be immediately identified.

The Commodity Futures Trading Commission filed related civil charges regarding the alleged pump and dump scheme.

McAfee’s Arrest in Spain

McAfee is being detained in Spain following his arrest on tax evasion charges announced in October last year. Both McAfee and Watson face civil charges by the US Securities and Exchange Commission. In October last year, the SEC accused McAfee of concealing over $23.1 million he made from promoting seven crypto offerings on Twitter. The authorities stated that McAfee touted altcoins including Dogecoin, Reddcoin, and Verge as part of a “Coin of the Week” or “Coin of the Day” tweet from around December 2017 through February 2018.

Authorities mentioned that McAfee held himself up as an expert on cryptocurrency and cybersecurity through his speeches, tweets, and his roles as a chief executive of a publicly-traded crypto firm. Authorities also accused McAfee of telling his followers that he had no stake in the altcoins, though he touted how such coins “will change the world.”

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Russian National Extradited to the U.S. to Face Crypto Money Laundering Charges

Alexander Vinnik, a Russian national accused of running an illegal crypto exchange BTC-e was extradited to the United States to face fraud charges.

In a statement, Kenneth A. Polite Jr., an assistant attorney, pointed out:

“After more than five years of litigation, Russian national Alexander Vinnik was extradited to the United States yesterday to be held accountable for operating BTC-e, a criminal cryptocurrency exchange, which laundered more than $4 billion of criminal proceeds.”

He added:

“This extradition demonstrates the Department’s commitment to investigating and dismantling illicit cyber activity and would not have been possible without the relentless work of the Justice Department’s Office of International Affairs.”

Following a 21-count superseding indictment charge in January 2017, Vinnik was put into custody in Greece in July 2017 based on a request made by the U.S.

The indictment noted that Vinnik, with his co-conspirators, administered, operated, and owned BTC-e, a significant online money laundering and cybercrime entity that permitted Bitcoin trading among users.

The report noted:

“The indictment alleges BTC-e facilitated transactions for cybercriminals worldwide and received criminal proceeds from numerous computer intrusions and hacking incidents, ransomware scams, identity theft schemes, corrupt public officials, and narcotics distribution rings.”

During the course of operation, BTC-e received Bitcoin worth more than $4 billion. Furthermore, it enhanced crimes ranging from drug trafficking to public corruption, tax refund fraud schemes, identity theft, and computer hacking.

In December 2020, Vinnik was imprisoned for five years by a Parisian court, Blockchain.News reported.

At the time, he was sentenced for money laundering as part of an organized criminal group and for providing false information about the origin of the proceeds. He was also accused of extortion and numerous cybercrimes.

KuCoin and Founders Charged with Bank Secrecy Act and Money Transmission Offenses

The United States Department of Justice has revealed that KuCoin, one of the world’s largest cryptocurrency exchanges, and its founders, Chun Gan (also known as “Michael”) and Ke Tang (also known as “Eric”), have been charged with criminal offenses related to the Bank Secrecy Act and unlicensed money transmission.

According to the indictment, KuCoin and its founders conspired to operate an unlicensed money transmitting business and violated the Bank Secrecy Act by failing to maintain an adequate anti-money laundering (AML) program. The charges further allege that the exchange failed to implement proper customer verification procedures and did not file any suspicious activity reports.

The indictment claims that KuCoin deliberately concealed the fact that a significant number of U.S. users were trading on its platform. Despite the large customer base, the exchange allegedly neglected to comply with U.S. laws designed to prevent money laundering and terrorist financing. As a result, KuCoin reportedly received over $5 billion and sent over $4 billion of suspicious and criminal funds.

U.S. Attorney Damian Williams emphasized that financial institutions like KuCoin must comply with U.S. law if they wish to operate in the United States. Williams stated, “Crypto exchanges like KuCoin cannot have it both ways. Today’s Indictment should send a clear message to other crypto exchanges: if you plan to serve U.S. customers, you must follow U.S. law, plain and simple.”

HSI Acting Special Agent in Charge Darren McCormack commended the investigation that exposed KuCoin’s alleged multibillion-dollar criminal conspiracy. McCormack stated that despite servicing over 30 million customers, the exchange failed to follow laws necessary to ensure the security and stability of the digital banking infrastructure.

KuCoin, founded in September 2017 by Chun Gan, Ke Tang, and others, solicited business from U.S. customers through its spot trading and futures trading platforms. Since its inception, the exchange has grown to become one of the largest global cryptocurrency exchange platforms, with daily trading volumes in the billions of dollars and millions of customers.

The indictment marks a significant development in the regulation of cryptocurrency exchanges and highlights the importance of enforcing anti-money laundering laws in the crypto industry. The charges against KuCoin and its founders serve as a reminder to other exchanges that compliance with U.S. law is essential when serving U.S. customers.