department of justice

Crypto Token Backed by $25M Diamond Ponzi Scam Flagged by DoJ

The US Department of Justice has charged a 51-year-old Florida native with wire fraud, for soliciting investors in a diamond-backed cryptocurrency Ponzi and investment scam.

Jose Angel Aman was charged and made his appearance in court last week. According to FBI investigations, the Florida native and his partners in crime targeted investors throughout the United States and Canada. Aman initially started off with a rough diamond business, touting that he had rough colored diamonds and a storage inventory worth $25 million in value. Aman also falsely promised his investors that the diamond business was a guaranteed high return investment, with no risk.

At the end of each investment cycle, Aman along with his accomplices would tout a sham called “Reinvestment Contracts” to investors, and through this ruse, the fraudsters were able to buy more time to recruit new investors and launder more money.

Diamond and Crypto Ponzi Scheme Generates $25M

All allegations were false. The scammer was alleged to have operated following a Ponzi scheme, in which he made interest payments to earlier investors with new recruits’ fiat funds. When his diamond Ponzi scheme was on the brink of collapsing, Aman turned to a new business plan and launched Argyle Coin, LLC, a cryptocurrency-based business that touted its own token, Argyle Coin.

Aman once again promised high rates of return, with no risk, and the token was said to be diamond-backed. Once again, the Florida native employed a Ponzi scheme to repay solicited investors. The total amount of his investment and crypto scams were said to have generated over $25 million.

Using only a fraction of the money received from Argyle, LLC investors to develop a cryptocurrency token, Aman employed the rest of his fraudulent profits to support “a lavish lifestyle,” pay off his accomplices and make interest payments to earlier targeted investors.

The US Securities and Exchange Commission (SEC) had moved to stop Aman’s cryptocurrency and Ponzi operation back in May. Aman is alleged to have conducted multiple operations through similar Ponzi schemes.

BitClub Crypto Ponzi Scheme

Ponzi schemes have been on the rise, with the US Department of Justice (DoJ) recently charging a Californian man for conspiracy in fraud and for his role in a cryptocurrency mining scam that generated at least $722 million.

The cryptocurrency mining scheme, BitClub Network, was a fraudulent scam that solicited money from investors in exchange for shares in purported crypto asset mining pools.

US DOJ Launches National Crypto Enforcement Team

The United States Department of Justice, through Deputy Attorney General Lisa O. Monaco, has unveiled an establishment of the National Cryptocurrency Enforcement Team (NCET), a body that is now tasked with the responsibility of fighting criminal activities involving digital currencies.

Per the press release issued by the DOJ, the new team has the authority to investigate and prosecute the criminal activities of cryptocurrency, particularly crimes committed by virtual currency exchanges, mixing and tumbling services, and money laundering infrastructure actors.

The US DOJ has been uptight in its fight against crimes bordering on digital currencies, ranging from the flagging of a diamond-back token investment scam back in September 2020 to the crackdown on Tether Stablecoin over its reserve claims which resulted in an $18.5 million back in February this year.

The inaugural of the National Crypto Enforcement Network stems from the framework for regulating the nascent digital currency industry back in Q4 2020. The new team will serve as a more direct approach for the DOJ to keep using virtual currencies in criminal activities across the country.

“Today, we are launching the National Cryptocurrency Enforcement Team to draw on the Department’s cyber and money laundering expertise to strengthen our capacity to dismantle the financial entities that enable criminal actors to flourish — and quite frankly to profit — from abusing cryptocurrency platforms,” said Deputy Attorney General Monaco. “As the technology advances, so too must the Department evolve with it so that we’re poised to root out abuse on these platforms and ensure user confidence in these systems.”

The DOJ confirmed that the members of the NCET will be reallocated from U.S. Attorneys’ Offices across the country. The leader of the team will be a veteran with experience in dealing with complex criminal investigations and prosecutions, as well as the technology underpinning cryptocurrencies and blockchain issues.

According to the DOJ, the NCET team will carry out its responsibilities in collaboration with other relevant government watchdogs.

Police Arrests 2 Suspects Involved in 2016 Bitfinex Hack

In an investigation that ran for over five years, the United States law enforcement has arrested a Manhattan-based couple identified as Lichtenstein and Morgan. They were suspected to be a part of the masterminds behind the 2016 Bitfinex exchange hack that saw 119,754 Bitcoin transferred from the platform.

As announced by the Department of Justice, the investigators followed the money trail right from when the exchange’s hackers deposited the funds inside a wallet, controlled by Lichtenstein and Morgan, to the points where they attempted to liquidate and launder the funds years after. The arrest has led to the recovery of 90,000 Bitcoins worth $3.6 billion at the time of seizure.

“Today’s arrests, and the department’s largest financial seizure ever, show that cryptocurrency is not a safe haven for criminals,” said Deputy Attorney General Lisa O. Monaco.

“In a futile effort to maintain digital anonymity, the defendants laundered stolen funds through a labyrinth of cryptocurrency transactions.”

The couple is expected to make their first appearance in court this week, facing imprisonment for at least 25 years if fully convicted of their crimes. According to the DOJ, a federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

The eventual bust of the perpetrated crime showcases how possible it is for financial transactions involving Bitcoin and cryptocurrencies to be tracked or monitored by regulators. This possibility is sometimes tricky in the case of fiat currencies.

Hacks are not uncommon in the digital currency ecosystem, with Crypto.com being one of the latest victims of centralized trading platforms to suffer from a similar fate. However, law enforcement agencies have often outsmarted cybercriminals in most instances as they often leave a trail of their transactions.

The advances in the blockchain ecosystem have also helped in developing tools that can help track criminal activities in the blockchain and crypto ecosystems. Thus far, the concerted efforts by all stakeholders to track illegal activities in the crypto world seems to be yielding fruits.

Virgil Griffith Sentenced to 5-Year Jail for Helping Individuals in North Korea Evade Sanctions

The strong hands of the law have been stretched to Virgil Griffith, an American national and one of the Ethereum core programmers, who is sentenced to 63 months in jail by U.S. District Judge P. Kevin Castel for allegedly helping individuals in the Democratic People’s Republic of Korea (North Korea) evade the US imposed sanctions.

The relations between North Korea and the United States remain intense as North Korea is reportedly still active with its nuclear program, which is still under sanctions by the United Nations. Based on this, the U.S. government enacted the International Emergency Economic Powers Act (IEEPA) to prevent U.S. entities from doing business or selling technologies that can aid North Korea’s threats.

Despite knowing this, the Department of Justice (DoJ) said in its announcement that Griffith and his co-conspirators have developed and managed technologies that can help North Korean individuals mine crypto and eventually evade sanctions. The DoJ revealed that against the approval of relevant authorities, Griffith not just travelled to North Korea by offering services directly to the country, but he also had sought to recruit other American citizens to do the same.

“There is no question North Korea poses a national security threat to our nation, and the regime has shown time and again it will stop at nothing to ignore our laws for its own benefit. Mr. Griffith admitted in court he took actions to evade sanctions, which are in place to prevent the DPRK from building a nuclear weapon. Justice has been served with the sentence handed down today,” said U.S. Attorney Damian Williams.

Griffith, 39, pled guilty to the charges levied against him, and following his sentence, he will be placed on 3 years of supervised release atop a $100,000 fine. The DoJ is known to be proactive when it comes to high-profile fraudulent cases featuring crypto-linked entities. One of the crackdowns launched by the DoJ in recent years involves former BitMEX co-founder and CEO, Arthur Hayes, who promptly resigned from the role following the criminal charges levied against him and other executives of the trading firm.

BlockFi Will Submit Assets And Liabilities For Bankruptcy On January 11

In a recent announcement, the cryptocurrency lending company BlockFi stated that it will provide information regarding its assets and liabilities, in addition to the payments that it received prior to its bankruptcy filing in November.

BlockFi stated that it had provided its stakeholders with a presentation in which it detailed its intentions for future court filings and provided a breakdown of the bankruptcy proceedings. BlockFi also provided a breakdown of the bankruptcy proceedings.

The lending company claims that shortly after the company’s initial bankruptcy hearing in November, it made contact with 106 potential buyers. On January 30, the company will ask the court for permission to proceed with the bidding process and will ask for approval from the court regarding the bidding process. Both of these requests will be made in relation to the bidding process.

To be more specific, the company stated that no members of the BlockFi management team had withdrawn any cryptocurrency from the platform since October 14 and that none of them had “made a withdrawal bigger than 0.2 BTC in value at any time” since August 17. This information was provided in a blog post that was published on the company’s website.

In addition, the company stated that following the acquisition of a revolving credit line for $400 million from FTX US in July, it had increased basic wages and paid retention incentives for specific personnel.

On January 11, BlockFi announced that it planned to provide a summary of its financial affairs, in addition to providing an account of its assets and liabilities.

The announcement was made after the United States Department of Justice informed the judge overseeing the bankruptcy of BlockFi that it had seized more than 55 million shares of Robinhood. At the time of publication, these shares had a value of approximately $450 million. The criminal case against the cryptocurrency exchange FTX and the executives of the company resulted in the seizure of the shares.

The next scheduled meeting for the public hearing regarding the FTX bankruptcy case is scheduled for the 11th of January. On the other hand, an all-encompassing hearing for BlockFi is scheduled for the 17th of January.

Randall Crater, Founder of "My Big Coin" Sentenced

Randall Crater, the person responsible for operating the fraudulent scheme known as “My Big Coin,” was given a sentence of one hundred months in prison and was ordered to make restitution payments totaling more than seven and a half million dollars to those who had lost money as a result of his scheme.

According to a statement that was released by the United States Department of Justice on January 31, the United States District Court Judge Denise Casper in the state of Massachusetts was the one who handed down the sentence that was given to Crater.

This sentence was handed down to Crater after he was found guilty by a federal jury on July 21 of four counts of wire fraud, three counts of unauthorised monetary transactions, and one count of operating an unregistered money-transmitting corporation. All of these charges were related to the same scheme. After adding up all of these fees, it became clear that Crater was running an unlicensed money transmission business.

Crater launched My Big Coin in 2013, and despite the fact that it was never intended to be a payment mechanism for cryptocurrencies, the company promoted itself as such. This resulted in the solicitation of potential victims between the years of 2014 and 2017, and the con was carried out right up to 2017.

According to Crater, the digital currencies that are available for purchase on My Big Coin are fully operational tokens that are backed by gold. Furthermore, the website has a collaboration with Mastercard to facilitate transactions.

In addition, Crater provided its users with access to a marketplace known as “My Big Coin Exchange,” which was promoted as a location at which users could trade their cryptocurrencies for fiat currencies such as the United States dollar and other currencies.

A substantial percentage of the $7.6 million in finance that Crater and his marketing team were successful in generating was used for the acquisition of a residence, many automobiles, and more than one million dollars’ worth of antiques, artwork, and jewellery.

Silvergate Bank Probed by DOJ for Ties to FTX Exchange

It has been claimed that the fraud section of the United States Department of Justice is conducting an investigation against the crypto bank Silvergate for its participation with the defunct FTX exchange and its affiliates.

According to a story published on February 3 by Bloomberg, which cited “people familiar with the subject,” the investigation is looking at Silvergate’s hosting of accounts that are tied to the companies of former FTX CEO Sam Bankman-Fried.

The cryptocurrency bank situated in California is not suspected of committing any crimes; nonetheless, detectives are trying to determine the extent to which the business was conducted with FTX and Alameda.

The failure of FTX in November had a significant negative effect on Silvergate, which resulted in a loss of one billion dollars in the most recent quarter. As a result of the collapse of the SBF empire, the bank was forced to lay off forty percent of its workforce and admit that it had taken out loans worth billions of dollars in order to avert a liquidity crisis and a bank run.

Investigators from the federal government are attempting to determine whether or not Silvergate and any other businesses that collaborate with FTX were aware of the issue.

According to Silvergate, Alameda signed up for a banking relationship with the institution in 2018, which was before to the release of FTX. According to the report, it asserts that it exercised appropriate due diligence and maintained continuing monitoring at the relevant period.

A spokesman from the financial institution said earlier this week that the company “has a rigorous compliance and risk management procedure.”

Josh Rager, a crypto trader, remarked on the potential effects that this most recent criminal probe may have on cryptocurrency exchanges that are connected to Silvergate.

On January 27, Silvergate announced that company will be temporarily suspending dividend payments, citing “recent volatility in the digital asset business.” At the time, it said that it had a “cash position that was in excess of their digital asset customer-related deposits.”

According to MarketWatch, Silvergate stock has dropped by 13% during the day, and it is now trading at $17.14 in after-hours trading. In addition, the price of SI is today 92% lower than it was in November 2021, when it was at its all-time high of $220.

Voyager Digital Subpoenas FTX Executives

Subpoenas demanding information have been issued on former FTX CEO Sam Bankman-Fried and other FTX and Alameda Research officials by attorneys representing insolvent crypto broker Voyager Digital.

According to the filing made on February 6, the subpoenas have a very broad reach, and the attorneys for Voyager are asking for copies of all documents and communication that may have taken place between FTX businesses and the Securities and Exchange Commission or the Department of Justice.

In addition to a large number of additional papers, the attorneys have demanded information about the loan portfolio held by Alameda and Voyager, as well as FTX’s financial status both before and after the company filed for bankruptcy on November 11.

The other executives who were ordered to deliver the needed material by February 17 include a former CEO of Alameda named Caroline Ellison, the co-founder of FTX named Gary Wang, and FTX’s head of product named Ramnik Arora. Each of these people was issued with a subpoena.

Voyager and Alameda have extensive financial relationships, and Alameda is now attempting to recoup the $446 million that it has already given back to Voyager. It asserted in a document that was submitted on the 30th of January that since it had repaid Voyager inside the first ninety days after filing for its own bankruptcy, it had the legal right to “claw back” the monies for the benefit of its creditors.

After Alameda made a bid for Voyager’s assets that it was unable to honor, which cost Voyager $100 million and rendered Alameda’s claim subordinate to those of its other creditors, Voyager responded by claiming that its creditors had suffered “substantial harm” as a result of Alameda’s actions. Voyager made this claim in its lawsuit against Alameda.

In the meanwhile, according to a story published on February 7 by Law360, United States bankruptcy judge Michael Wiles said that he would be appointing a fee examiner to look into the professional costs associated with Voyager’s Chapter 11 case.

Wiles is said to have claimed that the professional fees expended inside the bankruptcy process were larger than he anticipated, and the rationale that was presented by the U.S. Trustee had apparently persuaded him that a fee examiner would be advantageous.

Wiles did observe, however, that an examiner may wind up costing the estate more than it would be able to save in other professional expenses, and he suggested putting a ceiling on the examiner’s own fees in order to prevent this from happening.

Eddy Alexandre Pleads Guilty to Commodities Fraud

In a New York district court, Eddy Alexandre, the CEO of a putative cryptocurrency trading platform known as EminiFX, pled guilty to commodities fraud. As part of his plea deal, he agreed to pay back millions of dollars to investors who had lost money due to his “cryptocurrency investment hoax.”

On February 10, the Department of Justice (DOJ) of the United States of America made the announcement that Alexandre had pleaded guilty to one count of commodities fraud. Alexandre will pay approximately $248 million in forfeiture in addition to restitution, the amount of which has not yet been determined.

In May, Alexandre was arrested and prosecuted for his part in EminiFX. He first pled not guilty to the charges, but on February 10 he changed his plea to guilty. He might get a term of up to ten years in jail if convicted.

Between approximately September 2021 and May 2022, Alexandre allegedly ran the crypto and forex trading platform and “solicited more than $248 million in investments from tens of thousands of individual investors,” as stated by Damian Williams, the United States Attorney for the Southern District of New York.

According to Williams, Alexandre claimed that EminiFX could provide “monthly returns of at least 5%,” but in fact, the CEO didn’t invest a “significant amount” of the money and “even utilized some funds for personal expenditures.” Williams alleged that Alexandre lied about EminiFX.

He promoted EminiFX as a platform for earning passive income by virtue of its use of a top-secret new technology for automating trading in crypto and foreign currencies, which allegedly “guaranteed” the returns on investment that were advertised.

Alexandre avoided answering the investors’ questions on the nature of the technology but assured them that they would see a return on their investments in just five months. Investors in the scam were given misleading information to the effect that they had obtained the promised 5% returns on their investments.

In point of fact, Alexandre lost tens of millions of dollars on the cash that he did invest; nevertheless, he did not make this information known to the investors.

He also transferred over 14.7 million dollars to his own personal bank account, spent approximately 155,000 dollars on the purchase of a BMW, and more than that amount on the monthly payments for a Mercedes-Benz.

Despite the fact that Alexandre committed fraud, he retained the support of a number of the investors in EminiFX.

According to a story published on the 10th of August by Bloomberg, a few individuals flew from outside the country to attend a plea hearing in August. One of Alexandre’s supporters said that the prosecution against him was racially motivated.

In addition to this, he is being sued in a separate civil case by the Commodity Futures Trading Commission (CFTC), which claims that Alexandre engaged in “fraudulent solicitation and misappropriation” in connection with cryptocurrency and foreign exchange trading.

U.S. District Judge Kevin Castel Grants Request to Defer civil cases

Civil proceedings against Sam Bankman-Fried from the Commodities Futures Trading Commission and the Securities Exchange Commission have been postponed until after the FTX founder’s criminal trial in October. This decision was made by a judge in New York who granted a request made by prosecutors to defer the proceedings.

On February 13, 2019, the United States District Judge for the Southern District of New York, Kevin Castel, granted the motions to stay the civil proceedings “without prejudice.” This means that the cases will now be halted until after the criminal trial being conducted by the Department of Justice has concluded.

The application to delay both civil lawsuits against the FTX founder and former CEO was first presented on February 7 by Damian Williams, who serves as the United States Attorney for the Southern District of New York. The request was made in the filing.

Williams emphasized that providing the same evidence against Bankman-Fried will most likely be the deciding factor in all three cases, and that the trial that will be held by the Department of Justice in October will have a “significant impact” on these civil cases. Williams cited these reasons as the reason he wanted the delay.

He also suggested that not delaying the cases could give SBF unfair advantages in the DOJ’s trial, as the founder of FTX had the tools to “improperly obtain impeachment material regarding the government’s witnesses, circumvent the criminal discovery rules, and improperly tailor his defense in the criminal case.” If the cases were not delayed, he said, the DOJ’s trial would take place.

William’s request to postpone the proceedings was met with no opposition from the legal team representing Bankman-Fried.

As a related court development concerning SBF’s alleged witness tampering antics, on February 9 Judge Lewis Kaplan of the United States District Court for the Southern District of New York extended the FTX founder’s ban on using any encrypted messaging apps until February 21 as a condition of his bail. This was a part of the bail conditions he was required to comply with.

A week earlier, SBF’s legal team had negotiated a deal to use certain encrypted apps under strict supervision. However, Judge Kaplan overruled the agreement and suggested that he was more concerned about shutting down any encrypted communication than offering SBF a small convenience. This led SBF’s legal team to believe that the judge was more concerned about shutting down any encrypted communication than offering SBF a small convenience.