fine - Pwim.Net

First Bitcoin Mixer Slapped with $60M Fine by FinCEN in Money Laundering Crackdown

The Financial Crimes Enforcement Network (FinCEN) has charged a Bitcoin-mixing operator with a $60 million civil money penalty for violating anti-money laundering regulations.

Bitcoin shuffling gone wrong

Larry Dean Harmon was arrested and charged with providing unregistered money services businesses from 2014 to 2020. Operating under Helix and Coin Ninja, he contributed as a founder and primary operator. Both platforms provided Bitcoin trading services and virtual currency mixers. Currently, in addition to being fined a $60 million penalty, Harmon also faces charges of conspiracy for money laundering and operating “an unlicensed money transmitting business.”

According to FinCEN’s announcement, Harmon laundered over $300 million in Bitcoin (BTC) and enabled the trafficking of drugs, guns, and child pornography by promoting Helix’s services as a Bitcoin mixer through the dark web. US law officials also stipulated that over 365,000 Bitcoin transactions were processed through Helix.

In addition to promoting Helix services through his role as a primary cryptocurrency exchanger, Harmon also acted as a CEO for Coin Ninja, which was alleged to have offered unregistered money service businesses. Per the report:

“FinCEN’s investigation revealed that Mr. Harmon willfully violated the Bank Secrecy Act (BSA)’s registration, program, and reporting requirements by failing to register as a Money Services Businesses (MSB), failing to implement and maintain an effective anti-money laundering program, and failing to report suspicious activities.”

Per the charges from FinCEN, Harmon deliberately and knowingly went against the regulatory framework of the Bank Secrecy Act, conducting businesses with drug traffickers and counterfeiters by converting and exchanging Bitcoin through different techniques. FinCEN also alleges that the Bitcoin-mixing operator hid the illicit activities by actively deleting customer information he collected through Helix.

What is a Bitcoin mixer?

Bitcoin mixing is typically a solution that is used to minimize the risks of transacting with BTC online, through a “virtual currency shuffling” system. It offers services that aim to provide sender anonymity and privacy by swapping one’s BTC with others’ BTC. Privacy provided by Bitcoin mixing algorithms enables BTC investors to transact safely on the web, undetected by criminals looking to steal their crypto funds.

Unfortunately, though Bitcoin mixing can provide online security to investors and virtual currency holders, it has also been leveraged by criminals in certain instances to further their illicit activities in an anonymous way.

Binance Exchange Fined €3.3M by Netherlands' DNB

The Central Bank of the Netherlands, De Nederlandsche Bank (DNB), has fined Binance Exchange €3.3 million for allegedly operating a crypto trading service without receiving the appropriate authorization.

According to the DNB, the offence was committed from May 21 2020 to Dec 1, 2021. The apex bank noted that by failing to register in order to be guided by the Money Laundering and Terrorist Financing (Prevention) Act (Wwft), Binance received a lot of competitive advantages as it did not pay any fees.

“Binance has a very large number of customers in the Netherlands,” the press release from the DNB reads. “In addition, Binance has enjoyed a competitive advantage because it has not paid any levies to DNB and has not had to incur other costs in connection with ongoing supervision by DNB.”

With the fines for related offences up to 4 million euros, the DNB said the 3.3 million euros fine was that huge based on the length of time the exchange operated without oversight. The apex bank argued that Binance’s actions could permit criminal actors to thrive on its platform as the exchange will not be able to report suspicious money transactions to the FIU-NL.

Despite the sanctions, De Nederlandsche Bank said Binance has acted in good faith as it cooperated with the investigators and has also applied for licensing proper, a move that made it issue a fair discount in the final levied fine.

“DNB has moderated the fine by 5%, partly because a registration application has now been submitted and because Binance has been relatively transparent about its business operations throughout the process. This registration is currently being assessed by DNB,” the DNB said.

The DNB introduced the guides for crypto service providers to apply for licensing or to cease and desist from operating on its shores. The apex bank granted its first-ever license back in October 2020, with Amsterdam Digital Asset Exchange (AMDAX) being the first firm to benefit.

Coinme Fined $4 Million by SEC

The US Securities and Exchange Commission (SEC) has fined Coinme, a cryptocurrency exchange, nearly $4 million for allegedly offering unregistered securities and making “misleading statements” about its crypto token, UpToken. Coinme, its subsidiary Up Global SEZC, and its CEO, Neil Bergquist, were charged by the SEC on April 28, with Up Global agreeing to pay a $3.52 million penalty, for which Coinme was also held liable. The SEC alleged that Coinme’s Initial Coin Offering (ICO) of UpToken between October and December 2017 was an investment contract under the Howey test and was an unregistered securities offering. The ICO raised around $3.6 million to expand Coinme’s fleet of Bitcoin ATMs, with the funds used to add 30 ATMs, and UP holders received benefits such as discounted fees and cashback when using the ATMs. However, in January 2019, Coinme changed its offering and partnered with Coinstar to use its cash-counting kiosks to facilitate cash-to-crypto transactions instead of its own ATMs. Coinme shut down all of its ATMs by July 2019, and there is currently no use for UpToken, with its market cap falling to around $50,000 and 24-hour trading volumes topping just over $180.

Coinme was found to have offered unregistered securities, and the SEC handed down fines totalling almost $4 million to the company, its subsidiary Up Global SEZC, and the CEO of both firms, Neil Bergquist. The SEC found that Coinme’s ICO of UpToken between October and December 2017 was an unregistered securities offering, and the ICO was considered an investment contract under the Howey test. Coinme raised approximately $3.6 million through the ICO to expand its fleet of Bitcoin ATMs, adding 30 ATMs with ICO funding. UP holders received discounted fees and 1% cashback in UP when using the ATMs. However, in January 2019, Coinme changed its offering, partnering with Coinstar to use its cash-counting kiosks for cash-to-crypto transactions instead of its own ATMs. Coinme shut down all of its ATMs by July 2019, rendering UpToken unusable. The SEC also found that Bergquist and Up Global made false and misleading statements about the demand for UpToken and the amount raised in the ICO.

The SEC’s action against Coinme underscores the agency’s increased scrutiny of the cryptocurrency market, particularly with regard to ICOs and the sale of unregistered securities. The SEC has warned repeatedly that ICOs are subject to federal securities laws, and that any token offered or sold in an ICO must be registered or qualify for an exemption from registration. Failure to comply with these laws can result in enforcement action, as demonstrated in the case of Coinme.

Coinme’s ICO of UpToken highlights the risks associated with investing in ICOs, particularly those that are not registered with the SEC. Investors should conduct thorough due diligence and carefully review the offering materials before investing in any ICO. The case also highlights the importance of transparency and accurate disclosure in the cryptocurrency market, with companies facing enforcement action if they make false or misleading statements.