In line with its role as a leader in the investigation and enforcement of violations involving cryptocurrencies and other digital assets, on June 30, 2022, the U.S. Department of Justice (DOJ) announced four separate enforcement actions related to cryptocurrency -related fraud and other criminal acts. , which is summarized below.1 In particular, all four lawsuits involved allegations of cross -border misconduct in the digital asset space prosecuted under the statute based on long -standing fraud.
These enforcement actions reflect the DOJ’s continued focus on various cross-border errors in the digital asset space.
- Money Laundering and Wire Fraud: At United States v. Le Ahn TuanThe DOJ charged Vietnamese citizens with conspiracy to commit wire fraud and money laundering in connection with their alleged role in carrying out a fraudulent investment scheme involving the “Baller Ape” Non-Fungible Token (NFT).2 The DOJ acknowledged that defendants and co-conspirators launched a fraudulent investment program that claimed to give investors the opportunity to buy Baller Ape NFTs, but after investors transferred the cryptocurrency to defendants and co-conspirators, defendants and their associates. -conspirators stop premature investment programs and steal investor assets.3 Furthermore, the defendant allegedly engaged in “chain-hopping,” which included, among other things, converting one type of cryptocurrency to another to disguise a source of funds and possibly a form of money laundering.4
- Securities Fraud, Wire Fraud, and International Money Fraud: At United States v. Emerson Pires, et al.The DOJ charged Brazilian and U.S. citizens with conspiracy to commit securities fraud, cable fraud, and international money laundering in connection with a “global cryptocurrency -based Ponzi scheme.”5 Defendants allegedly had promoted the cryptocurrency investment platform through, among other things, misrepresentations about trading bot ownership and ability to generate secured returns and operate Ponzi schemes that paid previous investors with money obtained from later investors.6 The DOJ also alleged that non-U.S. defendants laundered investor funds through foreign cryptocurrency exchanges. The DOJ says it uses blockchain analytics to help with investigations.7
- Securities Fraud: At United States v StolleryThe DOJ claims that U.S. citizens commit securities fraud through initial coin offerings (ICOs) for cryptocurrency investment platforms.8 Among other things, defendants are accused of making misrepresentations about the customer base that the platform serves, including several American companies and well -known financial institutions such as the Federal Reserve.9 To carry out the scheme, defendant allegedly created a new cryptocurrency token, BAR, which he claimed would allow “the owner…. [to] show in [the platform’s] future earnings and appreciation in the value of BAR digital assets.10 The DOJ said the defendants “earned approximately $ 21 million in the form of various digital assets, such as Ether and Bitcoin, and cash from dozens of investors located in at least 18 states, including California, and abroad, who bought BAR. “11
- Commodity Fraud and Wire Fraud: At United States v. David SaffronThe DOJ charged U.S. citizens with conspiracy to commit commodity fraud, cable fraud, and related charges.12 Defendants and their co-conspirators allegedly obtained investor funds of at least $ 15 million by promoting various cryptocurrency trading programs, including programs for trading options contracts in various cryptocurrencies and fiat currencies through unlisted commodity pools.13 Defendant and his associates also claimed to use an artificial intelligence (AI) trading bot, which it represented could perform 17,500 transactions per hour on various cryptocurrency exchanges and would yield between 500% and 600%.14
The DOJ’s recent enforcement action revealed some key elements to the agency’s enforcement approach.
- Regulation by Enforcement: The DOJ noted that despite the “relative innovation of digital currency,” the agency is “dedicated.[d] use all available tools to protect consumers and investors from fraud and manipulation.15 This latest enforcement action reflects the agency’s efforts, in collaboration with the Securities and Exchange Commission, the Commodity Futures Trading Commission, and other federal agencies, to control misconduct in the digital assets space, even though there are no specific rules and regulatory guidelines on the issue. .
- Public-Private Partnerships: The action also reflects the potential role the private sector can play in the enforcement of cryptocurrency -related fraud. As discussed above, because the “novelty” of digital assets is an evolving technology, bad actors may seek to rely on a company’s reputation and financial intuition to provide fraudulent schemes with an “appearance of legitimacy.”16 Here, the DOJ emphasizes that the action is “an example[y] the importance of public-private partnerships ”and“ strong relationships with industry partners ”, which generate“ information [the] final investigation and indictment[s]. ”17
- Cross Border Enforcement: The action is notorious on an international reach, with two actions involving transnational schemes and targeting defendants located outside the United States. This may reflect the DOJ’s wider recognition that “criminal schemes involving digital assets” are often “transnational”. [in] nature.”18 Therefore, the DOJ has emphasized that “[c]ross-border collaboration is critical ”to an effective framework for detecting, investigating, and prosecuting criminal activity involving digital assets.19
1 Press Release, U.S. Department of Justice, Department of Justice Announces Enforcement Action Charging Six Individuals with Cryptocurrency Fraud Violations in Cases Involving Losses of More Than $ 100 Million (June 30, 2022), https://www.justice.gov/opa/pr/justice-department-announces-enforcement-action-charging-six-individuals-cryptocurrency-fraud.
2 Charges ¶ 1, United States v. Le Ahn TuanNo. 2: 22-cr-273-JLS (CD Cal), https://www.justice.gov/criminal-vns/case/file/1516756/download.
8 Accusations ¶¶ 1, 9-10, United States v StolleryNo. 2: 22-cr-207-JLS (CD Cal), https://www.justice.gov/criminal-vns/case/file/1516766/download.
12 View General Indictment, United States v. SaffronNo. 2: 22-cr-276-DSF (CD Cal), https://www.justice.gov/criminal-vns/case/file/1516761/download.
18 Report on 9, U.S. Department of Justice, How to Strengthen International Law Enforcement Cooperation to Detect, Investigate, and Prosecute Criminal Activity Related to Digital Assets, (June 6, 2022), https://www.justice.gov/ag/page/file/1510931/download.