Coinbase money laundering trial to be held in open court

Coinbase money laundering trial to be held in open court

In 2017, Paul Vernon, CEO of now-bankrupt cryptocurrency exchange Cryptsy, was found guilty of stealing over 11,000 of his customers BTC coins in 2014. He claimed that the loss was due to the exchange being hacked, but that claim was quickly refuted especially given the fact that he ran away to hide in Asia. At the time the amount surpassed $10 million, and Vernon was ordered to pay back $8.2 million to investors.

There were allegations that Vernon laundered the cryptocurrency through the Coinbase exchange, resulting in Silver Miller—a law firm known to target crypto companies—to file a lawsuit against the exchange. Coinbase had hoped to have the case heard in private arbitration, but the law firm turned down the idea. Now, the federal appeals court has ruled that the case will be heard in front of the public.

Silver Miller filed the class-action suit with its co-counsel, the Wites Law Firm. The suit alleged that Vernon was able to convert the stolen crypto through his Coinbase accounts between 2014 and 2016, and that Coinbase was responsible for culpable negligence in not providing more stringent account oversight. According to the lawsuit, “Plaintiffs seek damages based upon the unlawful conduct of COINBASE in failing to properly monitor customer accounts that held investors’ money and ignoring its duty to investigate suspicious activities under U.S. anti-money laundering rules.”

Silver Miller was part of the original lawsuit against Cryptsy and Vernon. The firm’s co-founder, David Silver, wanted cryptocurrency exchanges to have greater accountability and transparency in their actions, saying, “This ruling brings the plaintiffs one step closer to finding out just what type of Know Your Customer protocols and Anti-Money-Laundering protections Coinbase employed and whether Coinbase complied with state and federal statutes in that regard. Coinbase has delayed and tried to keep discovery hidden from the public long enough. That stops now.”

Coinbase has had a rough go of things lately. It was accused of insider trading following the announcement that it would accept Bitcoin Cash in late 2017, resulting in a lawsuit being filed earlier this year. It just recently announced that it was doing away with its Coinbase Merchant Tools platform in favor of Coinbase Commerce, a move that puts the onus on merchants to collect cryptocurrency payments instead of relying on Coinbase for the transactions. The move has brought significant blowback, with many companies threatening to drop Coinbase completely.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.
Backpage founders charged with using crypto to launder $500M

Backpage founders charged with using crypto to launder $500M

In 2004, a group of entrepreneurs and coders decided to launch a site that would give Craigslist a run for its money. The categories were virtually identical, although the site’s design was different. People could use to sell unwanted items, look for work, find employees or, what became the site’s main attraction, have sex. Now, the U.S. Department of Justice (DOJ) has dropped the hammer on the site, accusing it of being a global player in prostitution-related activity.

The DOJ seized the site last Friday, and followed up by arresting seven individuals. They face charges in a 93-count indictment that includes conspiracy to facilitate prostitution, facilitating child pornography and money laundering. In announcing the arrests and seizure, U.S. Attorney General Jeff Sessions said, “For far too long, existed as the dominant marketplace for illicit commercial sex, a place where sex traffickers frequently advertised children and adults alike. But this illegality stops right now.”

According to the DOJ, Backpage earned about $500 million in prostitution and illicit activity ads since it launched in 2004. Due to the shady nature of the company, credit card companies such as Visa and MasterCard stopped authorizing payments to the site, forcing it to begin a range of money-laundering activities to convert customer funds.

According to Don Fort, chief of the Internal Revenue Service’s (IRS) Criminal Investigation unit, the people behind Backpage not only “committed egregious amounts of financial crimes such as money laundering, they did so at the expense of innocent women and children.”

This is not the first time that Backpage has found itself under attack by U.S. authorities. In 2016, Carl Ferrer, the company’s CEO, was arrested and the site was temporarily shut down. Everything dropped, however, after a court determined that the site operated under the protection of the First Amendment relating to free speech. Whether or not the charges will be dropped again remains to be seen.

Note: Tokens in the SegWit chain are referred to as SegWit-Coin BTC (inaccurately called Bitcoin Legacy or Core by many) and SegWit Gold (SWG) and are no longer Bitcoin. Bitcoin Cash (BCH) is the only true Bitcoin as intended by the original Satoshi white paper.  Bitcoin BCH is the only public block chain that offers safe and cheap microtransactions.
Brazilian officials busted changing part of scam money to BTC

Brazilian officials busted changing part of scam money to BTC

Scammers continue to use cryptocurrency independence to drain off millions of money from the unsuspecting crowd all around the world. Police in Rio de Janeiro recently uncovered a major money-laundering scheme involving state officials who reportedly acquired $22.4 million—some of which had already been converted to legacy Bitcoin (BTC).

Police officers arrested seven people concerning the ongoing investigations, according to local reports. Among the arrested state officials were Marcelo Martins, current Director of Specialized Police;and Colonel Cesar Rubens Monterio de Carvalho, former secretary of Penitentiary Administration. Warrants of arrest were also issued for 16 other suspects including a businessman named Felipe Paiva.

According to local reports, the fraud is believed to have started back in 2001, when a company called Induspan was hired to carry out the Bread-school project.  The contract was terminated in 2010, as there were some imbalances in the financial records with price quotations being higher than the market prices.

After the termination of the first contract, Paiva—who owned Induspan–created a non-profit primus initiative in 2010 to deliver snacks to state-run prisons. He installed machines in the facility to help make bread with labor from the inmates. This, however, did not reduce the cost of bread as was expected thus resultingin termination of the contract in 2015. According to the prosecutor of the Anti-Corruption Action Group of the MPRJ, Silvio Ferreira de Carvalho Neto, the prices of bread kept increasing with each renewal of the contract. He also noted that a lot of money was spent on coffee and bread with no connection to increase in a number of the prisoners.

In May, an audit by the state court of the audit found that the prices of bread in the prison was twice what it ought to have been. Investigations also showed that de Carvalho’s wealth increased at least by 10 time during his term as secretary of the Penitentiary Administration.

Rio de Janeiro authorities also discovered that the state officials allegedly involved in the case bought BTC using a portion of the laundered money “in the attempt to remit values abroad.”

“We drew attention, in the Federal Revenue, regarding this specific operation, because for the first time appear operations involving Bitcoin. That’s a novelty, it shows that people are trying to sophisticate in some way, maybe fly below the radar of the IRS and the Central Bank. They were remittances made with the purchase of bitcoin out there. The idea, I have the impression, is to try to receive money abroad using this instrument, which is not regulated in most countries. So it’s something that catches our attention, it’s quite interesting,” Luiz Henrique Casemiro, superintendent of the Internal Revenue Service in Rio de Janeiro, told local news outlets.

Note: Tokens in the SegWit chain are referred to as SegWit1X (BTC) and SegWit Gold (SWG) and are no longer Bitcoin. Bitcoin Cash (BCH) is the only true Bitcoin as intended by the original Satoshi white paper.  Bitcoin BCH is the only public block chain that offers safe and cheap microtransactions.