DOJ targets cryptocurrency fraud | Baker


On October 6, 2021, the United States Department of Justice (“DOJ”) announced the creation of a National Cryptocurrency Enforcement Team (“NCET” or “Team”) to tackle investigations and prosecutions of criminal cryptocurrency abuses, including crimes committed by currency exchanges, mixing and tumbling services, and money launderers.[1] The DOJ’s announcement came the same day it launched its civilian cyber fraud initiative,[2] which targets “emerging cyber threats” that target “sensitive information and critical systems”. The creation of the NCET also follows ongoing concerns and plans to intensify regulation of digital assets by the United States Securities and Exchange Commission (“SEC”) and its chairman, Gary Gensler.[3]

Similar to the SEC Chairman’s recent comments, the DOJ announcement focused on cryptocurrency exchanges, noting that the NCET will seek to eliminate abuse on cryptocurrency platforms in an effort to promote and ensure user confidence.[4] NCET will also focus on prosecuting criminal activity involving the use of cryptocurrencies “to be the primary request mechanism for ransomware payments, money laundering, and the operation of money services businesses. illegal or unregistered, via the preferred medium of exchange in “dark markets”. “…” The DOJ press release announcing the NCET also notes the team’s commitment to locating and recovering assets lost in criminal schemes involving cryptocurrencies.

Building on the existing capacities of the Ministry

The team, which will be overseen by Deputy Attorney General Kenneth A. Polite Jr., plans to attract team members from various DOJ divisions who have knowledge in financial systems, blockchain technology, transaction tracing. and in applicable criminal laws.[5] NCET will be briefed by DOJ’s Cryptocurrency Enforcement Framework and will seek to use different areas of expertise already present within DOJ to “tackle the complex investigations and prosecutions of criminal cryptocurrency abuses “.[6] These areas include the Money Laundering and Asset Recovery section of the DOJ Criminal Division and the Computer Crime and Intellectual Property section, with other experts being recruited by US prosecutors’ offices. The NCET will not only look after its own affairs, but will also use its developed expertise to assist and support cases brought by other divisions of the DOJ and other federal, state, law enforcement authorities. local, tribal and territorial. Polite noted, “The Criminal Division is already an established leader in the investigation and prosecution of cryptocurrency misuse,” which will allow NCET to build on DOJ’s already established leadership to investigate. and prosecute fraudulent use, illegal money laundering and other criminal activities. activities involving cryptocurrencies.[7]

More specifically, the NCET will be responsible for:

  • Investigate and prosecute cryptocurrency related crimes;
  • Develop strategic priorities for investigations and prosecutions;
  • Identify areas requiring increased attention to investigation and prosecution, including professional money launderers, ransomware programs, human traffickers, narcotics traffickers, and financial institutions that work with cryptocurrency;
  • Build and improve relationships with Cryptocurrency-focused U.S. prosecutors and deputy prosecutors;
  • Develop and maintain relationships with federal, state, local and international law enforcement agencies that investigate and prosecute cryptocurrency cases;
  • Train and advise federal prosecutors and law enforcement agencies in developing investigative and prosecution strategies;
  • Support the coordination and sharing of information and evidence between law enforcement officers; and
  • Collaborate and build relationships with private sector actors with expertise in cryptocurrency to advance the law enforcement mission.

Conclusion

This announcement reflects continued pressure from regulators – and the DOJ in particular – to crack down on the use of cryptocurrency and blockchain technologies in criminal activity. The NCET will strengthen the DOJ’s ability “to dismantle the financial entities that allow criminal actors to thrive – and quite frankly profit – from the abuse of cryptocurrency platforms.”[8]

Companies need to be very vigilant that increased oversight by the DOJ is likely in the cryptocurrency industry. This review will likely extend not only to cryptocurrency-focused businesses, but also to businesses that accept cryptocurrency as a form of payment or do business with third parties engaged in cryptocurrency activities. Given the ever-changing regulatory landscape surrounding these technologies, companies should continue to assess compliance programs and practices to ensure that they appropriately mitigate cryptocurrency risks and act within the limits of the law. law to avoid being investigated or prosecuted by DOJ.


[4] Press Release, “New Cryptocurrency Enforcement Team,” supra note 1.


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