What virtual currency projects targeting the United States has the FBI cracked down on? Global Perspective

FBI's Crackdown on Virtual Currency Projects in the United States A Global Perspective

Introduction

Virtual currency crimes are not only countered in China, but any country based on societal and public interests will combat illegal activities. When dealing with virtual currency issues, it is not a simple matter of stating that China cracks down while foreign countries support freely. In fact, both China and other countries do not have absolute positions. A one-size-fits-all view is only a partial understanding of complex issues, much like blind people touching an elephant. Therefore, we will delve into the measures taken by various countries in dealing with major virtual currency crime cases in order to better understand the global governance of virtual currency crime. This chapter will take the United States as an example.

FTX Exchange Fraud Case

• Lido Shutting down several public chain services, even within the Ethereum ecosystem, is not well-received.
• Sui and the Korean regulatory authorities are engaged in a fierce battle is this the most dangerous moment for the project?
• The Crypto Mixer Conundrum: Mixing it Up with Money Launderers

FTX, a renowned exchange, unexpectedly collapsed overnight, especially its founder SBF, who went from being admired as a highly intelligent Jewish genius to being imprisoned, which is quite unexpected.

FTX used to be incredibly successful, receiving investments from top international VCs such as Sequoia Capital, Temasek, and Softbank. It even attracted investments from the Ontario Teachers’ Pension Plan (sympathy for retired teachers). At its peak, FTX had a valuation of $32 billion, almost on par with Xiaomi, a company owned by Lei Jun. Additionally, FTX had billions of dollars in market value for its FTT token.

However, this giant unexpectedly collapsed overnight after the CEO of a rival exchange, CZ, revealed a staggering $5 billion shortfall. Despite SBF emphasizing his “falsely accused” on Twitter, due to CZ’s influence, many users chose to believe him, leading to a frenzy of user withdrawals. Later, it was proven that CZ was right, and FTX was unable to fulfill user conversions, resulting in users being unable to withdraw any cryptocurrency assets from the platform.

Finally, FTX’s global users started to sound the alarm, and the Panamanian police intervened in the investigation, proving that the conservative estimate of the CEO of a certain security company was too low. The actual shortfall was over 8 billion USD, so SBF was apprehended. Subsequently, the U.S. Financial Management Bureau and the police in SBF’s home country cooperated to launch an investigation and filed an extradition request with the Panamanian authorities. Regardless of where SBF stands trial, the damage he has caused is global and no country or region can allow him to escape justice. He will face a trial of justice.

It’s truly astonishing how FTX, a industry giant that dared to challenge and completely disregard a certain something, ended up in such a sorry state. However, the collapse of FTX can also be seen as a further improvement to the entire industry. After learning from this lesson, other platforms have introduced reserve fund certifications, which can be considered as a driving force for the development of the industry.

3. “Silk Road” Dark Web Case of One Hacker Eating Another

On November 7, 2022, the U.S. Department of Justice announced the conviction of a hacker for illegally obtaining over 50,000 bitcoins. These bitcoins were worth over 3.36 billion USD at the time of seizure, making it the largest cryptocurrency seizure case in the history of the U.S. Department of Justice.

The hacker involved once created multiple anonymous accounts on the infamous dark web trading platform “Silk Road”. However, instead of engaging in drug trafficking or hiring assassins on the platform, he chose to feast upon the platform’s vulnerabilities.

Originally, he was a tech geek and while conducting penetration testing on “Silk Road”, he stumbled upon the website’s trading technology loophole. Using this loophole, he successfully obtained up to 50,000 bitcoins and transferred them to multiple independent addresses to obscure the source of the bitcoins and avoid being traced.

Afterwards, perhaps growing increasingly disgruntled with his fate of being eaten after eating others due to the arrest of the founder of “Silk Road”, he reported this case of one hacker eating another to the authorities in hopes of saving his own skin.

Finally, the authorities decided to open a case, and this investigation spanned from 2014 to 2022, resulting in the capture of the hacker who stole bitcoins. This case also reflects the fact that virtual currencies have always been considered legitimate assets in U.S. judicial practice, even before specific laws were enacted.

4. Others

1. Bitqyck Scam Case

In March 2022, Bitqyck’s founders, Bruce Bise and Sam Mendez, were sentenced to prison for defrauding over 13,000 investors (raising approximately 24 million USD) through cryptocurrency-related schemes. They failed to fulfill their promises to investors and instead used the funds for personal expenses, including casino trips, cars, luxury home goods, art, and rent. They also admitted to underreporting income to the U.S. Internal Revenue Service and failing to file tax returns for the company, resulting in total tax losses exceeding 1.6 million USD. They agreed to pay a fine of 8.3 million USD related to a civil settlement with the U.S. Securities and Exchange Commission. In the end, Bise was sentenced to 8 years in prison and Mendez was sentenced to 7 years in prison.

2. Hydra Dark Web Case

In April 2022, a federal joint investigation led to the seizure of Hydra, the largest and longest-running dark web marketplace in the world. Hydra was an online criminal market that allowed users primarily from Russian-speaking countries to buy and sell illegal goods and services, including illicit drugs, stolen financial information, and fraudulent identification documents. Hydra users could conduct transactions using cryptocurrencies, and the operators of Hydra charged a commission on each transaction on their platform. Since 2015, Hydra had received approximately $5.2 billion worth of cryptocurrencies. In addition to shutting down the dark web marketplace, the Department of Justice also brought criminal charges against Russian resident Pavlov, accusing him of conspiring to distribute narcotics and conspiring in money laundering activities related to the dark web market.

3. GenderBender Money Laundering Case

On February 8, 2022, Lichtenstein and his wife, Heather, were arrested in Manhattan on charges of conspiring to launder stolen cryptocurrencies. These cryptocurrencies were stolen during the 2016 Bitfinex exchange hack and are currently valued at approximately $4.5 billion. Around 119,754 bitcoins (BTC) were stolen from the exchange, and at the time of the arrest, they were worth around $4.5 billion. Law enforcement gained access to the wallet by decrypting files stored in a cloud storage account, which contained a list of 2,000 virtual currency addresses and their corresponding private keys. In the end, CIA agents lawfully seized and recovered over 94,000 of the stolen bitcoins, which were valued at over $3.6 billion at the time of confiscation. This also marked the largest single financial forfeiture in the history of the United States government.

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