A Texas bitcoin (BTC) investor is facing two years in prison after becoming the first person in history to be criminally charged for failing to report capital gains earned from crypto.

According to a US Department of Justice (DoJ) report from December 12, Frank Richard Ahlgren III “falsely underreported the (realized) capital gains” earned from selling Bitcoin worth $3.7 million between 2017 and 2019.

The report detailed how Ahlgren was an early investor in BTC and made his first purchases as early as 2011. In 2015, he bought approximately 1,366 BTC using his Coinbase account and sold 640 coins two years later for a total of $3.7 million. He reportedly used the proceeds to buy a house.

When it came time for Ahlgren to prepare his 2017 tax return, he lied to his accountant by submitting a false summary of his gains and losses from the sale of his BTC.

Specifically, he claimed that he bought the crypto at higher prices than he actually did, allowing him to underreport the true size of his gains. He also concealed gains on BTC sold for a total of $650,000 in 2018 and 2019 by moving it through multiple wallets and using mixers.

The total tax loss from Ahlgren’s activity totaled more than $1 million.

Read more: Ukraine to tax crypto like securities when it becomes legal next year

“Frank Ahlgren III earned millions buying and selling bitcoins,” said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division.

He added, “But instead of paying the taxes he knew were due, he lied to his accountant about the extent of a large portion of his gains, and sought to conceal another chunk of his profits through sophisticated techniques designed to obscure his transactions on the bitcoin blockchain. That conduct today earned him a two-year sentence.”

“Ahlgren will serve time because he believed his cryptocurrency transactions were untraceable. This case demonstrates that no one is above the law,” said Acting Special Agent in Charge Lucy Tan of IRS-Criminal Investigation (IRS-CI)’s Houston Field Office.

“This case marks the first criminal tax evasion prosecution centered solely on cryptocurrency. As the prices for cryptocurrency are high, so is the temptation to not pay taxes on its sale. Avoid the temptation and avoid federal prison.”

Got a tip? Send us an email or ProtonMail. For more informed news, follow us on X, Instagram, Bluesky, and Google News, or subscribe to our YouTube channel.

The post Texas investor sentenced to two years after hiding BTC gains from taxman appeared first on Protos.

When Binance agreed to a $4.3 billion settlement with the US Department of Justice (DoJ), the Commodity Futures Trading Commission (CFTC), the Financial Crimes Enforcement Network (FinCEN), and the Office of Foreign Assets Control (OFAC), it agreed to allow two government agencies to appoint compliance monitors within the company.

As a result, Binance agreed to let the DoJ monitor its operations for three years and FinCEN for five.

After a lengthy bidding process, the DoJ picked Forensic Risk Alliance (FRA) to operate its monitorship while, according to Bloomberg, law firm Sullivan & Cromwell will likely fulfill FinCEN’s.

Never before in the history of Binance has such an expansive surveillance apparatus existed. Indeed, as the world’s largest crypto exchange and hub for tens of millions of crypto traders around the world, these DoJ and FinCEN monitorships are arguably the most powerful and comprehensive government surveillance operations in the history of crypto.

US crypto surveillance backend for almost all crypto trades

For the first time in crypto’s 15-year history, the US government has workers installed within the world’s largest operating crypto exchange. It’s a leap in surveillance by orders of magnitude. The increased power above its prior data sources — such as one-off historical subpoenas, widely neglected suspicious activity reports, or Chainalysis blockchain analytics — cannot be overstated.

According to Binance’s sworn settlement, it must provide FRA, as DoJ’s authorized contractor, access to “all information, documents, records, facilities, and employees, as reasonably requested,” including “direct observation of selected systems and procedures of the company, including those related to know-your-customer, customer due diligence, US sanctions screening, real-time transaction monitoring, law enforcement notifications, internal accounting controls, record-keeping, and internal audit procedures.”

Monitorships probably explain CZ’s prison getaway

Given the immeasurable quantities of data to which the US government now has access — including tens of millions of people and untold criminal acts by Binance users for the next five years — it’s somewhat unsurprising that its CEO Changpeng Zhao was able to get off with such a short prison sentence.

Like Binance the company, Zhao, its founder and CEO, also pleaded guilty to violating anti-money laundering laws. However, he received only a relatively short, four-month prison sentence.

Many observers attribute the judge’s leniency in Zhao’s prison sentence to the expansive, dual monitorships to which he agreed. For the first time, the US government has guaranteed, court-enforced oversight of Binance’s global operations. According to Dennis Kelleher speaking to Law360 reporters, the monitorship plea agreement made it “preordained that he was not going to get a very serious sentence.”

Read more: Binance founder Changpeng Zhao sentenced to 4 months in prison

All other crypto surveillance tools in distant second place

Binance is by far the world’s largest crypto exchange and for years, it has facilitated multiples of the transactions of any of its closest competitors. Therefore, from a crime-fighting perspective, these years of surveillance will prove invaluable for US law enforcement efforts against crypto-using criminals.

According to a commentator, “It means bad actors going forward need to be really careful with their operational security practices to make sure they don’t pull in funds from an address which was incidentally doxxed because of an interaction with Binance.”

Binance has not settled the SEC’s multi-billion dollar lawsuit — that litigation regarding unregistered securities continues — and the crypto giant also faces continued law enforcement abroad.

Got a tip? Send us an email or ProtonMail. For more informed news, follow us on X, Instagram, Bluesky, and Google News, or subscribe to our YouTube channel.

The post Big Brother surveillance dystopia is now reality at Binance appeared first on Protos.

The US Department of Justice (DoJ) has explained why Tornado Cash founder Roman Storm’s motion to dismiss his criminal lawsuit has been inefffective.

The DoJ reiterated that its indictment has nothing to do with whether the computer code of Tornado Cash is free speech or otherwise Constitutionally protected by the First Amendment.

“The defendant is not being prosecuted for posting computer code,” claimed the DoJ.

“Instead, he is being prosecuted for his use of it in furtherance of a profitable and illicit business.”

Indeed, there are many forms of speech – including spoken words – that the First Amendment does not protect. Criminal speech such as threats of violence are not protected by the First Amendment.

The US Constitution does not protect all speech

Similarly, DoJ explains that banks use computer code to process financial transactions. If that code executes the work of a money transmitter, as defined legally, then that code is not mere free speech and is, instead, computer code that humans must ensure is implemented in such a way as to not violate money transmission laws.

Tornado Cash was part code, part speech, part business, and altogether a human creation. Storm did not just publish code; he operated a business and made operational decisions for years.

Tornado Cash the protocol is not the same as Tornado Cash the business. Just because Tornado Cash had some open source code does not mean that all of Roman Storm’s actions involving that code as the Tornado Cash business owner are Constitutionally protected free speech.

The DoJ focuses on Storm’s purposeful actions. Specifically, prosecutors focus on his knowing operation of an alleged money laundering operation that provided him millions of dollars worth of personal profit for washing over $1 billion in alleged criminal proceeds.

Roman Storm faces criminal charges of conspiracy to commit money laundering conspiracy, conspiracy to operate an unregistered money transmitting business, and violations of the International Emergency Economic Powers Act.

For his part, Storm argues that at no time did he conspire with parties like North Korea’s Lazarus Group, which sent illicit funds through his coin mixer, apparently without his knowledge.

The free speech precedent of Bernstein v. DoJ

Storm is sticking with the argument that publishing open-source code is not a crime. His legal team will almost certainly cite Bernstein v. Department of Justice, an old lawsuit that forced the US government to modify its regulations regarding the “export” of encryption software onto the internet. Yes, there was a time when the US government categorized robust encryption software as a military-level “munition” and imposed regulations on publishing code online. Prior to Bernstein v. DoJ, publishing certain details regarding cryptographic security onto the internet required registration as a US munitions exporter.

Bernstein v. DoJ actually helped facilitate international e-commerce by making it possible to publish more open source code, which ultimately allowed the secure processing of online card payments.

Read more: Coin Center loses Tornado Cash lawsuit, intends to appeal

Storm claims that Congress passed an impermissibly vague law

Storm also alleges that DoJ’s charges against him are unconstitutionally vague, which prosecutors rebuffed in their opposition. DoJ counterargues that Storm’s complaints mostly claim that the language of a law passed by Congress is somehow unconstitutionally vague – which is not legally availing in Storm’s defense. Courts must operate under the assumption that acts of Congress are not impermissibly vague, per precedent set in the prestigious 2nd Circuit Court of Appeals case USA v. Houtar.

If Storm wants Congress to change a law, DoJ argues, he should write to his legally elected representatives. For now, it is the job of the executive branch of government, including DoJ, to enforce the written laws of Congress, the legislative branch of government.

Was violating clear sanctions an act of free speech by Tornado Cash?

DoJ also rebuffed Storm’s claim that he should not face indictment for exporting Tornado Cash software. DoJ is crystal clear in its memorandum, reiterating that its indicment “does not charge the defendant with exporting Tornado Cash software.”

Prosecutors clarified that the charge covers Lazarus Group’s sending of illicit funds from a known, sanctioned wallet belonging to Lazarus Group, which the DoJ argues Tornado Cash should have known about and attempted to prevent. The Department of the Treasury clearly and publicly added Lazarus Group crypto wallets to its sanctions list in 2022.

US district judge Katherine Polk Failla of the US District Court for the Southern District of New York will read DoJ’s opposition and decide whether to honor or dismiss Roman Storm’s motion to dismiss case number 1:23-cr-00430, USA v. Storm.

Got a tip? Send us an email or ProtonMail. For more informed news, follow us on X, Instagram, Bluesky, and Google News, or subscribe to our YouTube channel.

The post DoJ claims Tornado Cash indictment is not about ‘free speech’ appeared first on Protos.

Samourai Wallet has had its website seized, its app removed from the Google App Store, and two of its lead developers — Keonne Rodriguez and William Lonergan Hill — arrested.

According to a press release from the Department of Justice (DoJ), 35-year-old Rodriguez and 65-year-old Hill helped to move $100 million worth of laundered funds and facilitated over $2 billion worth of unlawful transactions.

Samourai Wallet, a cryptocurrency mixing service, was well-known in the industry for its abrasive social media presence and for flouting rules and regulations. It also welcomed Russian oligarchs to the platform when US sanctions began.

According to Rodriguez’s LinkedIn profile, he’s an Oxford graduate, and Hill says he attended the French National Conservatory of Arts. The pair are listed as directors of a now-dissolved UK company called Katana Cryptographic LTD and both claim to have held positions at a company called Consign Holdings AB.

Read more: Vitalik Buterin endorses one of North Korea’s favorite coin mixers, Railgun

What else do we know?

Last year a Toronto-based cryptocurrency investment company called Cypherpunk Holdings apparently invested over $100,000 CAD in Samourai Wallet, though how it planned to earn money on the investment is unclear. Additionally, Hill was CTO at Soie LLC, a Wyoming-based company that was “seed funding privacy projects.” The X profile for the company is simply retweets of endorsements for Samourai Wallet.

It’s also worth noting that while the ‘samouraiwallet dot com’ website shows a seizure notice from numerous governmental agencies, the actual domain listed by the DOJ — samouraiwallet dot io — doesn’t have a seizure notice and is simply a broken link.

This may have to do with the fact that the US almost exclusively seizes dot com, dot net, and dot org domains.

Additionally, other services created by the developers at Samourai, such as its blockchain explorer OXT, are still up and running.

Rodriguez and Hill face two charges, one for conspiracy to commit money laundering (which carries a possible 20-year sentence) and another charge for conspiracy to operate an unlicensed money-transmitting business. This carries a possible five-year sentence.

Got a tip? Send us an email or ProtonMail. For more informed news, follow us on X, Instagram, Bluesky, and Google News, or subscribe to our YouTube channel.

The post Who are Samourai Wallet’s Keonne Rodriguez and William Lonergan Hill? appeared first on Protos.

Since at least February 5, a flood of accounts have been relentlessly tweeting about one topic: a collaboration between the Department of Justice (DoJ) and Tether.

It’s impossible to say for certain who’s put forward the money to buy a slew of blue check accounts on X (formerly Twitter) to post about the “great teamwork” between Tether and the US government. However, one would be inclined to believe it’s a PR company or Tether itself who have determined that a concerted public relations push is worth the time and effort.

Unfortunately, there’s no news from the DoJ or Tether about any collaboration or partnership. The last press release from the DoJ explicitly mentioning Tether is from November of last year. In the release, which concerned a so-called ‘pig butchering’ scam, the DoJ stated, “The department would like to acknowledge Tether for its assistance in effectuating the transfer of these assets.”

When a Google search is done for one of the main phrases repeatedly tweeted out — ‘Kudos to the DoJ and Tether’ — a LinkedIn post from one Erin West comes up. West is a district attorney for Santa Clara County who has previously been profiled by DLNews as being one of the few US prosecutors going after pig butchering scammers.

Read more: Tether: Ten years, 100,000,000,000 USDT, and still no audit

AI-generated bot farms tweak posts about Tether

While artificial intelligence will likely change the future profoundly, it’s also changing the world we live in today, albeit in slightly annoying ways. Examples include allowing bot farms on X to marginally change posts so they don’t appear to be spam. The current round of posts about the DoJ and Tether almost always consist of a phrase resembling ‘Kudos to the DoJ and Tether for teaming up to combat romance scammers, a much-needed effort!’

Read more: Tether rarely minded law enforcement, now it suddenly does

The funniest tweets resemble AI-generated poems about Tether, such as “the collaboration between the DoJ and Tether [is like a] symbiotic dance between flowers and pollinators,” and “rustling leaves evoke tranquility; the Tether and DoJ teamwork restores peace.”

These tweets would be far funnier if it wasn’t clear that a paid actor was promoting them on X, that a bot farm or PR firm is utilizing AI to cheapen the cost of spam, and if some of them didn’t sound like almost-normal people. Unfortunately, they do and Elon Musk’s platform is doing nothing to stop it.

Regardless, the strongest argument in favor of Tether not being behind the current pro-Tether-DoJ-collaboration tweets is simply that there’s no news related to the DoJ or Tether and there hasn’t been for a significant amount of time. There would be no good reason for the controversial stablecoin to draw attention to its ongoing difficulties or partnerships with law enforcement.

Got a tip? Send us an email or ProtonMail. For more informed news, follow us on X, Instagram, Bluesky, and Google News, or subscribe to our YouTube channel.

The post Who is paying for the pro-Tether propaganda on X? appeared first on Protos.

When Binance and its founder CZ pleaded guilty to a variety of crimes in Seattle last month, they agreed to allow the US government to appoint a monitor to surveil its business internally for three years. Bureaus of the Treasury will retain access to books, records, and systems of Binance for an additional two years.

Binance’s lax anti-money laundering (AML), know your customer (KYC), and countering the financing of terrorism (CFT) procedures were particularly concerning. In the past, Binance and CZ have admitted that they committed crimes and agreed to disgorge billions in ill-gotten gains. 

FinCEN, for example, alleged that Binance failed to report more than 100,000 suspicious transactions. Binance also admitted to helping sanctioned parties transact on its platform.

Beyond Binance’s record-setting $4.3 billion penalty – the largest in the history of the US Treasury – the most punishing part of Binance’s settlement is its upcoming monitorship. Many speculate that Binance cannot operate an exchange that resembles anything like its historical business in the presence of this government monitor.

Installing a government monitor inside Binance

Consider the unprecedented scope of the government’s visibility into Binance’s daily operations. According to Binance’s signed plea agreement, the US government will appoint one or more full-time monitor(s) to carry out three duties from within Binance’s offices.

1. The monitor will oversee Binance’s remediation of its compliance failures regarding anti-money laundering and sanctions.
2. The monitor will report to FinCEN, OFAC, and the CFTC about Binance’s conduct.
3. The monitor will share data, review outcomes, report on findings, and provide recommendations to all parties of the settlement.

In an interview with Law360, Binance chief compliance officer Noah Perlman was quick to recast the unprecedented and expansive terms of this monitorship as a “business accelerator.” Perlman is optimistic that the monitor will help Binance improve its compliance practices.

Interestingly, according to a third-party publication called Unlimited Hangout, Noah Perlman allegedly has ties to the collapse of FTX, the troubled Winklevoss-owned Gemini, and the sex trafficker Jeffrey Epstein.

Read more: Who is Richard Teng, Binance’s new CEO?

There are three agencies overseeing Binance’s monitorship — the Department of Justice (DoJ), FinCEN, and OFAC — yet Perlman speculated that the government will only appoint one, not three, workers.

The US government will select the monitor

Before the end of December, Binance must propose candidates. Candidates must have extensive experience in digital assets and have expertise in regulatory compliance. The government ultimately will select one or multiple workers.

Binance is still subject to another major, unresolved lawsuit. The case SEC v Binance et al. is still ongoing. The SEC alleges that Binance listed unregistered securities, operated a broker-dealer and clearinghouse illegally, and evaded registration requirements to operate in the US.

In summary, Binance’s CCO is doing his best to put on his happy face. He wants the public to believe that the DoJ and US Treasury overseeing a three to five year monitorship from within Binance as an “opportunity.” He believes the surveillance will serve as some sort of “business accelerator” for the world’s largest crypto exchange.

Got a tip? Send us an email or ProtonMail. For more informed news, follow us on X, Instagram, Bluesky, and Google News, or subscribe to our YouTube channel.

The post The US gov’t will monitor Binance for years — who’s right for the job? appeared first on Protos.

Several top Binance executives have recently resigned from Binance due to disagreements with chief Changpeng Zhao (CZ) over how to handle the ongoing Department of Justice (DOJ) investigations, according to reporting from Fortune.

The resignations are reported to include the crypto exchange’s chief strategy officer Patrick Hillman, general counsel Han Yg, and SVP of compliance Steven Christie.

Following the news report, Hillman posted a message on Twitter saying that he will be leaving Binance for personal reasons, but remains on good terms and still supports CZ. Christie also posted a message on Twitter saying that he was proud of Binance’s compliance program, but after having been a compliance officer in crypto for the last six years, he needed a break. His departure has nothing to do with the “sensational news” being published, Christie said.

Read more: Scoop: EU officials suspect Binance is faking accounts in Ireland and Malta

Fortune is alleging that the executives have resigned over CZ’s handling of the DoJ’s investigation on Binance, reportedly looking into money laundering as well as other issues.

There are no signs on Binance’s website that it’s looking for a replacement of Hillman and Christie, with no vacancies issued. Their decision to leave the company was not publicly known or announced and came as a surprise, but it also came after another recent surprise exit from the company by Binance’s Head of Investigations and previous IRS agent, Matthew Price.

Despite assurances from those leaving that the circumstances are separate, the sudden departure of key personnel from Binance comes at a very sensitive time. Along with the DoJ’s investigation, Binance faces an ongoing Securities and Exchange Commission lawsuit, a criminal investigation for money laundering in France, and several probes in various other European countries, along with Australia.

Got a tip? Send us an email or ProtonMail. For more informed news, follow us on Twitter, Instagram, Bluesky, and Google News, or subscribe to our YouTube channel.

The post Binance senior execs deny they’re resigning over DoJ probe appeared first on Protos.

To combat crypto crime in the United States, industry participants often turn to securities regulation and the Securities and Exchange Commission (SEC). But when it comes to cracking down on bad actors, the Department of Justice’s emerging playbook seems to have a far greater success rate.

Wire fraud, hailed as the “most powerful law in crypto” by Reuters, proves effective as charges aren’t contingent on the securities classification of crypto assets. The SEC can handle civil charges and dish out fines, but it doesn’t have the power to bring criminal charges against individuals — but the state attorney generals and the DoJ can.

The DoJ has already used wire fraud to land dozens of crypto’s bad actors in prison.

• Wire fraud is the most common criminal charge against crypto promoters.
• Here, ‘wire’ relates to interstate wire communications, not bank wires.
• Wire fraudsters use telecommunications or the internet to defraud victims out of money.

With so much media attention on securities regulation, many crypto industry participants think the SEC is responsible for almost every prosecution against the industry. In fact, other government agencies such as the IRS are more prolific enforcers. Moreover, private lawsuits by civilian plaintiffs dwarf the number of legal actions by all regulators combined.

Wire fraud and the DoJ’s new crypto enforcement playbook

The DoJ has been actively bolstering its capabilities to combat fraud within the digital asset industry. Recent criminal convictions suggest an emerging playbook for the DoJ to more effectively charge crypto crimes.

Two notable cases include the guilty plea of former Coinbase product manager Ishan Wahi for transmitting insider information and the guilty verdict against ex-OpenSea manager Nathaniel Chastain, who allegedly shared insider knowledge over interstate wires.

Intriguingly, instead of pursuing insider trading charges, the DoJ opted for wire fraud and money laundering. This approach allows the DoJ to defer questions regarding the classification of digital assets as securities to the SEC — a matter that the SEC seems quite happy to take off its hands.

Read more: DoJ cracks down on crypto fraud in flurry of criminal charges

Its wire fraud playbook provides the DoJ with legal precedents that it can use to pursue bigger cases in the future. Its convictions build on experience with enforcing digital asset fraud, such as the case against John DeMarr, who had a role in promoting the fraudulent projects Bitcoiin2gen and Start Options. The DoJ also successfully charged Karl Greenwood for wire fraud involving OneCoin.

Ultimately, the DoJ’s goal is to convince juries of defendants’ guilt, regardless of whether the assets in question are considered securities.

Got a tip? Send us an email or ProtonMail. For more informed news, follow us on Twitter, Instagram, Bluesky, and Google News, or subscribe to our YouTube channel.

The post How wire fraud, not securities violations, lands crypto criminals in prison appeared first on Protos.

A Vietnamese man charged with washing up to $3 billion in bitcoin and crypto through money-laundering service ChipMixer, is still on the run and remains on the FBI’s most wanted list.

Minh Quốc Nguyễn, a cryptographic engineer with an electronic engineering background from Taiwan, was last month charged by the Justice Department (DoJ) with laundering money for ransomware scammers, darknet markets, fraudsters, and state-sponsored actors.

The DoJ also alleges that ChipMixer, created by Nguyễn to help criminals bypass know-your-customer and anti-money-laundering measures, was used by the Russian military, state-sponsored North Korean hackers, and a recently-collapsed exchange. This is possibly a reference to now-defunct crypto trading platform FTX.

Read more: Dutch police recover 90% of victim decryption keys in ransomware scam

The largest transfer of funds on the system is alleged to have taken place by North Korean hackers who used the system to launder over $700 million from Axie Infinity’s Ronin Bridge and Harmony’s Horizon Bridge in 2022 and 2020, respectively.

According to authorities, up to 152,000 bitcoin have made their way through ChipMixer with up to 1,900 bitcoin seized. Charges were filed against Nguyễn in Philadelphia and an FBI warrant was issued after an extensive international investigation conducted by European and US authorities and Interpol. The operation, which was headline news in Nguyễn’s native Vietnam, saw around $40 million worth of funds recovered.

Got a tip? Send us an email or ProtonMail. For more informed news, follow us on Twitter, Instagram, Bluesky, and Google News, or subscribe to our YouTube channel.

The post ChipMixer creator accused of laundering $3B in bitcoin still wanted by FBI appeared first on Protos.

Six virtual currency accounts allegedly used to launder funds for a number of crypto investment scams have been seized by the US Justice Department (DoJ) along with an estimated $112 million in virtual currency.

As detailed in warrants greenlit by judges in Arizona, California, and Idaho, the scammers persuaded victims to invest in fraudulent crypto trading platforms before funneling the funds to their own wallets.

Authorities investigating the case have pledged to return as much of the funds as possible to the victims. 

The scheme described in the DoJ’s statement bears all the hallmarks of a so-called ‘pig-butchering scam,’ specifically, the fact that the scammers forged long-term relationships with their victims online.

Read more: Hong Kong investment manager loses $1.5M inheritance in crypto scam

Crypto fraud makes up most reported losses 

According to the DoJ, confidence scams make up the largest portion of losses being reported to the FBI. In 2022 alone, they totaled $3.31 billion.

But crypto fraud, including pig butchering scams like this one, makes up the majority of this figure, representing $2.57 billion of last year’s losses — a 183% increase from 2021.  

In response to the growing threat, the DoJ announced the creation of the Crypto Assets and Cyber Unit back in May 2022.

Last month it claimed to have “nearly filled” a call for 20 extra staff made alongside the unit’s announcement and is still “planning to add additional staff,” according to CoinDesk.

The DoJ also stressed the need to raise public awareness of these scams, asking the public to “be wary of people you meet online; seriously question investment advice, especially about cryptocurrency, from people you have not met in person; and remember, investments that seem too good to be true, usually are.” 

For more informed news, follow us on Twitter, Instagram, and Google News or subscribe to our YouTube channel.

The post DoJ seizes $112M in stolen crypto, will try to return funds to victims appeared first on Protos.