In December 2019, a federal grand jury in the District of Columbia indicted Larry Dean Harmon for conspiracy to launder monetary instruments, in violation of the District of Columbia’s Money Transmitters Act (MTA). He was charged in connection with his alleged operation of Helix, an underground tumbler for bitcoin. As described in the indictment, Helix “enabled customers, for a fee, to send bitcoins to designated recipients in a manner which was designed to conceal and…
On July 22, 2020, the U.S. Department of Justice announced that Kais Mohammad, a.k.a. “Superman29,” agreed to plead guilty to federal criminal charges that he operated an illegal virtual-currency money services business that exchanged up to $25 million – including on behalf of criminals – through in-person transactions and a network of Bitcoin ATM-type kiosks. According to his plea agreement, from December 2014 to November 2019, Mohammad owned and operated Herocoin, an illegal virtual-currency money…
Just yesterday, we reported on a lawsuit brought against the U.S. Internal Revenue Service for allegedly obtaining information improperly from Coinbase about its accountholders. Now, the Block is reporting that the IRS has entered into a contract with Coinbase to use its Coinbase Analytics blockchain tracing software. The one-year contract, for $124,950, commences on July 23, 2020. According to the report, the IRS had signaled its intention to buy a software license from Coinbase in…
We previously reported that, in July 2019, the IRS announced that it had begun sending the now infamous letters to taxpayers who, supposedly, may have failed to properly report income and pay taxes associated with cryptocurrency transactions. About 10,000 of these Letter 6173 were sent. On tax day (July 15 this year) the IRS was sued in connection with these letters. The complaint alleges that Plaintiff James Harper opened an account with Coinbase in 2013. …
On July 13, 2020, the U.S. Securities and Exchange Commission charged California-based Abra (a crypto investment app maker) and a related firm in the Philippines for offering and selling security-based swaps to retail investors without registration and for failing to transact those swaps on a registered national exchange. In a parallel action, the U.S. Commodity Futures Trading Commission issued an order filing and settling charges against both companies for entering into illegal off-exchange swaps in…
On July 7, 2020, the Texas State Securities Board issued an Order against Mirror Trading International (MTI) to cease operations immediately, alleging the South African bitcoin and forex trading network is a multilevel marketing scam. According to the Order, Mirror Trading, controlled by Cornelius Johannes “Johan” Steynberg, is recruiting multilevel marketers to illegally sell fraudulent investments in a bitcoin and forex pool. Investors allegedly purchase the products by transferring bitcoin to Mirror Trading. Mirror Trading…
In the context of a search warrant in a criminal case, the Fifth Circuit Court of Appeals in the United States held that the virtual currency exchange Coinbase was like a “traditional bank.” The details of the case, U.S. v Gratkowski, Case No. 19-50492 (5th Cir. June 30, 2020), are as follows. Richard Gratkowski became the subject of a federal investigation when federal agents began investigating a child-pornography website. To download material from the website,…
On June 25, 2020, the U.S. Securities and Exchange Commission charged NAC Foundation, its Chief Executive Officer Marcus Andrade, and political lobbyist Jack Abramoff with conducting a fraudulent, unregistered offering of AML BitCoin, a digital asset security the defendants claimed was a new and improved version of bitcoin. The SEC alleges that Nevada-based NAC Foundation raised at least $5.6 million from more than 2,400 investors by selling tokens that could later be converted to AML…
The U.S. Securities and Exchange Commission announced on June 19, 2020 that it had filed an emergency action and obtained a temporary restraining order and asset freeze against two Pennsylvania-based brothers and three entities they control to stop an offering fraud and the misappropriation of investor proceeds. According to the SEC’s complaint, from at least July 2019 through May 2020, brothers Sean Hvizdzak and Shane Hvizdzak offered securities in a private fund that purported to invest in…
On June 5, 2020, the U.S. Securities and Exchange Commission unsealed a complaint it had filed on May 7, 2020 in Salt Lake City, Utah against Daniel F. Putnam, Jean Paul Ramirez Rico and Angel A. Rodriguez, as well as their company, MMT Distribution. The SEC also announced that it obtained an asset freeze and other emergency relief against the Defendants. The SEC’s complaint, alleges that, beginning in at least July 2017, Putnam operated a multilevel…