The US Department of Justice Has Filed the First Charge of Criminal Sanctions Against Crypto

According to a Federal judge, the U.S. Department of justice has launched its first criminal prosecution for using cryptocurrency to evade sanctions.

An unnamed U.S. citizen is now accused of sending $10 million in cryptocurrency to a country sanctioned by the U.S. Treasury Department’s office of foreign assets control. Judge Zia M. faruqui of Washington, D.C., approved the Department of justice’s charge against the defendant that the defendant transferred cryptocurrency assets to one of the many countries facing severe U.S. sanctions, namely Iran, Cuba, North Korea, Russia or Syria. “Faruqui said:” the Ministry of justice can and will prosecute individuals and entities who fail to comply with OFAC regulations, including the prosecution of virtual currency.

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The OFAC said that virtual currency had been incorporated into recent laws

OFAC issued regulations in October 2020, clarifying that transactions involving digital assets with sanctioned countries are no different from transactions in legal tender with these countries.
Ali Redbird, who served as a senior adviser to the Ministry of Finance in 2019 and 2020, said this case was the first. “What we see is that the Ministry of justice will actively pursue those who try to use cryptocurrency, but it is also difficult to use cryptocurrency to escape sanctions,” he said.

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Cryptocurrency is not as anonymous as you think

The ruling follows the arrest of two people by the Ministry of justice on charges of conspiracy to launder bitcoins stolen in a hacker attack on bitfinex, Hong Kong’s cryptocurrency exchange. In both cases, the immutability and pseudonym nature of bitcoin have proved to be a fatal flaw in the offender’s arsenal.

In the bitfinex case, the law enforcement department used blockchain analysis technology to trace most of the money laundering funds to a cryptocurrency wallet named “wallet 1cga4s”, and then completed the problem of connecting personnel with the wallet by closing a “dark net” website named alphabay in 2017, which is the channel of money laundering. “Today’s arrest and the largest financial seizure in the Department’s history show that cryptocurrency is not a safe haven for criminals,” said the Deputy Attorney General involved in the case.

In this case of evading sanctions, law enforcement again used blockchain analysis tools, which have been developing since the bitfinex incident to track the defendant’s transactions. Then they summoned a cryptocurrency exchange in the United States, an overseas exchange and a traditional American bank to sort out information about their common customers. The Internet Protocol (IP) addresses used to access the two exchanges enabled law enforcement to find the defendant’s home. An e-mail search warrant and the registration information of the shell company completed the investigation.

They also found that the receiving accounts of both exchanges were entered from foreign accounts in the sanctioned countries. “Virtual currency is untraceable? Wrong,” the judge said in a nine page consultation document. At the end of his opinion, he said that the virtual currency that may be transmitted overseas to the sanctioned jurisdiction is a criminal act, and the perpetrator may be responsible for evading sanctions involving two cryptocurrency exchanges.