Category: Crime

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Bitcoin Crime Crypto News

Swedish Government Pays Convicted Drug Dealer 33 Bitcoin Due to Prosecutor Error

The Swedish government has had to pay a convicted felon US$1.6 million upon release thanks to the increasing value of bitcoin (BTC) and a slip-up on the part of the prosecutor.

According to a report from Swedish news source Sveriges Radio, Swedish law enforcement has found itself in a rather unusual situation where it has to pay out roughly US$1.6 million to a released convict. The authorities are being forced to pay the man 33 BTC after his illegally obtained bitcoin appreciated while behind bars.

Appreciating Bitcoin Makes a Nice Get-Out-of-Jail Present

Two years ago, Swedish law enforcement arrested a man who was operating an illegal online drug shop, earning himself 36 BTC, or about U$136,000 at the time.

While he’s been locked up, the price of bitcoin has risen and as of August 20 was trading at around US$48,978 per coin, pushing the value of his 36 BTC to more than US$1.6 million.

By the time the convicted drug dealer was released, to satisfy the court’s original settlement of US$100,000 the Swedish Enforcement Authority needed to sell off just 3 BTC. This left the dealer with 33 BTC worth US$1.6 million in his wallet of ill-gotten gains.

An Unfortunate Turn of Events For the Prosecutor

Tove Kullberg, the prosecutor in the case, had reported the illegal funds in dollars instead of crypto. Kullberg admitted that in retrospect it was a mistake not taking into account how much the value of bitcoin would increase.

It is unfortunate in many ways. It has led to consequences I was not able to foresee at the time […] The lesson to be learned from this is to keep the value in bitcoin. The profit from the crime should be 36 bitcoin, regardless of what value the bitcoin has at the time.

Tove Kullberg, Swedish prosecutor

Since this was one of the first crypto-related cases that the department had to deal with, there was no established protocol or precedent to follow. Kullberg added: “I think we should probably invest in internal education in the [prosecution] authority, as cryptocurrency will be a factor we’ll be dealing with to a much greater extent than we are today.”

With the increase in crypto crimes, law enforcement is facing new crypto-related cases it hasn’t seen before.

On a related note, earlier this year we saw an Australian couple charged for running DarkMarket, a dark net marketplace.

Categories
Australia Crime Crypto News Cryptocurrencies

Record $8.5 Million Crypto Seized in Australian Drug Bust

Victoria Police have seized what they claim is the largest ever cryptocurrency amount in connection with an Australian crime after busting online drug traffickers.

Detectives impounded nearly A$8.5 million in cryptocurrency after an investigation over several months culminated in the arrest of three Melbourne residents.

The arrests and currency are linked to a joint investigation by the Cyber Crime Squad and the Criminal Proceeds Squad into drug trafficking on dark web platform Silk Road, said to have been shut down by the FBI in 2012.

Money Laundering an Increasing Trend in Cyber Crime

Victoria Police commander Mick Frewen warned money laundering via crypto­currency is an expanding criminal trend.

“People go on [Silk Road] with the buyer confidence of a mainstream internet site and purchase drugs that are delivered to their door,” Frewen told The Australian newspaper.

“Not only is the user not needing to leave their lounge chair, neither is the offender.”

People are looking to hide their wealth through … real estate or cryptocurrency by virtue of its anonymity and to some extent its security; money can go offshore or to an offshore entity really quickly.

Victoria Police commander Mick Frewen

‘We Follow The Money’

Detectives picked up the offenders’ money trail after they spotted records of it on the distributed ledger blockchain, Frewen said.

He cautioned other would-be ­offenders they were far from anonymous, despite the common perception that dealing in cryptocurrency effectively conceals the identity of its traders.

[Organised criminals] will seek to hide their wealth any way they can. We follow the money. [Tackling organised crime] now isn’t just about identifying offenders or seizing drugs – it’s about the money. We seek to cripple their activities in any way we can where we make the most impact, and that is [through the] seizure of money – whether it be cash or cryptocurrency, real estate or shares.

Victoria Police commander Mick Frewen

Police arrested a 31-year-old woman from Melbourne’s northeast and two men, aged 30 and 33, from the city’s north. All were conditionally released pending further inquiries. Drugs including cannabis, magic mushrooms and MDMA were impounded along with two properties valued at about $2 million and vehicles worth about $100,000, taking the total value of seized assets to about $13.1 million.

Drugs Ordered Online, Imported by Mail

In June, Crypto News Australia reported on a Queensland IT student who was charged with possession of methamphetamine after ordering the drug online and paying for it with A$300 worth of bitcoin. In that case, the student was arrested after Australia Post intercepted a parcel bound for his parents’ address.

Last September, a port worker received a two-year sentence after attempting to import illegal substances via the dark web, also by post, to a Victorian coastal town. The Australian Border Force seized five parcels addressed to the defendant over a period of nine months, all of them paid for with cryptocurrency.

And exactly a year ago, Australian Federal Police confiscated crypto, designer goods, luxury cars and homes in a concerted campaign against the ill-gotten gains of organised crime.

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Crime Crypto News

Flashy Instagram Crypto Trader Shot Dead in Porsche

Brazilian crypto trader Wesley Pessano Santarem was shot dead in broad daylight on August 4 when a hail of bullets sprayed his red Porsche as he drove through the city of Sao Pedro da Aldeia on his way to get a haircut.

Police said Santarem was hit by at least four bullets, including a fatal shot to his head. An unnamed friend of his travelling in the passenger seat of the Porsche at the time of the shooting was also injured. 

Santarem, who was just 19, was an “Insta-bragging” trader who flaunted his wealth on his Instagram page, often posting photographs of himself and his expensive car, with rolls of cash in hand. It seems he was targeted because of this, as other young crypto traders (Kieren Hamilton, from Manchester, UK, for example) have also been the victims of violent crime.

Wesley Pessano Santarem and his red Porsche. Source: Instagram

Santarem had 133,000 followers on Instagram, plus a YouTube channel with 15,600 subscribers to whom he gave trading tips.

“Finfluencers”, or social media influencers who give financial advice, with the disclaimer #notfinancialadvice, to their followers are on the rise. The penalty for giving unlicensed advice in Australia is up to five years’ imprisonment and/or a fine of up to A$133,200 for an individual and 10 times that for businesses.

However, international finfluencers based overseas are not subject to Australian laws. Just last month, ASIC cautioned new and young investors about the risks of taking advice from finfluencers. And a report from the Australian Competition and Consumer Commission published in June revealed Australians lost A$26.5 million in bitcoin to scams in 2020, adding that scammers are now commonly receiving money from victims via crypto.

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Bitcoin Crime Crypto News Litecoin

IRS Seized $1.2 Billion in Crypto and Quietly Auctioned Some Off

In June, GSA Auctions tried to sell off some confiscated crypto with an estimated value of US$377,000, bringing total seizures so far in 2021 to US$1.2 billion.

US General Services Administration (GSA) auctions are just one of the entities that sell off federal property seized by the IRS. The most recent lot, with an estimated value of $21,500, is 4TQSCI21402001, confiscated as part of a tax non-compliance case with combined lots worth about $377,000.

GSA first began auctioning cryptocurrency on behalf of the US government in early 2021. To date, bidders on the GSA Auctions platform have successfully bid for a total of 16.99 bitcoins over three auctions that collected a combined $937,092.

Experienced investors recognise a good opportunity when they see it, which is why our auctions have generated so much enthusiasm among the crypto community […] With the addition of a new type of cryptocurrency, this promises to be one of our most exciting auctions of the year.

Thomas Meiron, regional commissioner, GSA’s Federal Acquisition Service

US Government Has Been Trading in Crypto Since 2013

Since 2013 the US Government has been selling confiscated crypto including Bitcoin, Ethereum, Litecoin and others, with Silk Road being one of the earliest and largest cases of crypto seizure. The Silk Road wallet containing approximately 30,000 BTC was eventually sold to venture capitalist Tim Draper for US$19 million, now worth over US$1.1 billion.

According to Jarod Koopman, director of the IRS cybercrime unit, “In fiscal year 2019, we had about $700,000 worth of crypto seizures. In 2020, it was up to $137 million. And so far in 2021, we’re at $1.2 billion.”

The government has been seizing, stockpiling and selling off cryptocurrencies, alongside the usual assets one would expect to be gleaned from high-profile criminal sting operations.

It could be 10 boats, 12 cars, and then one of the lots is X number of bitcoin being auctioned.

Jarod Koopman,  director, IRS cybercrime unit

Lawbreakers Providing Government With Some Pocket Money

With the increase of cybercrime and crypto scams, the haul of digital tokens will increase along with it. And with the US Treasury setting its sights on tax evaders trying to use crypto to beat the tax man, government crypto safe boxes are expected to swell even further.

Since the Silk Road takedown, the government has successfully established a workflow that remains in place.

“Interviews with current and former federal agents and prosecutors suggest the US has no plans to step back from its side hustle as a crypto broker,” CNBC reported on August 4.

Categories
Crime Crypto News Monero

Former Chief Monero Maintainer “Fluffypony” Arrested

Riccardo Spagni, former lead maintainer for Monero (XMR), was arrested last month in the US and will soon be extradited to South Africa to face fraud charges linked to alleged offences in the RSA between 2009 and 2011.

Spagni, known online as “Fluffy Pony”, has been accused of stealing approximately US$100,000 from his former employer, Cape Cookies, by creating false invoices and redirecting payments to his personal bank accounts between 2009-2011.

If Spagni is convicted, he faces 20 years in prison.

Riccardo Spagni, aka “Fluffy Pony”. Source: Peter Saddington/Twitter

Fraud or Misunderstanding?

In the wake of his arrest, Spagni’s wife, Saskia, posted a message on her Twitter account on her husband’s behalf:

Despite the fact that Spagni’s arrest had nothing to do with his work on the Monero project, a member of the Monero core team issued a statement on Twitter:

Crypto Community Supports Fluffy

Spagni is a highly respected figure within the crypto community. He became interested in Bitcoin in 2011 and emerged as a prominent, entertaining and well-liked figure over ensuing years. This was largely down to his colourful personality and his involvement in various crypto projects, particularly Monero, where he worked as lead maintainer for five years from 2014 until 2019. Despite these recent charges, many in the community stand by him.

Some within the Monero community have suggested that the charges might have been fabricated due to anti-cryptocurrency sentiment that has been building within governments around the world. There is no evidence to support these claims, though on paper the specifics of the case and the timing of the allegations do seem quite strange.

Governments Wage War on Privacy Coins

Privacy coins like Monero have faced hard times in recent years, often the target of regulatory action from governments resistant to their citizens having access to anonymous transactions. Last month, an Australian couple was charged with operating one of the world’s largest illegal marketplaces, which accepted both bitcoin and Monero in exchange for illegal goods and services.

At the start of the year, Bittrex delisted Monero, ZCash and Dash, presumably because of regulatory pressure. Australian exchanges have also been feeling the heat, with exchanges like Swyftx forced to delist privacy coins as well. However, decentralised exchanges such as COMIT Network are hoping to get around this by offering atomic swaps instead of regular trading.

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Crime Crypto News Interviews

Biographer Claims McAfee Went from $100 Million to Broke

In an upcoming book, No Domain: The John McAfee Tapes, biographer Mark Eglinton details how controversial late tech pioneer John McAfee managed to blow his US$100 million fortune.

Cover of No Domain: The John McAfee Tapes. Source: Amazon

McAfee’s life was as controversial as its ultimate ending. Earlier this year, he was charged with fraud and just last month, he was found dead in his Spanish cell in an apparent suicide. True to form, McAfee preemptively tweeted:

Latest Revelations

Eglinton’s revelations come shortly after McAfee’s untimely death. The biographer alleges that McAfee blew millions of dollars on “bizarre” mansions and compounds around the world. Eglinton apparently interviewed McAfee over Skype starting in August 2019, when McAfee was on the run, fearing a pending US indictment on charges of tax evasion, which was unsealed upon his arrest last October.

Eglinton suggests that McAfee got hammered by the real estate crisis in 2008. Many of his properties were sold at a great loss, such as his Woodland Park, Colorado compound which he bought for US$25 million and later sold for US$5.2 million.

McAfee was allegedly so broke that he was unable to pay advance money to cover costs prior to sealing a book deal, remarking that he couldn’t do it, telling Eglinton “my financial situation is worse than yours”.

I don’t doubt that if he could have helped he would have.

Mark Eglinton

In one his last tweets, McAfee claimed that he had “nothing”:

Janice Dyson, McAfee’s widow, maintains that her husband did not commit suicide and as yet has not commented on the status of McAfee’s estate.

Categories
Crime Crypto News Hackers Monero Ransomware Zcash

US Government Offers $10 Million Bounty for Cyberattacks, Enticing with Crypto Payments

Following the infamous Colonial Pipeline attack earlier this year and a slew of copycat ransomware attacks, the US government has gone on the offensive by announcing a bounty program to counteract the ongoing risk of cybercrime.

Reward for Attacks on “Critical Infrastructure”

In a statement, the US Department of State’s Rewards for Justice (RFJ) program noted it was offering a reward of up to “US$10 million for information leading to the identification or location of any person who, while acting at the direction or under the control of a foreign government, participates in malicious cyber activities against US critical infrastructure”.

Cars queue to refuel following the “Colonial Pipeline” cyberattack which crippled the US’ biggest fuel pipeline based in Washington, DC, May 15, 2021. Source: Daily Sabah

The RFJ statement went further, saying:

Commensurate with the seriousness with which we view these cyber threats, the Rewards for Justice program has set up a Dark Web (Tor-based) tips-reporting channel to protect the safety and security of potential sources.

Office of the Spokesperson Source: US Department of State

Bounty May be Paid in Crypto – Bitcoin or Privacy Coins?

Recognising that potential whistleblowers may wish to be paid in crypto, the statement noted that:

The Reward For Justice program also is working with interagency partners to enable the rapid processing of information as well as the possible relocation of, and payment of, rewards to sources. Reward payments may include payments in cryptocurrency.

Office of the Spokesperson Source: US Department of State

The official statement did not specifically disclose which cryptos would be accepted as a means of bounty payment.

However, given the nature of cybercrime and the fact that the RFJ has set up a Tor-based reporting channel, it is likely that potential whistleblowers will elect to remain anonymous. Accordingly, they are likely to prefer privacy coins such as Monero or Zcash over open-source networks such as Bitcoin.

Cyberattacks have not been limited to the US. Last year, Australian television networks were impacted by various cyber attacks and, most recently, this month thousands of retailers were affected by a supply-chain ransomware attack.

Categories
Bitcoin Crime Crypto News Scams

Tinder Date Goes Bad in Attempted Crypto Grab

A US man was drugged by a woman he met on Tinder who then attempted to steal his crypto.

The man, who was a client of Casa, a company that offers heightened Bitcoin security, reported the attempted robbery to the Casa team, who performed a postmortem on the incident.

Over the weekend, a CasaHODL client survived a ‘wrench attack’ – he was drugged and persuaded to give up access to phone, accounts, and passwords. With the client’s permission, we are sharing the story to help others learn to protect themselves.

Tweet from Nick Neuman, CEO & co-founder of CasaHODL

Beware the Tinder Trap

A blog post written by Casa’s Jameson Lopp details the strange and concerning attack. According to the victim, the woman claimed to be a crypto trader on her bio, which intrigued him and helped him establish common ground with her. After chatting online, they met up at a coffee shop. He thought she looked different from her photos, but not enough to raise any red flags.

Later, they went back to his place for a drink and while he was in the bathroom it is suspected the woman laced his drink with scopolamine, also known as ‘Devil’s Breath’, or a benzodiazepine. Both drugs cause loss of inhibition and memory. He woke up the next day, noticing that his phone was missing and that attempts had been made to withdraw crypto from several of his accounts.

Thankfully, the man was not harmed in any way and the perpetrator only managed to steal a small amount of his crypto, largely thanks to Casa’s multisig technology. The scammer managed to get a small amount of bitcoin out of one of his exchange accounts. He was able to block some of the other requested purchases and withdrawals by contacting those custodians to inform them of the compromise.

The attacker managed to get a small amount of bitcoin out of one of our client’s exchange accounts. He was able to block some of the other requested purchases and withdrawals by contacting those custodians to inform them of the compromise. Since the attacker only had one of the client’s five keys to his Casa multisig, those funds could not be spent.

Jameson Lopp, Casa co-founder

A Rise in Crypto Scams

Although this incident is bizarre, it is sadly not unprecedented. As the price of Bitcoin continues to rise, so too do the scams, particularly romance scams. According to Australian government website Scam Watch, there were 277 reports of romance scams in June alone, resulting in losses of A$5,857,472. Many of these incidents do not make the news though there have been some high-profile cases; Australian schoolteacher Melanie Kilgour was involved in a romance scam in 2020 that cost her an estimated $50,000 worth of bitcoin.

Protecting Against Romance Scams

Crypto News Australia has put together an excellent guide on how to avoid Bitcoin scams, including a section on romance scams, which we strongly recommend you check out. Additionally, at the end of his postmortem, Lopp provides a list of useful strategies to help protect yourself and minimise the risk of becoming a victim of a romance scam.

Categories
Australia Crime Crypto News

Australian Crypto Executive Faces Money Laundering Charges Amid BitMEX Investigation

Australian crypto executive Gregory Dwyer is facing extradition to the US from the island territory of Bermuda for his alleged involvement in several crimes, including money-laundering schemes and operating an unregistered exchange in the US.

Dwyer, referred to as “the Australian Bitcoin Mogul”, was the first employee of BitMEX, a crypto derivatives platform. Dwyer turned himself in to authorities along with BitMEX colleagues Ben Delo and Sam Reed in a surrender agreement with the US Federal Bureau of Investigation (FBI).

All were accused of violating the US Bank Secrecy Act for not establishing an adequate anti-money laundering program and operating an exchange without a licence from the Commodity Futures Trading Commission.

Dwyer Confined to Bermuda on Bail

BitMEX set up shop in Bermuda following a visit by Hayes in July 2018, who met with the territory’s Premier, David Burt. Dwyer moved there the following year, but after the BitMEX case was investigated between 2019 and 2020, Dwyer was required to be extradited to the US for participating in money laundering. 

Last year, Magistrate Khamisi Tokunbo released Dwyer on US$20,000 bail. Dwyer was not allowed to leave the country pending his extradition hearing. 

We have been in touch with the government on this matter and Mr Dwyer has every intention to defend himself in court against these meritless charges.

Jenna Dabbs, lawyer from US firm Kaplan Hecker & Fink LLP, representing Dwyer

According to the US Justice Department indictment filed against Dwyer and his colleagues, they “wilfully failed to establish, implement and maintain an adequate anti-money laundering [AML] program, including an adequate customer identification program, more commonly referred to as a know your customer program [KYC]”.

ATO, IRS Jointly Investigate Crypto Money Launderers

Dwyer is the latest in a growing list of Australians involved in money-laundering schemes using cryptocurrencies. As a result, the Australian Tax Office (ATO) has been targeting cryptocurrencies, reportedly joining forces with the IRS (Internal Revenue Service) in the US to investigate criminals and tax evaders in Australia.

Two months ago, Aamer Abdulaziz, CEO of Phoenix Holding Group, was accused of money laundering and being part of a cryptocurrency scheme called OneCoin.

Categories
Australia Bitcoin Crime Scams

Australian Bitcoin Romance Scam Victim Melanie Kilgour Sentenced to Six Months in Jail plus Community Service

Australian schoolteacher Melanie Kilgour, who became the victim of an online Bitcoin romance scam after misappropriating funds from her former employer in 2019, has been sentenced to six months’ imprisonment after pleading guilty to fraud charges.

She is also subject to a two-year community corrections order, which includes 150 hours of unpaid community service, and was ordered to repay A$148,908.85 in restitution to her former employer, the Alexandra Community Hub in north-eastern Victoria.

Ms Kilgour pleaded guilty in March this year to charges of defrauding the ACH via multiple transactions. It was alleged that $50,000 was lent to a friend who failed to pay her back, and that an undisclosed sum was spent on repairs to Ms Kilgour’s house.

The court was told that the remainder of the funds had been sent in Bitcoin to an “overseas lover” in an apparent romance scam. The scammer cashed out the amount and later disappeared.

The fraud was detected when it was found Ms Kilgour had forged the signature of ACH director John Cannon.

Kilgour Gives Her Side of the Story

“I am gutted and extraordinarily remorseful for my actions in 2019,” Ms Kilgour wrote in a letter emailed to Crypto News Australia ahead of her sentencing on 1 July in the Victorian County Court. “I seem to have successfully smashed 30 years of achievements in a [relatively] short period of time. This has affected my mental health and put added pressure on my beloved parents, siblings, friends and colleagues, so I find it hard to forgive myself and [I] can never forget.”

Ms Kilgour was dealing with both her parents’ cancer illnesses, an abusive ex-husband, and an unscrupulous builder who was renovating her house when she found herself in a “lonely and vulnerable” position.

I have worked very hard all my life. I understand that one in four women fall victim to romance scams by people who prey on the lonely. Along with losing all of my own savings, I then took money from my employer, to my shame and horror, with no real understanding of the total amounts. My mental health at the time made me feel suicidal.

Melanie Kilgour

Forced To Step Down From New Job

Ms Kilgour found new employment in 2020 at Greater Shepparton Secondary College, also in rural Victoria, but fallout from her court appearance and subsequent negative publicity forced her to step down from the position.

I had never committed a crime before this time or re-offended since, and never will because I have to keep going to support my children and do what’s best for my family. I have suffered greatly and sacrificed a lot to do the right thing since I took the money. I just want the opportunity to be able to keep working hard to pay back my debt to society … with hope of a better future.

Melanie Kilgour

Australians lost over $850 million to scams in 2020, according to a report last month from the Australian Competition and Consumer Commission (ACCC). The Securities and Investment Commission (ASIC) also reported that in just three months last year (March-May), the rate of online romance scams involving cryptocurrency increased by 20 percent.

Please spend some time to learn about the Bitcoin scams going around and how to avoid becoming a victim.