Category: Cryptocurrency Law

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Australia Bitcoin Crypto News Cryptocurrency Law Illegal Scams

Australian Man Pleads Guilty to $90 Million Crypto Hedge Fund Scam

An Australian crypto fund manager has pleaded guilty in a US court for the theft of almost $90 million of investor’s money. 

Stefan He Qin was charged with defrauding clients over a three year period between 2017 and 2021 through two cryptocurrency hedge funds that he founded. The US Securities and Exchange Commission (SEC) began investigating one of the 24-year old entrepreneur’s businesses, Virgil Capital LLC, in December last year.

It was discovered that Qin had attempted to funnel money from his second fund, VQR Multistrategy, to pay investors of the Virgil Sigma Fund. However, after years of risky investments and frivolous spending, much of the funds were gone, leaving investors empty-handed.

Judge Valerie Caproni found Qin guilty of the charges on 4 February 2021 brought forward by the United States Attorney’s Office for the Southern District of New York. US Attorney Audrey Strauss said Qin is now awaiting sentencing after being found guilty of draining “almost all of the assets from the $90 million cryptocurrency fund he owned, stealing investors’ money, spending it on indulgences and speculative personal investments, and lying to investors about the performance of the fund.”

Special Agent Peter C. Fitzhugh who had been investigating the case reiterated the charges, stating that Qin had been using investor’s funds to “live his extravagant lifestyle.”

“Qin orchestrated this reprehensible criminal scheme for many years, making misrepresentations and false promises that coaxed investors into pouring millions of dollars into fraudulent cryptocurrency firms, all the while stealing the hard-earned money of his investors,” he said.

Crypto Scams on the Rise

The case is reminiscent of the recent Mirror Trading International (MTI) scam perpetrated by South African Johann Steynberg. In December last year, Steynberg reportedly fled South Africa after the country’s financial regulator began investigating his company. The Financial Sector Conduct Authority (FSCA) found evidence suggesting that MTI’s broker, Trade 300, was owned and operated by Steynberg.

Despite several warnings issued during 2020, clients continued to invest money into the firm, which promised unrealistic returns of up to 10 percent monthly. The unlicensed firm has now gone into liquidation, with assets worth approximately $863 million unaccounted for.

“There were no proper accounting records and Bitcoin was transferred in and out,” FSCA executive Brandon Topham told Bloomberg. “Thus no definitive answer currently exists as to how much Bitcoin was actually invested but is in the region of 23,000 plus.”

Due to fraudsters taking advantage of the panic and uncertainty brought about by the ongoing pandemic, law enforcement agencies around the world reported a rise in financial scams in 2020. Scams such as these are likely to continue throughout 2021.

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Crypto News Cryptocurrencies Cryptocurrency Law Ripple

Date For Ripple’s Pretrial Has Been Set

Ripple has been steadily falling, with multiple crypto exchange networks poised to delist XRP due to the SEC announcing that they are taking Ripple Labs to court, claiming that they are trading unlicensed securities in the form of XRP.

Although Bitcoin and Ethereum are not considered securities by regulatory bodies, the same seems to not be true for XRP.

Now a date has been set for the pretrial – which will be held virtually – before the official trial is held.

Ripple’s Future Is On The Rocks

Following massive sell-offs of the cryptocurrency that has prompted anxiety even among the most die-hard HODLers, the value of XRP has fallen by 65%, according to some crypto trading websites – although at the time this article was written, the cryptocurrency seems to be recovering slightly.

A surprising turn of events is that RippleLabs purported partner MoneyGram has also distanced themselves from the debacle.

According to a press statement issued by the company, MoneyGram is prepared to go on solo, despite the fact that RippleLabs is a major shareholder.

“As a reminder, MoneyGram does not utilize the ODL platform or RippleNet for direct transfers of consumer funds – digital or otherwise. Furthermore, MoneyGram is not a party to the SEC action. MoneyGram has continued to utilize its other traditional FX trading counterparties throughout the term of the agreement with Ripple, and is not dependent on the Ripple platform to accomplish its FX trading needs.”

A court document issued on the 29th of December has set the date of the pretrial – which will be held on the 22nd of February 2021. It will take the form of a teleconference, and all parties will submit a joint letter a week earlier – which should lay out the details being judged.

“(1) a brief description of the case, including the factual and legal basis for the claim(s) and defense(s), (2) any contemplated motions, and (3) the prospect for settlement.”

Whether you are a fan or a detractor of XRP, the trial is important – as it will set an important precedent for cryptocurrencies.

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Australia Cryptocurrency Law Tokens

High-Value Asset Token Platform Eyeballs Australian Launch

TOKO – a new asset token platform targeting high-value markets such as real estate and the art world – is looking for countries that already have a clear regulatory asset tokenization framework in place.

As such, the USA, the UK, Australia, Singapore, Switzerland, and Canada are in TOKO’s sights. TOKO is a collaboration between law firm DLA Piper, Aldersgate DLS, and Hedera Hashgraph.

Renowned Companies, Renowned Partners

DLA Piper is a law firm that specializes in international law and has offices in over 40 countries, while Hedera Hashgraph is a company running a highly scalable distributed ledger technology used by private companies and government sectors worldwide – including the Aussie agricultural sector.

Scott Thiel – a DLA Piper Technology partner – stated that TOKO is the result of years of development and research into the laws of countries around the globe regarding the creation of tokenized assets.

DLA Piper explained that through the use of blockchain technology, auditing can be carried out much easier – a welcome blessing in industries that are at times rife with speculation and fraud allegations.

“Our clients understand the technology and smart contracts, and see the benefits tokenization can provide in terms of the trust and efficiency it can create in fractionalizing assets.”

Aside from the three companies already involved, the BCW Group will be brought on board to aid with marketing strategies and more.

To celebrate its launch, TOKO finished tokenizing artwork commissioned by DLA Piper partners based in Hong Kong.

Although the partners have not set a date in stone for the launch of TOKO in various countries, Australia’s crypto-friendly atmosphere should make the delay minimal.

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Bitcoin Cryptocurrencies Cryptocurrency Law

Police Seize Nearly $1 Billion From Silk Road’s Hoard

This week, somebody transferred 69,369 BTC from a wallet believed to belong to the former owners of the Silk Road black market that was closed in 2013.

Although briefly brought back as Silk Road 2.0, the final nail in the coffin came on the 6th of November 2014 – exactly a year after the second iteration went online.

The wallet on the receiving end of the transaction was unknown until recently  – but the US Department of Justice confirmed in a press release on the 5th of November that they were behind it.

Ever since Paul Leslie Howard – an Australian national who was the first individual to be convicted of Silk Road-related crimes – was arrested and subsequently convicted for drug offences, law enforcement officials worldwide have been scrambling to confiscate assets that resulted from Silk Road’s sale of illicit drugs and other illegal merchandise.

Individual X

Five years after Ross Ulbricht – the creator of Silk Road – was sentenced to life behind bars, the Criminal Investigation division of the IRS managed to track down a stash of 69,369 BTC. Located in the world’s 4th biggest wallet, no transactions had been carried out involving it – until now.

It turns out a hacker – who goes by the online moniker “Individual X” – was the one who managed to take control of the crypto assets.

“According to the investigation, Individual X was able to hack into Silk Road and gain unauthorized and illegal access to Silk Road and thereby steal the illicit cryptocurrency from Silk Road and move it into wallets that Individual X controlled. According to the investigation, Ulbricht became aware of Individual X’s online identity and threatened Individual X for return of the cryptocurrency to Ulbricht.”

Individual X did not return the assets, in spite of the threats. He did, however, agree to transfer the funds to the US government, following an agreement with the San Francisco US Attorney’s Office.

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Australia Cryptocurrencies Cryptocurrency Law

RBA Partners With Perpetual, Consensys, And Others To Study CBDCs

In a press release, the Reserve Bank Of Australia Stated that they would be joining forces with Commonwealth Bank, National Australia Bank, Perpetual, and ConsenSys Software in order to perform further research into the use of a wholesale CBDC.

Research Continues Despite Prior Reservations

This comes in the wake of an announcement in September that RBA will probably not be developing a CBDC – then recanting and continuing to study.

Whether this is due to banks in countries such as China, Germany, and the USA continuing research – the Chinese going so far as to test the digital yuan by handing out free digital currency to some Shenzhen residents – or a simple change of heart, it seems an Australian CBDC is being looked into more seriously than before.

The RBA hopes to develop a POC (proof-of-concept) system to create tokens for their tentative CBDC. This CBDC would be used for funding, settlement, and loan repayment by companies and individuals buying or selling products and services in wholesale qualities.

Like many other new cryptocurrencies, the new Aussie CBDC would be based on the Ethereum blockchain as a Distributed Ledger Technology (DLT) system.

Assistant Governor Michele Bullock stated that while the use of a CBDC remains up in the air, the interest by commercial partners in national cryptocurrencies has been noted.

“With this project, we are aiming to explore the implications of a CBDC for efficiency, risk management, and innovation in wholesale financial market transactions. While the case for the use of a CBDC in these markets remains an open question, we are pleased to be collaborating with industry partners to explore if there is a future role for a wholesale CBDC in the Australian payments system.”

The research should be done by the end of 2020, and the study group plans to release its results within the first half of 2021.

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Australia Cryptocurrency Law Cryptocurrency Tax

ATO Sends Out Tax Reminders To Crypto Traders

Not too long ago, the ATO (Australian Tax Office) sent out emails to 350,000 cryptocurrency traders and investors reminding them that they must declare their cryptocurrency income revenue – leading to a massive spike in Google searches for “crypto tax”.

Tax Calculations Simplified

In 2018, software engineer Shane Brunette created a tool called CryptoTaxCalculator when he was confronted with a tangled web of crypto tax laws.

Hoping to prevent other crypto enthusiasts from facing the same challenges, he created the crypto tax calculator tool – which has since been integrated with the Aussie cryptocurrency exchange platform CoinSpot.

Shane noted that the use of the tool has grown exponentially since the emails started doing the rounds.

“The ATO has fired a warning message to all crypto investors to declare their taxes. The next step will be far less forgiving. Although we have been around for two years, we really started to see significant traction after the ATO emails. I think most cryptocurrency users in Australia have been pleading ignorance about their tax obligations, but the market is now more educated about cryptocurrency taxes. There really isn’t any more excuse for not doing your taxes.”

Although calculations for taxes owed due to crypto to crypto transactions can cost you a couple of sleepless nights when done manually, the CryptoTaxCalculator tool can help you do your paperwork in a matter of minutes.

 Crypto traders and investors can simply export their transaction data via a CSV file into the tool. In a couple of minutes, a report will be generated, containing everything an accountant may need.

The move by the Australian government also proves that cryptocurrency will be considered a major player on the financial market, on par with stocks and other investments.

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Cryptocurrencies Cryptocurrency Law Europe

Europol Crypto Raids Result In Aussie Arrest

On the 15th of October, a Europol sting operation led by Portuguese law enforcement with some help from the US Department of Justice resulted in over 40 warrants and subsequent arrests.

Assets were seized, however, at the moment the exact sum has not been confirmed by the law enforcement agencies of the countries involved. Computers used for the operations and other hardware —  including cryptocurrency mining rigs in Bulgaria —  have also been seized.

International Cooperation

In the wake of the operation that saw cooperation between 14 countries, an arrest has also been made on Australian soil. At the moment, however, there are no additional details pertaining to the arrest, due to privacy laws. 

The sting operation — named Operation 2BaGoldMule —  was carried out on members of the QQAAZZ cybercrime group.

Comprised of several layers of members mainly operating out of Latvia, Georgia, Bulgaria, Romania, the UK, Spain, and Belgium, the QQAAZZ network ran and maintained hundreds of corporate and personal bank accounts — as well as crypto wallets —  from all over the world to receive money from cybercriminals who gained the funds from illicit activities, whether through classic theft, identity theft or scamming.  

The funds were then bounced around through the QQAAZZ-controlled account network and sometimes converted to cryptocurrency using ‘tumbling’ services in order to launder the illicit funds — before returning the now clean funds to the thieves, minus a fee of up to 50%.  

QQAAZZ advertised themselves as a “global, complicit bank drops service” on Russian hacking where cybercriminals, hackers, and networkers would gather to offer their skills — or find the right person for an online heist. The teams behind some of the world’s most harmful malware in recent years — such as Dridex, Trickbot, and GozNym — are some of QQAAZZ’s many clients.

Edvardas Šileris — the Head of Europol’s European Cybercrime Centre — stated that the 2BaGoldMule operation was just one of many examples of how a coordinated response from strategic partners worldwide can stop millions from being stolen by bad actors. 

“Cybercriminals are constantly exploring new possibilities to abuse technology and financial frameworks to victimize millions of users in a moment from anywhere in the world. Today’s operation shows how through a proper law enforcement international coordination we can turn the table on these criminals and bring them to justice.”

The first exact charges should be confirmed in the near future by the United States Attorney Office for the Western District of Pennsylvania.

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Blockchain Cryptocurrencies Cryptocurrency Law

Traditional Banks May Be Forced To Change Their Views On Crypto

Last month, Kraken became the first cryptocurrency exchange to officially become a bank. 

The Wyoming Banking Board voted to approve the San Francisco-based crypto exchange’s application for a special purpose depository institution (SPDI) charter. 

Less than 3 years ago, Lloyd Blankfein — the CEO of Goldman Sachs — called cryptocurrency a fraud. The bank has since changed its mind and is currently investing in cryptocurrencies themselves. 

A New Generation Of Banks On The Horizon

Goldman Sachs isn’t the only financial authority to change its tune. The central banks of multiple countries are looking into national cryptocurrencies.

Countries such as Sweden, Canada, and China are all actively investigating the potential benefits of a central bank-issued digital currency. However, the RBA isn’t as interested in the use cases of blockchain technology.

The RBA isn’t fully disinterested, however: Although the Reserve Bank of Australia currently believes a “digital Australian Dollar” would be risky, it is still looking into Ethereum-based solutions for wholesale purposes.

In a payments paper issued on Thursday, the RAB expressed doubts regarding the future of stablecoins, along with cryptocurrencies such as Facebook’s Libra project.

The RBA has stated that it remains to be seen whether or not Facebook’s Libra cryptocurrency will gain regulatory approval and be allowed to operate in Australia.

Private companies may still have the upper hand, however. Kraken, for instance, is already forming a partnership with Silvergate bank — which may bring SWIFT and FedWire crypto funding choices for the USA market.

 Well-known crypto exchanges Coinbase and Gemini are also now customers of JPMorgan, even though JPMorgan CEO Jamie Dimon routinely denounced the worth of Bitcoin and cryptocurrencies just some little years ago.

The days when cryptocurrencies were regarded as a tool for cybercriminals to make anonymous transactions are long gone. Of course, privacy coins still exist — but they are used only by niche traders. 

Given the popularity of cryptocurrencies since the 2017 boom, we may soon see demand for cryptocurrency exchanges at our ATMs — and banks would be hard-pressed to not offer the service. 

Whether the cryptocurrency offered by banks would be the national digital version or the already popular cryptocurrencies, however, remains to be seen.

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Australia Crypto News Cryptocurrency Law

Aussie Cruise Ship to Become World’s First Crypto “Seasteading” Hub in International Waters

Former P&O Cruises Australia cruise ship the Pacific Dawn is set to take on a new role in the post-COVID cruise economy — by becoming the world’s first floating “seasteading” community specifically for cryptocurrency, blockchain, and decentralized startups and entrepreneurs.

The Pacific Dawn, formerly a flagship cruise liner owned by the Australian arm of international cruise industry giant P&O, will be acquired by a company called Ocean Builders. The deal between P&O Cruises Australia and Ocean Builders will see the Pacific Dawn, built in 1991, anchored in the Gulf of Panama to become a “floating, off-grid home” for digital entrepreneurs.

The sale of the cruise ship, driven by economic fallout caused by shrinking cruise industry profits, is set to finalize on November 4 in the Mediterannean. The Pacific Dawn will be renamed as the “Satoshi.”

Chad Elwartowski, the COO of Ocean Builders, highlighted the importance of technological experimentation and development to the purchase of the Pacific Dawn in statements released to Maritime Executive:

“We look forward to creating a hub for technology and innovation here in Panama. Our goal is to figure out how to live sustainably on the sea and chart new waters in this new frontier.”

Elwartoski has experimented with “seasteading” before, recently capturing the attention of the Thai Navy for establishing an offshore “seasteading” home in the Andaman Sea off the coast of Thailand.

The core goal of the project, states Elwartowskiu, is to create an international offshore hub for digital entrepreneurs, cryptocurrency ventures, digital nomads, and startups that want to test innovative new technological solutions in a controlled environment. 

Crypto Cruise Ship Sets Sail

The Ocean Builders project has been highlighted by the company as the “Crypto Cruise Ship,” and will make cabins available for purchase via auction starting from November 5, 2020. The first auctions will see the deck 10 staterooms of the vessel auctioned in a similar fashion to a condo, allowing buyers to take full ownership over a cabin. While buyers will own the rights to the staterooms they purchase, they will be required to pay a monthly fee to cover the operational expenses of the vessel.

The first sale of cabins in the renamed “Satoshi” will see 200 cabins auctioned with prices starting at $25,000 USD. A total of 777 cabins will be made available in the crypto cruise ship, with an anticipated total occupancy of 2,020 passengers.

Ocean Builders has announced that residents will be able to use cryptocurrency to pay for services and amenities aboard the ship, which include bars, lounges, casinos, restaurants, and gyms. The Pacific Dawn — soon to the the Satoshi — will set sail from the Mediterranean and will anchor in the Gulf of Panama, with a 30 minute ferry ride taking residents to and from Panama City.

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Australia Cryptocurrencies Cryptocurrency Law

Aussie Government Contractor Walks Free Despite Using Government Supercomputers For Mining

Cryptocurrencies are digital tokens – functioning on blockchain technology – that allow people to conduct financial transactions in a peer-to-peer system. “Cryptomining” is the use of computer processing power to solve equations – which help to consolidate and secure the cryptocurrency system. The miner is then rewarded for this activity with cryptocurrency tokens – which is a huge drain on electrical power and PC components.

Jonathan Khoo, a 34-year-old former contractor for the Commonwealth Scientific and Industrial Research Organisation (CSIRO), was accused of using the government supercomputers placed at his disposal at work in order to mine Ether (ETH) and Monero (XMR). The total value of cryptocurrencies gained is only about $9,420 AUD, which he promptly deposited into his own accounts.

Huge Bill Racked Up

Although 9240 AUD isn’t that big of a sum, it turns out an AUD 76.668 electricity bill to the Commonwealth Scientific and Industrial Research Organisation (CSIRO) was allegedly a direct consequence of Khoo’s actions.

By installing code on 2 of the supercomputers at CSIRO, Khoo was able to use resources at the Institute’s disposal for personal gain. This diverted power away from the operations that were supposed to run on these supercomputers.  

When asked for comment, Federal Police cybercrime operations commander Chris Goldsmid stated that Khoo’s conduct had caused a loss of trust in the government and had hindered the important and legitimate activities of the CSIRO supercomputers.

“This man’s activities diverted these supercomputer resources away from performing

significant scientific research for the nation, including pulsar data array analysis, medical research and climate modelling work.”

In spite of an offence carrying a maximum sentence of 10 years, magistrate Erin Kennedy gave the Sydney resident a 15-month intensive corrections order – in exchange for his guilty plea. Khoo will serve out his custodial sentence in the community – and must fulfil  300 hours of community service. He will also receive counselling.