Last Friday, FinCEN, the CFTC and the SEC issued a joint statement warning digital asset space players of their AML/CFT obligations under the Bank Secrecy Act (BSA). The statement emphasized that covered entities must establish and implement an effective AML program, and have certain recordkeeping reporting obligations, including filing suspicious activity reports. The agencies reminded those dealing with digital assets that simply labeling an asset or activity something does "not necessarily align with" how the BSA or other federal rules or regulations may classify them: "The nature of the digital asset-related activities a person engages in is a key factor in determining whether and how that person must register with the CFTC, FinCEN, or the SEC."
Also last Friday, the SEC announced a temporary restraining order against two offshore entities the Commission alleges were conducting an illicit digital token offering in the U.S. and abroad. The SEC alleges that Telegram Group Inc. and subsidiary TON Issuer Inc. began raising capital in January 2018 to fund their operations. The complaint against the companies alleges they failed to register the token offers and sales, 2.9 billion tokens worth $1.7 billion, which the SEC avers are securities.
This week the CFTC filed a civil action against David Saffron and Circle Society Inc. related to a Ponzi scheme Saffron allegedly ran through Circle Society. The complaint alleges that for nearly two years, defendants tricked U.S. individuals into handing over $11 million worth of bitcoin and U.S. dollars to trade off-exchange binary options on foreign currencies and cryptocurrency pairs. The defendants allegedly guaranteed returns up to 300%, but instead misappropriated the funds.
A federal grand jury has indicted a South Korean national for operating the largest child exploitation market by volume of content. Hundreds of users in the U.S. and 37 other countries have been arrested and charged. The darknet site offered 250,000 videos for sale in exchange for bitcoin. The DOJ is seeking forfeiture of the bitcoin and to give the funds to the victims.
For more information, please refer to the following links:
- SEC Halts Alleged $1.7 Billion Unregistered Digital Token Offering
- CFTC Charges Nevada Company and its Owner in $11 Million Cryptocurrency Fraud and Misappropriation Scheme
- Leaders of CFTC, FinCEN, and SEC Issue Joint Statement on Activities Involving Digital Assets
- South Korean National and Hundreds of Others Charged Worldwide in the Takedown of the Largest Darknet Child Pornography Website, Which was Funded by Bitcoin
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