The Department of Justice’s Cryptocurrency Enforcement Team
The Department of Justice’s (DOJ) National Cryptocurrency Enforcement Team (NCET) will help identify and enforce violations of the law involving the misappropriation of digital assets. As part of the team’s mission to prevent fraud and exploitation, the team will be actively engaging with companies that have a strong compliance program. In the last few months, the Justice Department has taken some important steps towards preventing and identifying these types of abuses.
One of the most significant milestones in the Department’s crypto enforcement efforts was the announcement of a team that would focus on crypto exchanges. This is the first such unit in the department. According to DOJ spokesperson Zia Faruqui, “The crypto team will work to help the DOJ take a broader approach to investigating and tackling fraudulent activities involving cryptocurrencies and other digital assets. Specifically, the team will help the department investigate and prosecute fraud and misconduct in the cryptocurrency space and will provide assistance to federal law enforcement agencies whose investigations are focused on the same area.”
Another big step was the announcement of a superseding indictment in the Southern District of New York. This indictment was accompanied by a related civil forfeiture complaint pertaining to the theft of $48.5 million worth of ETH and IHT Real Estate Protocol tokens from a Korean-based virtual currency exchange in November 2018. It’s a big deal for several reasons. First, a large portion of the funds were laundered by two Chinese nationals. Second, the laundry of these particular stolen digital currencies obfuscated their origins. But perhaps the biggest revelation was that one of the actors involved in the hack was actually connected to North Korea.
Aside from the criminal and civil forfeitures, the DOJ filed a legal complaint against the defendants, invoking the best and the worst of the crypto world. While the case is ongoing, the government already has a number of high profile arrests on the books for their roles in this and other related cases. These include two Chinese nationals who were involved in malicious cyber-enabled activity and who were sanctioned by the Office of Foreign Assets Control.
Moreover, the DOJ announced in October that it would form a crypto team. This team will be led by Eun Young Choi, who previously argued an appeal for Ross Ulbricht, and will focus on the identification and prosecution of misappropriations of digital assets. Other members of the team are Jessica McCormick and David Recker. Ultimately, the team will be responsible for determining whether and how the DOJ should apply the appropriate regulatory measures to ensure that the digital space is safe from abuses.
Finally, the Justice Department has made the announcement that it will be taking steps to support the current crypto-related investigations by establishing the aforementioned superseding indictment and filing a new civil forfeiture complaint against a second Chinese national who was involved in the laundering of the $48.5 million. They also plan to re-open the relevant case to provide additional details, and will continue to pursue other, more obscure, cryptocurrency-related investigations.