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Crypto Crime in 2019: How Law Enforcement is Targeting Digital Currency

The end of 2018 may have seen the value of cryptocurrencies plummet from their unprecedented high the previous year, but sell-offs and market fluctuations haven't reduced interest in the future potential of digital currencies. That's true for consumers and prospectors who think crypto is the way of the future, and for law enforcement who know it's becoming an increasingly more common element in crime.

Our Ohio criminal defense attorneys at Friedman & Nemecek, L.L.C. Attorneys at Law have a special focus on cyber litigation, including all types of state and federal crimes involving cryptocurrency. With extensive experience in this field, Attorney Ian N. Friedman and our team have become known as frontrunners in handling complex cases involving new technologies, legal gray areas, and evolving laws.

The Latest in Crypto Crime

As we stay apprised of recent trends, case law, and legislation involving cryptocurrency, our attorneys know there’s a lot going on. To provide a better overview of the latest news in crypto crime, we’ve detailed some of the most notable recent events and issues below:

  • New York launches nation’s first cryptocurrency task force – In early January, New York Assemblyman and Chair of the state’s Internet and New Technologies subcommittee announced that New York will be the first state in the U.S. to launch a cryptocurrency task force. In a recent blog post, we discussed measures made by federal regulators in creating a new cybersecurity task force that will address, in addition to other internet crimes, matters involving cryptocurrency. New York’s new task force was created under the state's Digital Currency Study Bill, signed into law in December 2019 by Governor Andrew Cuomo, and will solely focus on cryptocurrency. Per the bill, a task force will study how cryptocurrencies and blockchain technologies are regulated, used, and defined. The effort is likely to impact both criminal legislation and other public and consumer interests, and is already being followed by newly introduced legislation in other states.
  • Ireland passes crypto-focused money laundering bill – In the first days of 2019, the Irish Cabinet passed sweeping laws designed to combat money laundering and other crimes involving cryptocurrencies. The Money Laundering and Terrorist Financing bill was an amendment to existing Irish laws, and empowers the Gardaí (Irish law enforcement) and the country’s Criminal Assets Bureau to obtain access to bank records when conducting money laundering investigations. Ireland is considered among the top countries in terms of crypto-friendliness, and is looking to create a robust framework of rules and regulations for the future.
  • Cryptocurrency theft increased dramatically in 2018 – A recently released report from the cyber-security firm Kaspersky Lab noted an estimated 13 million reported cases of cryptocurrency theft in 2018 – a 400% increase over the previous year. While matters of self-reporting, new interest in cryptocurrency, and other factors may skew the numbers, they do confirm a growing trend involving crypto-related crimes. Experts report this has a lot to do with more people learning about the industry following crypto’s record-breaking high in December of 2017, and often involves privacy-focused forms of alternative digital currencies, known as alt coins. Cybercriminals use several methods to divert funds into their own wallets, including remote hijacking of computers and malware.
  • IRS releases annual report mentioning crypto tax crimes – The IRS released its Criminal Investigation Division’s annual report for the 2018 fiscal year, detailing various law enforcement efforts and statistics. Apart from citing $10+ billion in financial crimes and a nearly 92% percent conviction rate, the report noted the CI increased its focus on cybercrime and white collar crimes involving cryptocurrencies in FY 2018. This includes not only crimes like money laundering, but also tax fraud and tax evasion, as selling or exchanging cryptocurrency is a taxable event. Moving forward, the IRS CI division will require all special agents to complete special cyber training to better handle the overwhelming number of cases with cyber components.
  • FBI cybercrime report shows upward trend – A statistical breakdown of the FBI Internet Crime Complaint Center’s annual reports on cybercrime showed cybercrime accounted for roughly $1.2 billion in consumer losses in the U.S. last year. The report noted an increase in cybercrime victims and financial losses nationwide, especially in states such as California, Arizona, and Alaska, and an increase in complexity of the schemes used to defraud and commit crimes. While many of these internet crimes include offenses involving phishing and hacking, the upward trend also reflects an increase in crypto-related crimes and theft.
  • U.S. Has Romanian Crypto Exchange Founder Extradited – International laws can be highly complex, but the U.S. government recently succeeded in having the founder of Coinflux, a Romanian cryptocurrency exchange, extradited for prosecution. According to officials, Calin’s arrest stems from claims that he knowingly facilitated money laundering activities and criminal activity in the U.S. He is being charged with various fraud offenses and RICO crimes.

Cybercrime & Cryptocurrency Attorneys in Ohio

The early weeks of 2019 are an indication of much to come in terms of cybercrime and cryptocurrency. As states and countries around the world begin to grasp the magnitude of growing interest in digital currencies and their use in criminal activity, legislators and law enforcement will be tasked with creating a complex system of laws and enforcement strategies to prosecute offenders, and levy harsh penalties upon those who are convicted.

The unique nature of cryptocurrencies and their new and sometimes difficult-to-understand technology, however, means authorities may not always get things right when investigating or prosecuting suspects. As such, defense attorneys with experience in the field may not only be important to protecting the rights and freedoms of defendants, but potentially the future of cryptocurrency laws as well.

Friedman & Nemecek, L.L.C. Attorneys at Law provide award-winning representation and defense counsel to clients throughout Ohio and the nation, and is available to discuss cases involving cybercrimes and cryptocurrency. To speak with an attorney, contact us.

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