Crypto Crime Cartel: BitMEX, Kraken, Binance, Bitcoin.com, Blockstream & Ethereum

The indictments and lawsuit against BitMEX and its founders are encouraging signs that law enforcement is cracking down on the criminal element within the digital asset sphere. However, BitMEX and their founders aren’t the only outfit to finally be called to account for their criminal behavior, just the latest. What’s more is that the employees and facilitators of these criminal enterprises have now been put on notice: prosecutors will come after you, as well as the company you are working for.

Over the past 10 years, a steady stream of criminals have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market. If your exchange isn’t outright stealing your investment, they’re manipulating the markets that their customers are investing in (admittedly, this difference is academic). If they aren’t scamming people directly, they are enabling the scam by endorsing and publicizing the criminals. If your digital asset isn’t financing terrorists and scammers directly, it’s facilitation of that illegal activity is an advertised feature.

By and large, the task of bringing this criminal activity to light has been left to private litigation in venues not suited for exposing large-scale conspiracies of fraud, market manipulation, theft and money laundering which cause damage far in excess what could be suffered by any one individual.

Slowly, however, authorities are catching up. The ferocity with which federal prosecutors and the Commodity Futures Trading Commission (CFTC) have made their respective cases against BitMEX is encouraging. BitClub’s $722 million Ponzi scheme finally led to indictments in 2019. Binance is all-but confirmed to be under investigation for money laundering.

As long as the digital asset sphere is viewed as a gray area—one in which would-be investors are unprotected and the amount of money you can steal and misappropriate is limited only by how many customers you can lure to your platform—it will attract criminals. We pay a double price for this: the cost to the individuals on these exchanges who are directly victimized, and the cost to the legitimate community who come under increased scrutiny and whose great work is overshadowed by the actions of a few.

But to focus too much on the individual scandals—the stolen investments, the market manipulation, the bullying of whistleblowers—is to miss the bigger, more insidious story.

The criminals don’t like Bitcoin SV

The motivation isn’t solely profit, and this digital asset crime wave is not merely composed of independent opportunists. A look at those individuals and companies who are regularly in the news for the wrong reasons show a cabal of ideologically-aligned entities who have done everything in their power to prevent the original vision for Bitcoin—not one where crime is undetectable and unpunishable, but one of true transparency—from being realized, and they are all too happy to slander anyone who stands in opposition to that goal. If a tidy profit can be made along the way, even at the expense of legitimate investors, then so much the better.

In a way, this is understandable. After all, these detractors are fighting for their survival.

When Dr. Craig Wright appeared from hiatus, and saved the original Bitcoin protocol but was forced to rename it and get a new ticker symbol as the criminals who attacked were able to get their complicit and criminal exchange friends to let them steal the name and ticker—the backers and evangelists of these pseudo-Bitcoin platforms began attacking both Craig and Bitcoin SV in earnest. Look at the slate of defamation cases that Dr. Wright has been forced to enter into: Peter McCormack in the U.K., Marcus Granath of Norway, BCH’s Roger Ver—the list goes on.

The attacks on Dr. Wright’s credibility are about much more than either profit or the identity of Satoshi Nakamoto. Rather, the headlines that people like Ver have been able to secure by calling Wright a fraud are noise, obscuring the more important and coordinated attack on Bitcoin SV itself.

Not only will victory for Dr. Wright mean the end of blockchain-enabled safe-havens for unabashed criminals, but when Dr. Wright asserts his ownership of the original Bitcoin, and if he can argue that the likes of BTC and others are illegally passing themselves off as the true Bitcoin, then the entire ecosystem is due a reckoning that will bring the community to a screeching halt. The bill for such an infraction would be staggering, and well in excess of whatever amount Wright will look to seriously recover in his defamation proceedings.

The perpetrators

Fortunately, their brand of ideological warfare makes those being motivated by crime easily identifiable. One only has to ask: Is this entity pro-regulation and anti-secrecy, like Dr. Craig Wright’s Bitcoin SV? Or are they spending an incredible amount of time and money attempting to discredit Wright, Bitcoin SV and any prospect of Bitcoin that doesn’t give cover to criminals—terrorists and pedophiles alike?

BitMEX, Kraken, Binance, Bitcoin.com, Blockstream, Ethereum and others have all been in the news for various improprieties.

They have all also wasted considerable energy trying to discredit Dr. Craig Wright and Bitcoin SV.

Ethereum’s Vitalik Buterin called BSV a ‘complete scam’, yet a report on digital asset crime in 2019 identified Ethereum as a hotbed for scams that is only getting worse.

The CEO of Binance, Changpeng Zhao, tweeted on February 24 2020, in which he said “CSW is a fraud. Investing in a fraud never ends well.” Binance, you might recall, leverages its laughably light (read: non-existent) Know-Your-Customer procedures to attract millions (approaching billions) in criminally-gained digital assets for the purpose of money laundering.

Roger “I think insider trading is a non-crime” Ver, owner of crypto wallet service and BCH mining pool Bitcoin.com, is currently being sued by Wright in Antigua for repeated attacks on his credibility. Remember, Ver has in the past also been arrested for using the internet to sell explosives online, something we should all be grateful to an open internet for.

Ver also happens to be closely affiliated with Binance, Kraken and Shapeshfit (run by Erik Voorhees), having been an early investor in all three, and these are the three exchanges which collaborated to delist BSV. Here is where the cartel becomes even more obvious: these exchanges are more than happy to cycle through a never-ending roster of thinly supported scam coins, and yet BSV gets delisted—a top-five digital asset at the time—for some reason this is the priority for all three exchanges with a vendetta against Wright.

Isn’t it funny that so much of this crime cartel’s defense of itself rests on the idea that they are hands-off and ‘decentralized’, when they are hands-on enough to rally together and wage an information war on Dr. Craig Wright and targeting BSV specifically for delisting?

The reckoning is coming—and not just to those at the top

These are criminal enterprises waging an ideological war via disinformation and lies in a desperate effort to preserve what they feel is the ability to break the law with impunity. And, unfortunately, the rot often runs deeper than what you can see on the surface.

While the people at the head of these enterprises are finally being rounded up, each case shows many instances of employees enabling their employers’ scams—if not driving them directly. Court documents in the BitClub scam case—closely tied to Roger Ver reveal top executives callously laughing at the ‘moron’ victims of their scam. If employees are not enabling the criminality directly, they are complicit merely by being a part of the enterprise. Lawmakers have shown themselves increasingly willing to look throughout the organization for people to put cuffs on. A BitClub promoter was indicted in that case, and BitMEX’s first employee, Gregory Dwyer, was arrested after being indicted last week, along with the other founders Arthur Hayes, Benjamin Delo and Samuel Reed.

It’s what the U.S. RICO (Racketeer Influenced and Corrupt Organizations) Act is for. For those unfamiliar with RICO, it is a law originally used for tackling large-scale criminal organizations such as the American Mafia, but it applies to any criminal organization engaging in a pattern of racketeering activity (which includes wire fraud, money laundering and terrorist financing). For RICO to apply there must be a person or company engaging in a pattern of racketeering activities—including wire fraud and money laundering—as part of an enterprise (a company qualifies, but is not required). The case against AlphaBay was built using RICO, for instance.

Employees of an organization that appear to be facilitating large-scale money laundering, like Binance, will undoubtedly fall within the reach of RICO. More importantly, so too will the various digital assets who brag about being anonymous and outside the reach of regulators.

In fact, the entire network of such a digital asset can be considered an enterprise for the purposes of RICO. In the seminal RICO case Boyle v. United States, the Supreme Court of the United States said that for the purposes of RICO, an enterprise:

need not have a hierarchical structure or a ‘chain of command’; decisions may be made on an ad-hoc basis and by any number of methods – by majority vote, consensus, a show of strength….The group need not have a name, regular meetings, dues, established rules and regulations, disciplinary procedures, or induction or initiation ceremonies… Nothing in RICO exempts an enterprise whose associates engage in spurts of activity punctuated by periods of quiescence.

This speaks to the kinds of crime cartels highlighted above, who often use the legitimate traffic on their exchanges or networks as a way of washing their hands of the criminality also taking place. But it also speaks to the digital asset operators who brag about their ‘anonymous’, anti-government protocols and yet will take no responsibility when the infrastructure they have created is used for crime of many kinds.

Therefore, employees who may not even be controlling officers of illegitimate exchanges may actually be the easy case for RICO. If you are an employee of an enterprise who is using their company—whether you have been directed by your company or not—for racketeering activities, then you can be prosecuted under RICO and will be vulnerable to up to 20 years in prison per count of racketeering.

Time is running out for you

If you are an employee of any of the entities discussed here, then know that in facilitating your organization’s criminal endeavors, you are putting yourself personally at risk of prosecution and now sit in the path of a crackdown which has already begun with the likes of BitMEX and the recent arrest of ICO pumper John McAfee. The immutability of the blockchain is such that there will be a paper trail of your facilitation long after the company itself might have collapsed.

If you aren’t sure, ask yourself: where does my company stand in relation to the pro-regulation, pro-security, pro-law enforcement message of Dr. Wright and many others working hard to ensure the digital asset community is not co-opted by criminals?

Calvin Ayre put it best following the announcement of the BitMEX indictments:

If this applies to you, consider which side of the law you want to operate on, and hop off the train now, because BitMEX is just the beginning.

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