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Credit to Author: Chris Stokel-Walker| Date: Mon, 16 May 2022 15:27:26 +0000<\/strong><\/p>\n Chris Stokel-Walker<\/a><\/span><\/span><\/p>\n To revist this article, visit My Profile, then View saved stories<\/a>.<\/p>\n To revist this article, visit My Profile, then View saved stories<\/a>.<\/p>\n Cryptocurrencies have long<\/span> been seen as the Wild West of money transfers, but few online payment and money transfer platforms have been as blatant in appealing for illicit cash as one highlighted but not named in a memorandum opinion<\/a> unsealed on May 13 in the US District Court in Washington, DC. The platform is apparently based in a \u201ccomprehensively sanctioned country\u201d\u2014likely North Korea, according to those within the crypto law space\u2014and advertised its services as evading US financial sanctions. It was built using a US front company that facilitated the purchase of domain names, according to court records.<\/p>\n The platform, which was designed to sidestep financial bans aimed at crippling pariah countries, handled more than $10 million worth of bitcoin that was transferred between the United States and the sanctioned country using a US-based crypto exchange, which, the opinion implies, was not aware that it was helping users avoid sanctions.<\/p>\n The opinion<\/a>, written by Magistrate Judge Zia Faruqui, was likely unsealed because someone has been arrested for operating the crypto platform. It all marks a shift in the way US law enforcement\u2014and the law\u2014handles cryptocurrencies.<\/p>\n \u201cIssue One: virtual currency is untraceable? WRONG. … Issue Two: sanctions do not apply to virtual currency? WRONG,\u201d Faruqui concludes in his opinion, directly citing two Saturday Night Live<\/em> skits parodying TV host and political commentator John McLaughlin, who was known for his direct style.<\/p>\n \u201cFor some time, we\u2019ve heard a narrative that cryptocurrency could potentially be used for sanctions evasion,\u201d says Ari Redbord, head of legal and governmental affairs at TRM Labs, which monitors crypto fraud and financial crime. \u201cWhat we see here is the first time that the Department of Justice has charged a criminal case involving the use of cryptocurrency to evade sanctions.\u201d<\/p>\n The decision puts crypto exchanges on notice that they can be liable for enabling users to sidestep sanctions\u2014intentionally or not\u2014and is a warning to those trying to evade such sanctions that law enforcement is coming for them.<\/p>\n For years, cryptocurrency has been seen as a safe haven for criminal gangs and enterprises looking to launder ill-gotten gains. Unlike a bank account, cryptocurrency doesn\u2019t require a name attached to transactions, which are recorded on a public blockchain ledger. This apparent anonymity attracted criminal enterprises in the early days of cryptocurrencies like bitcoin. \u201cYou had the Silk Roads<\/a> of the world and the AlphaBays<\/a>,\u201d says Jessie K. Liu, partner at law firm Skadden, Arps, Slate, Meagher & Flom. A former deputy general counsel at the US Treasury who also served in the Justice Department, Liu has prosecuted several crypto cases. \u201cThe early reporting on bitcoin made it out to be some sort of secretive, anonymous currency that bad guys used to do bad things.\u201d The founding principles of the platform\u2014and the libertarian, privacy-loving, decentralized attitude that gave birth to it\u2014contributed to the perception that virtual currencies can\u2019t be traced.<\/p>\n What all of those groups and individuals overlooked was that the underpinning of cryptocurrencies\u2014the immutable blockchain that keeps a record of every transaction made\u2014was building a stockpile of evidence for prosecutors<\/a>. \u201cThe thing that\u2019s so unique about crypto is you can actually trace and track the flow of these funds on an entirely open ledger,\u201d says Redbord. \u201cIt\u2019s only because crypto moves and lives on an open ledger on the blockchain that allowed for this type of investigation.\u201d<\/p>\n In the opinion, Faruqui explains how the defendant\u2019s identifying information and IP address were tracked and linked to the payments platform they operated. \u201cThe striking point is that cryptocurrency quickly became this dark asset used for illegal activity, which was never the purpose, and that is now being turned on its head and will just as quickly become more transparent than traditional asset classes,\u201d says Nimesh Shah, CEO of London-based accountancy company Blick Rothenberg. Others go further: \u201cJudge Faruqui's opinion pours cold water on the idea that cryptocurrencies mean the death of sanctions,\u201d says Anupam Chander, professor of law at Georgetown University in Washington, DC. Chander says the opinion is good for cryptocurrencies as they seek to shake off their early bad reputation and gain mainstream traction: \u201cJudge Faruqui treats the virtual objects as if they are dollars or dinars.\u201d<\/p>\n While the court\u2019s opinion sets a legal precedent that crypto transactions can and should be traced by authorities, in other ways it\u2019s wholly unremarkable. \u201cJudge Faruqui is, as far as I\u2019m aware, the first judge who has actually said explicitly that cryptocurrency can run afoul of sanctions,\u201d says Liu. \u201cBut that\u2019s been the Treasury Department\u2019s view for a number of years.\u201d What\u2019s significant about the decision is that it codifies what has long been an informal attitude toward crypto.<\/p>\n \u201cThe question is no longer whether virtual currency is here to stay (i.e., FUD) but instead whether fiat currency regulations will keep pace with frictionless and transparent payments on the blockchain,\u201d Faruqui writes. (Chander says that while Faruqui isn\u2019t the first judge to use \u201cFUD\u201d\u2014meaning fear, uncertainty, and doubt\u2014in a federal opinion, he may well be the first to use it without defining it, showing just how much crypto has burrowed its way into the mainstream.)<\/p>\n