Author: Syedur Rahman
10 May 2022
3 min read
For almost as long as cryptocurrency has been in existence it has been accompanied by two things: crime and an apparent failure to tackle such crime.
But things do, at least to some degree, seem to be changing for the better. Even if that change is on a modest scale at present. Law enforcement does appear to be waking up to both the problem and the need for action to tackle it.
Looking across the Atlantic, we have just seen the charging of Luiz Capuci Jr, the founder and CEO of Mining Capital Coin (MCC) for allegedly orchestrating a $62 million global investment fraud scheme.
To see the head of what purports to be a cryptocurrency mining and investment platform facing such action indicates that the US authorities are prepared to follow the money – whether real or digital – in order to track down who they believe are the bad actors in this fast-moving sector.
Mr Capuci Jr is accused of misleading investors about MCC’s cryptocurrency mining and investment programme by making promises about his firm’s international reach and ability to generate impressive profits. According to prosecutors, he diverted investors’ money into cryptocurrency wallets he controlled. He has been charged with conspiracy to commit wire fraud, conspiracy to commit securities fraud and conspiracy to commit international money laundering.
Mr Capuci Jr is obviously innocent until proven guilty. But the cryptocurrency backdrop to his alleged activities is very much cutting edge. His case shows that the authorities are – to use a US term – wising up to the use of crypto by those looking to commit the most traditional financial offences. This case has been investigated by the FBI and Homeland Security Investigations, yet the US SEC (Securities and Exchange Commission) has also been on the front foot regarding crypto. It recently announced it would be almost doubling the number of its staff who are responsible for protecting investors in cryptocurrency markets. This comes after the US Department of Justice’s creation last year of a National Cryptocurrency Enforcement Team to investigate the criminal use of cryptocurrency.
After what appeared to be far too long, the US now appears to be fully alert to the criminal threat posed by crypto. It would be pleasing to report that this is also happening in the UK. But that is not quite the case.
The lack of law enforcement activity in the UK regarding crypto has been a regular source of complaint by commentators. Depending on who you listen to, the UK authorities lack either the willingness to tackle crypto-related crime, the tools to do so or a combination of the two. My firm’s Freedom of Information requests have revealed – to put it politely - a very low number of investigations being conducted by the Financial Conduct Authority into cryptocurrency wrongdoing. But it should be said that the picture is not all doom and gloom.
The UK government has recently announced the Economic Crime and Corporate Transparency Bill, part of which focuses on cybercrime and the way that cryptocurrencies are used by the likes of fraudsters and ransomware attackers to make illegal gains.
If the Bill becomes law, enforcement agencies will be equipped with new powers that will enable them to seize crypto assets easier and quicker if they are believed to have been involved in crime. A new civil forfeiture process will also come into existence, to tackle those who use their funds to promote criminality.
Such developments will not eradicate the problem of crypto-related crime. It may even take a lengthy period of time before anyone can say with any certainty whether the Bill’s measures are having a positive effect. Symbolism counts for little or nothing when it comes to tackling any form of crime. But the measures in the Bill do at least represent a growing awareness in the corridors of power of both the dangers posed by crypto and the desperate need for some form of strategic response to them.
The cryptocurrency sector has developed at a rapid rate. This development has been both unchecked and unregulated. As a result, law enforcement agencies have been faced with a problem that they are ill-equipped to deal with. Legislation that had been drafted and passed years or even decades ago was of little use when the authorities sought to target those involved in, or with connections to, crypto-related crime. Such legislation was, for the most part, either not relevant to offending where there was a cryptocurrency element or no match for the levels of sophisticated planning and execution of such crime. This was down to the simple reason that, at the time it was drafted and passed, there was either little or no understanding of crypto or crypto did not even exist. Now the understanding is growing, we may see this increasingly reflected in legislation. Which may, in time, see more of those involved in crypto crime being held to account.
This may take some time. But the authorities do at least now have their eyes open when it comes to cryptocurrency’s problems.
Syedur Rahman is known for his in-depth experience of serious fraud, white-collar crime and serious crime cases, as well as his expertise in worldwide asset tracing and recovery, international arbitration, civil recovery, cryptocurrency and high-stakes commercial disputes.