Lot's of questions swirling in the space about whether FTX will be charged criminally. So what factors do federal prosecutors generally consider when deciding whether to pursue criminal charges against a business organization? The “Principles of Federal Prosecution of Business Organizations” in the Justice Manual describe specific factors that prosecutors should consider in conducting an investigation of a corporation, determining whether to bring charges, and negotiating plea or other agreements." These factors include “the adequacy and effectiveness of the corporation’s compliance program at the time of the offense, as well as at the time of a charging decision” and the corporation’s remedial efforts “to implement an adequate and effective corporate compliance program or to improve an existing one.” DOJ Memo

Attorney General Report to the White House on Crypto Criminal Regulation Recommends Amendments to 18 U.S.C. § 1960 (Unlicensed Money Transmitting Businesses). Let's discuss those proposed amendments regarding range of punishment and fines. Section 1960’s penalty provisions: "Under existing law, violations of § 1960 are punishable by a maximum of five years’ imprisonment, a term materially less than that prescribed for analogous fraud (20 or 30 years) and money laundering statutes (10 or 20 years)." "Enforcement efforts would benefit from increasing the statutory maximum sentence to 10 years (from five) and by adding an enhanced penalties provision, under which individual criminal fines would double—and corporate criminal fines would triple  for violations involving a money transmitter’s business of more than $1 million in a 12-month period to reflect the seriousness of the conduct at issue and allow for sentences more in line with the Guidelines range called for by the Sentencing Commission."

Federal jury returned a guilt verdict against defendant for "money laundering and operating an unlicensed money transmitting business as part of a scheme to launder the purported Bitcoin proceeds of drug trafficking." "The verdict followed a four-day trial before United States District Judge Pamela K. Chen. When sentenced, Goklu faces up to 25 years in prison." “The defendant offered his customers the ability to launder their criminal proceeds, remain anonymous and conceal where their Bitcoin was coming from so they could continue to engage in drug trafficking and other crimes while avoiding law enforcement detection,” 

"As proven at trial, in July 2018, DEA special agents identified an advertisement posted on localbitcoins.com where an individual with the username “Mustangy” offered to purchase up to $99,999 worth of bitcoins (“BTC”), ... [and] convert them into U.S. currency for a fee. "A DEA Special Agent acting in an undercover capacity (the “UC”) began exchanging encrypted text messages with defendant to arrange in-person exchanges of BTC to U.S. currency."

"The UC and the defendant subsequently met and engaged in seven transactions or attempted exchanges of BTC to cash over a nine-month period"

Defendants Allegedly Defrauded Victims of Almost $18 Million as Part of “Pig Butchering” Investment Fraud and Money Laundering Schemes and Illegally Converted More Than $52 Million of Cash to Cashier’s Checks. “For once the name of a scam - pig butchering - reflects the grotesque nature of the harm it causes victims. We allege these fraudsters bled dry each of their victims and then used the money to set up fake cryptocurrency accounts."

OpenSea announced yesterday their new system that "proactively scans URLs shared on OpenSea to identify if they may be malicious. It starts by cross checking a given URL against a blocklist of known malicious sites." OS noted that "scammers ... try to spread these URLs on OpenSea through fraudulent collection listings and unwanted NFT transfers." According to OS, the new system also "analyzes interactions and transactions to identify malicious behaviors like signature farming and wallet draining"OS will "simulate interactions and transactions with new URLs to identify malicious behaviors like signature farming and wallet draining ... Scammers that attempt to spread detected malicious links will have their accounts banned, their collections delisted, and their transfer requests blocked when using OpenSea." Under this new pilot program, OS will try to "detect NFT theft in REAL-TIME and prevent further resales of suspected stolen items to unsuspecting buyers." OS will then display a new yellow “under review” module on those items. According to OS, this move is to better address the ongoing problem of thieves reselling NFTs before victims have an opportunity to file a theft report. 

OS tweeted that "items involved in detected suspicious behavior will be temporarily disabled on OpenSea, and the previous owner will immediately be notified via email. The previous owner can then share feedback with us to reinstate the item and enable it to be sold again." Most importantly, OS announced that they are "working closely with other marketplaces, wallet providers, analytics organizations, and others, to develop holistic scam detection and prevention systems."
These measures by OS look like a good step in the direction of trying to address the issue of stolen and flagged NFTs. But, without cross-platform adoption of these measures, flagged NFTs continue to be bought and sold on other NFT secondary trading marketplaces. 
It will be interesting to see how this program works in real-time, whether it will curb the continued market for flagged NFTs and whether other platforms will agree to adopt similar measures.