Blockchain Crime Update: First federal prison sentence handed down for digital asset "insider trading" in connection with wire fraud indictment. Defendant was sentenced to 10 months in federal prison for his participation in a scheme to commit insider trading in cryptocurrency assets by using confidential information from his brother, a former product manager at Coinbase. DOJ Press Release
DOJ Press Release United States Attorney Jane E. Young, announced that a federal jury convicted Ian Freeman, 42, of Keene, on all counts of money laundering, conspiracy to launder money, operation of an unlicensed money transmitting business, and tax evasion (four counts).
According to trial exhibits and witness testimony during the ten-day trial, Freeman laundered over ten million dollars in proceeds of romance scams and other internet frauds by exchanging U.S. dollars for bitcoin. By failing to register his business with the Financial Crimes Enforcement Network as required by law, disabling “know your customer” features on his bitcoin kiosks, and ensuring that bitcoin customers did not tell him what they did with their bitcoin, among other things, Freeman created a business that catered to fraudsters. By charging exorbitant fees, Freeman made in excess of a million dollars. Link to Tweet
he Commodity Futures Trading Commission today filed a civil enforcement action in the U.S. District Court for the Southern District of New York charging Avraham Eisenberg with a fraudulent and manipulative scheme to unlawfully obtain over $110 million in digital assets from a purported decentralized digital asset exchange. This is the CFTC’s first enforcement action for a fraudulent or manipulative scheme involving trading on a supposed decentralized digital asset platform, and its first involving a scheme that is sometimes called “oracle manipulation.” CFTC Press Release
Avraham Eisenberg is alleged to have participated in a scheme to steal approximately $110 million by manipulating the price of MNGO Perpetuals on Mango Markets, a decentralized cryptocurrency exchange. According to the government's criminal complaint, Eisenberg used an account he controlled on Mango Markets to sell and then buy a large amount of Perpetuals for MNGO and engaged in a series of large purchases of MNGO to increase its price relative to USDC, which caused the price of MNGO Perpetuals on Mango Markets to increase significantly. As a result of the market manipulation, Eisenberg was able to borrow and withdraw approximately $110 million worth of various cryptocurrencies from Mango Markets using the increased value of the MNGO Perpetuals he had purchased as collateral. When Eisenberg ceased manipulating the price of MNGO Perpetuals, the price fell significantly, causing other investors with deposits on Mango Markets to lose much or all of their deposits. Reuters Reports
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