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.
To ensure that the Department continues to meet the challenge posed by the illicit use of digital assets, the Criminal Division recently launched the nationwide Digital Asset Coordinators (DAC) Network. The DAC Network is composed of designated federal prosecutors from U.S. Attorneys’ Offices nationwide and the Department’s litigating components. Led by the NCET, and in close coordination with CCIPS and the MLARS Digital Currency Initiative, the DAC Network serves as a forum for prosecutors to obtain and disseminate training, technical expertise, and guidance about the investigation and prosecution of digital asset crimes. Each DAC acts as their district’s or litigating component’s subject-matter expert on digital assets, serving as a first-line source of information and guidance about legal and technical matters related to these technologies.
As members of the DAC Network, prosecutors will learn about the application of existing authorities and laws to digital assets and best practices for investigating digital assets-related crimes, including for drafting search and seizure warrants, restraining orders, criminal and civil forfeiture actions, indictments, and other pleadings. The DAC Network will also serve as a source of information and discussion addressing new digital asset forms, such as DeFi, smart contracts, and token-based platforms. In addition, the DAC Network will raise awareness of the unique international considerations of the crypto ecosystem, including the benefits of leveraging foreign relationships and the challenges of cross-border digital asset investigations.
The DAC Network will be a crucial part of the Department’s efforts to continue to address the ever-evolving challenges posed by the illicit use of digital assets, by ensuring that prosecutors receive training, technical expertise, investigative resources, and direct legal guidance for investigations and prosecutions in this area. The DAC Network is modeled on the success of two previously established coordinator programs: the Computer Hacking and Intellectual Property (CHIP) Network and the National Security Cyber Specialist (NSCS) Network. The Criminal Division established the CHIP coordinator program in 1995 to ensure that each U.S. Attorney’s Office and litigating division has at least one prosecutor who is specially trained on cyber threats, electronic evidence collection, and technological trends that criminals exploit.58 The National Security Division similarly launched the NSCS
Network in 2012 to equip U.S. Attorneys’ Offices “around the Nation with prosecutors trained on national security cyber threats, such as nation-state cyber espionage.”
June 1, 2022:
The US Attorney for the S.D. of N.Y. returned an indictment against the former head of product at OpenSea alleging he committed wire fraud and money laundering in connection with "insider trading" of NFTs. Let's breakdown the charges. DOJ Link
As part of his employment, Defendant was responsible for selecting NFTs to be featured on OpenSea’s homepage. OpenSea kept confidential the identity of featured NFTs until they appeared on its homepage.
After an NFT was featured on OpenSea’s homepage, the price buyers were willing to pay for that NFT, and for other NFTs made by the same NFT creator, typically increased substantially." From at least in or about June 2021 to at least in or about September 2021, [Defendant] used OpenSea’s confidential business information about what NFTs were going to be featured on its homepage to secretly purchase dozens of NFTs shortly before they were featured."
June 6, 2022:
Defendant used sites to buy and sell Bitcoin & profited from those sales by collecting a percentage of the transactions which ranged from 5-30%.
18 U.S.C. § 1960 makes it a federal crime to operate an unlicensed money transmitting businesses. "An entity acting as an MSB that fails to register as required is subject to civil money penalties and possible criminal prosecution." DOJ Link
Defendant allegedly received funds in various forms from customers and then "used several bank accounts to conduct his business, but the banks shut down the accounts after inquiring about the origination of the funds." "During the course of three months, the unlicensed money transmitting business received and transmitted approximately $515,147.19 in Bitcoin."