Millennial Couple Faces Twenty Years in Prison for Largest DOJ Bitcoin Seizure in History

Millennial Couple Faces Twenty Years in Prison for Largest DOJ Bitcoin Seizure in History

On February 7, 2022, authorities arrested a husband and wife in their 30s, Ilya Lichtenstein and Heather Morgan, accused of attempting to launder $4.5 billion worth of stolen bitcoin. The Department of Justice (DOJ) seized over 94,000 of the allegedly stolen bitcoin, valued at $3.6 billion, making it the largest financial seizure in DOJ history. The stolen bitcoin was funneled through a wallet that Lichtenstein controlled in 2016 as part of a hack of crypto-exchange Bitfinex, which initiated over 2,000 unauthorized transactions. The couple allegedly laundered the stolen bitcoin by depositing funds in a number of cryptocurrency exchanges and darknet markets using fake identities. According to the DOJ, they then would cash out from Bitcoin ATMs and spend money on NFTs, gold, gift cards, and make deposits into their own accounts.

The husband and wife team face up to twenty years in prison if found guilty of money laundering.

Read the Washington Post article here.

Department of Treasury Warns Against Money Laundering in NFTs

In February 2022, the US Department of the Treasury (Treasury Department) issued a report on the study of the facilitation of money laundering and terror finance through the trade in works of art. The Treasury Department noted that certain qualities inherent to art, including the high-dollar value of a single transaction, ease of transport of works of art, culture of privacy in the market, and use of art as an investment or financial asset make this market attractive to illicit actors.

The Treasury Department's report examined risks associated with the purchase of art from online marketplaces as non-fungible tokens (NFTs), which are digital units on an underlying blockchain that can represent ownership of a digital work of art. The Treasury Department noted that NFTs can be used to conduct self-laundering, where criminals purchase an NFT with illicit funds and then transact with themselves to create a record of sales on blockchain. The NFT can then be sold to an unassuming buyer who compensates the criminal with clean funds. Other risks of NFTs include the ability to transfer some NFTs via the internet, thereby making digital art susceptible to exploitation by criminals seeking to launder the illicit proceeds of a crime. In addition, the structure of NFT transactions through quick smart contracts creates a higher incentive to transact rather than verify the identity of a buyer or conduct proper due diligence. Furthermore, traditional art auction houses or galleries are not well-versed in the technicalities of the distributed ledger technology required to practice effective customer identification and verification in the NFT space.

The Treasury Department's report also examined the possibility of money laundering associated with NFTs that are used for payment or investment purposes, which could cause the NFTs to fall under the virtual asset service provider definition (VASP). Service providers that use NFTs in such a way and meet this definition of VASP may be required to establish and implement compliance controls, compliance officers, and relevant trainings, among other items, under the US AML/CFT provisions.

Read the Department of Treasury's report here.

Former NFL Player Joins Thirteen Other Defendants in Nationwide Health Care Fraud Scheme

Former National Football League (NFL) player, Robert McCune, was sentenced to five years in prison for defrauding the Gene Upshaw NFL Health Reimbursement Account Plan (the Plan), which provided former players, their spouses, and dependents up to a maximum of $350,000 per player tax-free reimbursement for out-of-pocket medical care expenses not covered by insurance.  

McCune allegedly submitted 68 false and fraudulent claims on his own and other former players' behalf between June 5, 2017, and April 12, 2018. He sought reimbursement for expensive medical equipment costing $40,000 or more, including ultrasound machines, electromagnetic therapy devices, and hyperbaric oxygen chambers. McCune's fraudulent claims to the Plan totaled $2.9 million.

McCune joined thirteen other defendants who participated in the nationwide false claim scheme and plead guilty to one count of conspiracy to commit health care fraud and wire fraud, ten counts of wire fraud, twelve counts of health care fraud, and three counts of aggravated identity theft.

Read the DOJ press release here.