US DOJ Continues to Position Itself as Preeminent Global Enforcement Agency for Virtual Currency and Digital Assets
The news about virtual currency-related enforcement activity coming out of the US Department of Justice (DOJ) is coming so fast that it can sometimes feel hard to keep up. The summary of recent actions below shows how, in just the past month, DOJ has shown its commitment to pursuing crime involving cryptocurrency and digital assets.
A New “Crypto Czar”
On February 17, 2022, DOJ announced the first director of its newly created National Cryptocurrency Enforcement Team (NCET). Director Eun Young Choi—already dubbed the “Crypto Czar” by the national media—is a DOJ veteran and spent nearly a decade prosecuting cybercrime cases as an assistant United States attorney in the Southern District of New York. Most recently, Choi has served as senior counsel to Deputy Attorney General Lisa Monaco, but prior to that time, Choi was the cybercrime coordinator in the Southern District of New York and prosecuted such notable cases as the Silk Road case and the operation of an unlicensed currency exchange. The decision to place someone close to Monaco at the top of NCET indicates the importance with which DOJ views NCET’s mission. To the extent one can forecast DOJ’s future enforcement activities from where it chooses to place talent and resources, it looks very clear that virtual currency and digitals assets are likely to remain a top-level priority of the department for some time.
The appointment of Choi appears calculated to send a clear message. Much like it has for the past several decades in areas such as global anticorruption, DOJ is staking its claim as the world’s preeminent law enforcement agency when it comes to combatting crimes involving digital assets. “The department has been at the forefront of investigating and prosecuting crimes involving digital currencies since their inception,” Choi said in a statement. “The NCET will play a pivotal role in ensuring that as the technology surrounding digital assets grows and evolves, the department in turn accelerates and expands its efforts to combat their illicit abuse by criminals of all kinds.”
A Dedicated FBI Investigative Team
In conjunction with Choi’s appointment, the Federal Bureau of Investigation (FBI) announced the creation of a new investigative team dedicated solely to virtual currency. This team will work with and within NCET to investigate and disrupt crimes involving digital assets wherever they occur.
Arrests and the Largest Asset Seizure in DOJ History
Significantly, both announcements come on the heels of DOJ’s most substantial seizure of virtual currency of all time. On February 8, authorities arrested Ilya Lichtenstein and Heather Morgan (a.k.a. Razzlekhan) of New York City in connection with their alleged roles laundering Bitcoin stolen during the 2016 hack of Bitfinex, a leading exchange. While these arrests are significant themselves, the accompanying eye-popping recovery of approximately $3.5 billion in stolen Bitcoin was even more noteworthy. The recovery represented the single largest asset seizure in DOJ’s long history. Investigators’ ability to trace and recover such a staggering amount demonstrated considerable sophistication and skill on the part of the FBI, the Internal Revenue Service (IRS), and the Department of Homeland Security, Investigations (HSI), which jointly conducted the investigation.
Forecast for Clients, Companies and Investors
The infamous Willie Sutton once quipped that he robbed banks because “that’s where the money is.” The same logic applies both to the criminals seeking to exploit the promise of digital assets and to DOJ’s decision to prioritize this area for enforcement. The explosion of worldwide interest in digital assets and the largest asset recovery in DOJ’s history has very clearly convinced its leadership that virtual currency is an area in which increased enforcement presents a good return on investment.
Companies and investors—wherever in the world they may be—should be mindful of these developments. DOJ has shown it is committed to further developing enforcement capabilities in this space, and those looking to avoid law enforcement scrutiny should be building know-your-customer, suspicious activity reporting, anti-money laundering and other compliance functions now that will comport with the expectations of the US government. That is equally true for entities that generally operate outside of US territory; DOJ has a long history of extraterritorial enforcement, and it appears wholly dedicated to extending its reach as far as possible into the world of virtual currency and digital assets.
