US enforcement agencies are turning up the heat on crypto-related crime

On the evening of Jan. 7, Anatoly Legkodymov, founder of the cryptocurrency exchange Bitzlato, was arrested in Miami. The following day, the United States Department of Justice (DOJ) unsealed a complaint in federal court charging him with “conducting a money transmitting business that transported and transmitted illicit funds.” According to the DOJ, Bitzlato failed to meet U.S. regulatory safeguards, including Anti-Money Laundering requirements. 

Less than a month earlier, former FTX CEO Samuel Bankman-Fried was arrested in the Bahamas. In a statement, U.S. Attorney General Merrick Garland said, “The Justice Department has filed charges alleging that Samuel Bankman-Fried perpetrated a range of offenses in a global scheme to deceive and defraud customers and lenders of FTX and Alameda, as well as a conspiracy to defraud the United States government.”

Garland stated, “The U.S. Department of Justice will aggressively investigate and prosecute alleged criminal wrongdoing in the financial system and violations of federal elections laws.” But is it really a new day? Will U.S. law enforcement be able to go after alleged crypto criminals at home and abroad?

According to Oberheiden PC attorney Alina Veneziano, who represents executive clients under criminal investigation against U.S. Securities and Exchange Commission subpoenas and DOJ fraud allegations, the answer is yes.

“Attempts to reign in this new, unrestrained industry were inevitable,” Veneziano tells Magazine. She believes that federal government agencies are increasing their investigative efforts toward crypto crime and will utilize all the tools at their disposal — subpoenas, summons and inter-governmental sharing of information.

 “For example, only last year, the SEC increased the size of its Crypto Assets and Cyber Unit in an effort to investigate more fraudulent crypto asset schemes and better protect investors in the crypto markets.” Veneziano also believes the Internal Revenue Service will further enforce U.S. tax laws for cryptocurrencies. 

Former federal prosecutor Grant Fondo also sees an increase in activity. Now a trial attorney and founder of the Digital Currency and Blockchain Technology practice at Goodwin, Fondo believes that this is the result of the current bear market, widespread acceptance of cryptocurrency and the government’s obligatory focus on crime.

“I think anytime there is a course correction and/or an economic event like a crypto winter, that can also increase activity […] When assets go down, people get hurt, and if people are mixing funds and things, it can create problems,” Fondo tells Magazine. Add to that the prolific global adoption of crypto, more people involved and the DOJ’s concern about any asset used for illicit activity, and Fondo sees beefed up enforcement as an inevitability.

In 2021, the DOJ created the National Cryptocurrency Enforcement Team (NCET) to handle investigation and prosecution of criminal misuse of cryptocurrency. NCET would combine the expertise of the agency’s Money Laundering and Asset Recovery Section and the Computer Crime and Intellectual Property Section. In 2022, the DOJ also created the Digital Asset Coordinator (DAC) Network. Under the leadership of NCET, designated federal prosecutors from U.S. attorney’s offices around the country would be assigned to the DAC Network. Each office’s DAC will be the digital asset subject matter expert and the first, investigative source of information. 


What types of crimes аre they going after?

According to a DOJ report submitted to the presidential administration in September, the agency believes that cryptocurrency is the preferred payment method for ransomware and other digital extortion activities. As an example, the DOJ referred to a ransomware attack in May 2021 on the Colonial Pipeline. According to the report, the attack forced the company to shut down a gasoline and jet fuel pipeline for days. This resulted in fuel shortages around the country, including several airports. The attackers demanded and received a ransom paid in Bitcoin. 

The report also says, “Cryptocurrency is used to raise funds for terrorist organizations and other nation state threat actors.” The DOJ states that its largest cryptocurrency seizure disrupted the funding campaigns of ISIS and other terrorist groups. The agency took down a fraudulent ISIS website operation that purported to sell N95 masks and other protective equipment during the height of the COVID-19 pandemic.

The Department of Justice released photo of a group posting a request for donations and claiming to be a Syrian charity, but allegedly sought funds to support “the mujahidin in Syria with weapons, financial aid and other projects assisting the jihad.”
The Department of Justice released photo of a group posting a request for donations and claiming to be a Syrian charity, but allegedly sought funds to support “the mujahidin in Syria with weapons, financial aid and other projects assisting the jihad.” (

The Department of Justice released photo of a group posting a request for donations and claiming to be a Syrian charity, but allegedly sought funds to support “the mujahidin in Syria with weapons, financial aid and other projects assisting the jihad.”

Veneziano believes that these crimes are not new — they’ve just adapted to cryptocurrency. “We are likely not looking at the creation of brand new crimes but are instead more likely to see the crypto element incorporated into other offenses, such as crypto tax evasion, crypto theft, unregistered crypto offerings, crypto money laundering, etc. Due to the nature of the blockchain, it is likely to be confined to federal offenses as opposed to state crimes,” Veneziano says.

Fondo suggests that wire fraud is also a big factor. “So, you’ll notice in a lot of the criminal indictments, they allege wire fraud. Wire fraud is agnostic to the type of asset, whether it’s a security, a commodity, whatever — doesn’t matter.” Historically, criminals would use the telephone, aka the wires, to commit fraudulent acts. Today, wire fraud refers to crimes committed using any type of telecommunications technology. According to Fondo, if you move digital assets around using the wires, and you commit fraud, it’s a crime, and most indictments in the crypto space fall into that category. 

For example, in a statement on Dec. 14, 2022, U.S. Attorney for the Southern District of New York Damian Williams “announced charges in two separate indictments against the founders and promoters of two cryptocurrency Ponzi schemes known as IcomTech and Forcount,” both with conspiracy to commit wire fraud. 

According to the DOJ, victims purchased IcomTech and Forcount investment products using cryptocurrency, cash, checks and wire transfers. They were then given access to an online portal where they could monitor dubious returns. “While Victims saw ‘profits’ accumulate on the schemes’ respective online portals, most victims were unable to withdraw any of these so-called profits and ultimately lost their entire investments.” All the while, IcomTech and Fourcount’s promoters skimmed hundreds of thousands of the victim’s funds, withdrew it as cash and spent the loot on promos for the Ponzi scheme, luxury goods and real estate. 

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What other agencies are involved?

Venziano believes that collaboration between government agencies on crimes is nothing new and should be expected in the crypto sphere. Venziano says, “Consider a crypto fraud scheme involving a new token. The SEC will be involved if the token is unregistered and satisfies the definition of an ‘investment contract’ under the Howey test,” an analysis based on a Supreme Court decision.

Wally Adeymo, deputy treasury secretary
Wally Adeymo, deputy treasury secretary. (

She continues, “The IRS will also be involved where there is tax evasion or the failure to report crypto sales and dispositions. Further, the DOJ may initiate an investigation where money laundering or other illicit activity is present. There is even a call for greater collaboration from the private sector to combat crypto fraud.” Additional agencies, including the Financial Crimes Enforcement Network (FinCEN), the Federal Bureau of Investigation, Immigration and Customs Enforcement, the Secret Service and the Department of Homeland Security have all participated in cryptocurrency investigations. 

In the Bitzlato case, the DOJ teamed up with the Department of Treasury’s Financial Crimes Enforcement Network. In a joint press conference with officials from the DOJ, Deputy Secretary of the Treasury Wally Adeyemo said that FinCEN is officially identifying Bitzlato as a “primary money laundering concern” in connection with Russian illicit finance. Adeyemo thanked the DOJ “for being such great partners” on this action but also on “going after this ecosystem more broadly.”

Do politics affect who the government investigates?

According to Fondo the answer is yes and no. The DOJ is part of the Executive Branch of government and the president nominates its leader, the Attorney General. The U.S. Senate is tasked with confirming the president’s nominee.

“Generally, it is an agency that is agnostic in a sense as to who the president is,” Fondo says. When he was a federal prosecutor, Fondo believed that he was completely immune to whoever was in the White House. On the other hand, whenever national actors are involved, Russia or China for example, Fondo says that a potential case escalates in significance. Since the DOJ gets lots of leads and complaints, so they have to prioritize resources and decide which ones to pursue.

“A case that involves a national actor, stealing trade secrets, stealing assets, funneling assets (to Russia) to fight, say, the war in the Ukraine, that will rise well above something else that’s an otherwise more typical crime. So, in that way, the DOJ is more political.”

Fondo also believes that when there is a national scandal, like Enron, Bernnie Madoff or the fall of FTX, the government is more apt to jump in and get more involved. “When something hits the press, like a major incident, there is more pressure to get charges more quickly,” Fondo says.

Venziano points out that crypto activity isn’t limited by geographic borders and can affect overseas markets in a matter of seconds. “Crypto activity can certainly affect international politics, demanding cooperation between the United States and enforcement agencies in other nations. Take the Bitzlato case as an example. The DOJ received significant operational and informational assistance from other agencies — both domestic and international — including Customs and Border Protection and also EUROPOL and Dutch and Belgian authorities,” Venziano says.

In the U.S., there are no federal laws on the books specifically regulating the use of cryptocurrency. Different regulatory agencies have taken responsibility and have written rules for the oversight of different digital assets. Sooner or later, Congress is expected to move legislation to the president’s desk, formally defining cryptocurrencies and how they are to be regulated.

In the meantime, Fondo believes that the lack of clarity, and even disagreement among regulators, leads to ambiguity that crypto-centric companies struggle with. In essence, it’s hard to follow the rules if you don’t know what they are, especially on the civil, as opposed to the criminal, side of things.

Nonetheless, he believes that the industry has matured in recent years, and “there are a lot of great actors out there trying to do the best they can with regulatory uncertainty, but also trying to meet the demands of the market. But, when there’s a situation, a crime is a crime is a crime. If the government sees something that looks like fraud, it doesn’t really matter what the asset is, and they think it’s significant enough and worthy of chasing, they’ll do it.”

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Crypto winter can take a toll on hodlers’ mental health

With so many struggling to maintain emotional well-being during this crypto winter, self-improvement and mental health experts can help navigate the ups, downs and soul-shattering experiences that a long-term bear market can bring.

Mental health professional Elizabeth Sterbenz and wellness thought leader Srikumar Rao discuss with Magazine how to cope with the depreciation of crypto portfolios, move forward and illuminate intuitive happiness. Sterbenz is a licensed psychotherapist in California specializing in individual, couples and financial therapy. Rao is an international speaker and executive business coach with a PhD from Columbia University. He teaches a course at the Kellogg School of Management at Northwestern University that merges Eastern philosophies with modern business practices.

Learn how to ride a tsunami

Rao believes that crypto traders, developers and community members have been hit by a tsunami. They are struggling through a long-term crypto winter that shows no immediate signs of warming. They also celebrated a two-year NFT boom that was quickly followed by a devastating bust.

The community was recently gobsmacked when major figures in the cryptocurrency industry, like Sam Bankman-Fried and Do Kwon, were accused of fraudulent activities, discrediting the industry and harming investors. 

And the hits keep coming. Just weeks ago, the United States Department of Justice and other international authorities took down a Hong Kong-based crypto exchange and arrested its founder in Miami. 

Rao believes that the bear market can be used as an opportunity to learn how to surf the top of the tsunami while calmly observing what’s happening below. He says one can achieve this by accepting that winning is not a requirement for happiness. Happiness doesn’t come from making the right trade or a lot of money. According to Rao, that’s a false belief:

“The thought that you have to have something happen in order to be happy, it’s just false. But you believe in it so strongly because you never really thought about it independently. You’ve just been carried on by the mass hysteria.” 

Sterbenz takes it a step further, suggesting it’s unnecessary to go it alone, especially in these tough times. “I think you have to be able to kind of trust, you know, having a good financial adviser. That’s an important part of your team.”

She believes getting sound, objective financial advice will provide peace of mind. Relying on someone else to help assess trades and to help make decisions about overall financial situations provides a feeling of being covered. “You can then set your financial worries aside and focus on your well-being,” Sterbenz says. 

Rao claims it’s also important to recognize that cryptocurrency has no intrinsic value. The value is only what people believe it is. Large numbers of people agree that a particular token has a particular value at a particular time, but the moment people don’t feel that way anymore, the coin ceases to have the same value.

Rao says, “If you accept that up front, before you make the investment, and you say that what could have happened did happen, and it happened when I made the wrong trade, that’s okay. I’ll recover. I’ll move on, and I never really needed this to work out to be happy in the first place.”

A crowd formed outside of the Oregon Trust & Savings after executives announced it was shuttering because it would be unable to pay obligations. Aug. 22, 1907. Source: Wikimedia Commons

How to deal with the crypto corruption shakeout

Many of the crypto community’s worst fears were realized when FTX imploded and its founder was arrested, as well as when Terra crashed and subsequent charges were filed against its former CEO. Uncertainty about the inevitability of stricter federal regulatory efforts further validated those concerns.

Crime is now, undeniably, a part of the crypto ecosystem, just as it is part of the traditional investment arena. That’s a tough pill to swallow, and even meaningful regulatory crackdowns are cause for concern.

Nonetheless, Sterbenz suggests that this is nothing to be ashamed of and doesn’t mean participating in crypto is disreputable or embarrassing. Comparing the situation to those critical of traditional investors after history’s largest Ponzi scheme was exposed, Sterbenz says, “That’s also like saying, like Bernie Madoff, ‘I told you all these stocks were a scam. You should be putting your money in the mattress.’”

According to Sterbenz, it’s important to separate from the bad behavior of unscrupulous characters and simply accept that there will always be bad actors.

Rao believes blaming lousy luck or crypto losses on those bad actors certainly won’t lead to happiness or peace of mind. He says that when the universe, or its participants, doesn’t play by the rules and things go the opposite way, it’s easy to assume the sky is falling. Distress and unhappiness can quickly follow. 

“And you blame it all on an outside force. I am unhappy because so and so did such, and he’s a downright scallywag. And because he’s a scallywag, he’s now being investigated. But, in the meantime, the markets are gone to hell!” Rao says. Instead, he suggests anchoring yourself in the idea that you’re only involved in crypto because that’s where your path is taking you. “Me playing this game is something I do because it’s my path in life, and I’ll enjoy playing the game. I don’t necessarily have to win for it to bring me satisfaction or joy,” Rao says.

That’s great, but I’m rekt!

According to Rao, traders who have lost it all must accept that they believed something, perhaps all of their lives, that turned out to be disastrously untrue. Happiness cannot be found in a successful trade any more than it can be lost by a bad one.

Rao says, “The thing to do is not beat myself up and shoot second arrows at myself. Simply recognize that this was wrong. It was a sharp cut with a knife, but now that I have received it, I can see how clearly I was wrong. Let me pick up the pieces and not make that same mistake again. Tomorrow is another day, and I don’t have to let today’s residue poison tomorrow.” 

Although it’s not easy, Rao suggests looking at awareness like it’s a flashlight. A flashlight illuminates whatever it shines its light on. “If you illuminate it on the big gains you once had and neglected to sell, and now it’s all gone, and you’re behind where you started, you’re shining the flashlight of your awareness on something that you defined as wrong in your life,” Rao says. That’s an inefficient strategy. Instead, he suggests shining the flashlight on what to do next. “You’re not starving, you’re not being foreclosed and thrown out of the house — or even if you are, nobody’s holding your hands in a vice while they rip your fingernails off,” Rao says.

For those really struggling with severe anxiety or depression, Sterbenz recommends therapy and believes that professional help can be a gateway to personal growth. If one is not experiencing a severe clinical need and therapy isn’t necessary, she suggests focusing on the concept of radical acceptance. 

According to the Berkeley Well-Being Institute, radical acceptance is “accepting what is not under your control and embracing what is happening now in a non-judgmental way.” Radically accepting emotional or physical pain can reduce the suffering they cause. “If you were involved in any of the cryptocurrencies that have been affected by this, you can move forward from there. Other people have also been affected by this. You made the best decision you could at the time,” Sterbenz says. 

Reach out for help 

If crypto traders or holders are experiencing thoughts of self-harm, Sterbenz says, “Get help immediately.” She suggests going directly to a medical professional or calling a trusted friend.

The crypto community has previously shared resources such as international aggregators of suicide hotlines during bear markets when a number of hodlers who were underwater expressed harmful thoughts.

Regarding such thoughts, Sterbenz says, “They do pass. It does not feel like that when you’re in that moment. It does not feel like those two to five minutes are going to end.” Therefore, she believes it’s most important to have people around you who will do the best for you.

Sterbenz also believes that family and friends shouldn’t hesitate to reach out to loved ones who might be considering self-harm. She says that many people think talking about suicide makes it more likely something will happen. “And that is really not true,” Sterbenz says. She recommends directly asking those struggling if they are thinking of hurting themselves. “That’s not gonna make them more likely to do something.”

Lady of Crypto, a trader and Twitter influencer, also advocates for mental health. She tells Magazine, “It was an incredibly tough time in the crypto space, and so many people were affected. I’ve had friends who have struggled, and I’ve seen how people can become shadows of themselves and be pushed to the edge. To see these messages on Twitter really is heartbreaking. No one should ever be in a position where suicide is their only option. I just thought if I kept my inbox open and could make a difference to even one person, it would be worthwhile.”

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So, where’s the happiness after all?

According to Rao, one can’t look for happiness. It can’t be discovered in a favorite altcoin, and it won’t suddenly appear when Bitcoin finally breaks $100,000. Rao believes that happiness is not something to be sought after. The more one seeks happiness, the more it runs away. Happiness just happens. It’s not an aspirational goal but springs out organically in adopting a certain mindset.

“The mindset you’re gonna occupy as a crushed crypto trader is: Okay, I’ve blown a big chunk of my fortune and net worth away. It’s very unfortunate, but that’s the way the universe went. And I can now cry myself to sleep every night and make matters a whole lot worse, or I can shine the flashlight of my awareness on the fact that I’m still healthy. I’m still whole. I’ve learned a very expensive lesson,” Rao says.

Focus on what to do next. Even if yesterday’s red candles insistently keep trying to grab one’s attention, Rao suggests recognizing this as mental chatter. Instead, focus only on what to do going forward.

The post Crypto winter can take a toll on hodlers’ mental health appeared first on Cointelegraph Magazine.