In 2022, a staggering $2.57 billion was reported to be stolen in cryptocurrency fraud schemes. That’s up 183% from the previous year. This blog post explains how crypto crimes occur and why only the most experienced criminal defense lawyers are competent to defend allegations of cryptocurrency crime.
Stechschulte Nell believes every member of the community should understand the law and how it affects them personally. Only then can they ensure they don’t violate the law and also understand how to protect themselves from unfair prosecution and conviction if they are charged with a crime.
What Is Cryptocurrency Fraud?
Cryptocurrency remains a mysterious concept to many people even though it has become a fixture in the financial world. Unfortunately, millions of people have been enticed to invest their hard-earned money in crypto ventures despite the fact that they do not fully understand how cryptocurrency works.
Crypto is a digital currency. Its significant difference from normal currency is the fact that all transactions and records are kept in an encrypted decentralized database using what is called “blockchain” technology. Because the transactions are encrypted and decentralized, the parties to whom the funds belong are anonymous and untraceable.
Why would this be attractive to someone doing business or seeking to invest money? The U.S. federal law requires that financial transactions that are suspicious or which involve $10,000 or more be recorded and reported to the Department of Treasury. These reports are filed by banks and may be investigated by federal law enforcement and tax authorities.
People who do not want to disclose the fact that they possess these funds, or people who obtained the funds through criminal activity do not want the government to either tax the money or discover where the money originated. By using the crypto economy, people can keep their transactions from being discovered and they can launder money gained through criminal activity.
Money Laundering Through Cryptocurrency
Money obtained through criminal activity can be laundered through the use of cryptocurrency through the three-step process of placement, layering, and integration.
Placement: This is the stage of money laundering in which the person with the illicit funds places the money into the financial system. Ideally, they wish to do so with as little notice as possible. That’s why large sums of money are often deposited in smaller increments over time to avoid being flagged. They may also purchase items and then resell them, later being able to point to the sale as the source of the new money.
Layering: The layering stage of the laundering process involves moving the money through multiple transactions using different means. A deposit may be moved into an investment, that is then traded for another valuable asset which is then sold, and those funds are used to purchase yet another property.
Integration: When the illicit money has been placed and then layered sufficiently to disguise its criminal origin, the funds laundered through the confusing series of transactions can be placed back into the person’s legitimate accounts.
How Does Cryptocurrency Launder Money?
Cryptocurrency is useful to launder illicitly obtained money because it is possible to establish multiple private crypto accounts and then shift money successively from one account to another, each time further obscuring where the funds came from. Since cryptocurrency has become a volatile investment, sometimes yielding enormous profits in a short period of time, large sums of money can be attributed to untraceable crypto transactions.
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Cryptocurrency Fraud
The promise of massive profits from modest investments continues to lure tens of thousands of trusting investors into cryptocurrency fraud schemes. In most cases, these victims are groomed over several weeks or months by someone they believe they met naturally online. Some of these “relationships” grow from dating apps, gig-economy work relationships, or well-designed fishing emails that appear to be legitimate opportunities.
Fraudsters often located abroad slowly win the trust of the targeted victim and convince them to place a small investment in a crypto fund, promising safety and an inside track to guaranteed profits. Few victims understand crypto beyond what they may have heard from general information sources. They have little if any understanding of how blockchain or crypto mining works.
Believing they have made legitimate investments in their own new cryptocurrency accounts, the fraudster convinces the victim to either follow up with more investments or to prepay taxes on the large profits they believe they made. However, the victim’s account was never theirs. Instead, the victim’s money was deposited into another crypto account with an anonymous owner who then shifted the funds several more times through multiple accounts until it disappeared.
Penalties for Cryptocurrency Fraud and Money Laundering
Cryptocurrency money laundering carries the same severe penalties as other forms of illegally hiding or disguising funds obtained from criminal activity.
Federal money laundering penalties include 10 to 20 years in federal prison, a fine of up to $500,000, and up to twice the value of the money laundered. It’s important to remember, however, that cryptocurrency crimes will necessarily involve using computers or other digital communications devices. That fact will usually serve as the basis for additional related criminal charges of wire fraud which also carry severe penalties of up to 20 years in prison for each event.
Contact the Best Criminal Defense Attorney in Tampa
While cryptocurrency offers a myriad of legitimate transactional opportunities, it can also create challenging legal situations that could leave you facing allegations of illegal activities.
Whether you’re already involved in the crypto world, or you find yourself confronted with allegations of cryptocurrency fraud or money laundering, staying informed and prepared is absolutely essential. Charges of such nature can have significant, long-lasting consequences on your life and reputation.
You need not face these accusations alone. The team at Stechschulte Nell is experienced in navigating the intricacies of such cases and is ready to provide expert defense on your behalf.
If you’re in need of professional legal advice or representation, we encourage you to reach out to us at 813-280-1244.
