peercem@ballardspahr.com | 646.346.8039 | view full bio

Margie is a litigator who, in her more than 30 years of practice, has handled matters across the criminal and regulatory spectrum including white collar criminal defense, regulatory matters, and complex civil litigation. Her work includes cases arising from alleged violations of the Internal Revenue Code, the FCPA, the BSA, and a broad range of fraud investigations.

She represents numerous individuals in several AML/BSA investigations by the U.S. Department of Justice and has represented a financial institution in a matter implicating BSA issues. She has handled matters involving Suspicious Activity Reports and Currency Transaction Reports and structuring-related offenses and she has represented individuals accused of money laundering offenses. Margie has also handled a significant number of matters with the SEC, FINRA, and the CFTC.

Farewell to 2020.  Although it was an extremely difficult year, let’s still look back — because 2020 was yet another busy year in the world of money laundering and BSA/AML compliance.

We are highlighting 12 of our most-read blog posts from 2020, which address many of the key issues we’ve examined during the past year

Incorporating in the Seychelles but Allegedly Operating in the U.S. Spells Trouble for Company and its Founders

Anse Source d’Argent, La Digue Island, Seychelles

The Bitcoin Mercantile Exchange, or BitMEX, is a large and well-known online trading platform dealing in futures contracts and other derivative products tied to the value of cryptocurrencies. Recently, the Commodity Futures Trading Commission (“CFTC”) filed a civil complaint against the holding companies that own and operate BitMEX, incorporated in the Seychelles, and three individual co-founders and co-owners of BitMEX for allegedly failing to register with the CFTC and violating various laws and regulations under the Commodity Exchange Act (“CEA”). The 40-page complaint alleges in part that the defendants operated BitMEX as an unregistered future commission merchant and seeks monetary penalties and injunction relief.

In a one-two punch, the U.S. Attorney’s Office for the Southern District of New York on the same day unsealed an indictment against the same three individuals, as well as a fourth individual who allegedly served various roles at BitMEX, including as its Head of Business Development. The indictment charges the defendants with violating, and conspiring to violate, the requirement under 31 U.S.C. § 5318(h) of the Bank Secrecy Act (“BSA”) that certain financial institutions – including futures commissions merchants – maintain an adequate anti-money laundering (“AML”) program.

Both documents are detailed and unusual. This appears to be only the second contested civil complaint filed by the CFTC based on the failure to register under the CEA in connection with the alleged illegal trading of digital assets (other than those for which settlement orders were entered into with the CFTC). The first such complaint was filed only a week prior against Latino Group Limited (doing business as PaxForex), but the BitMEX complaint has garnered more attention in light of BitMEX’s reputation and size. Most of the CFTC’s prior actions against digital asset companies involved claims for fraud or misrepresentation in the solicitation of customers. This complaint, against a relatively mature and large digital asset company, demonstrates that the CFTC continues to actively pursue trading platforms and exchanges that solicit orders in the United States without proper registration. In addition to failing to register, the complaint alleges that the defendants failed to comply with the regulation under the CEA, 17 C.F.R. § 42.2, which incorporates BSA requirements such as an adequate AML program.

The indictment is unusual because it charges a rare criminal violation of Section 5318(h) – the general requirement to maintain an adequate AML program. Although indictments against defendants involved in digital assets are increasingly common, this also appears to be the first indictment combining allegations involving the BSA, digital assets, and alleged futures commissions merchants.

The complaint and the indictment share the common theme that the defendants attempted to avoid U.S. law and regulation by incorporating in the Seychelles but nonetheless operating in the United States. The opening lines of the CFTC complaint declare that “BitMEX touts itself as the world’s largest cryptocurrency derivatives platform in the world with billions of dollars’ worth of trading each day. Much of this trading volume and its profitability derives from its extensive access to United States markets and customers.” Meanwhile, the indictment alleges that defendant Arthur Hayes – a Fortune “40 Under 40” listee – “bragged . . . that the Seychelles was a more friendly jurisdiction for BitMEX because it cost less to bribe Seychellois authorities – just “a coconut” – than it would cost to bribe regulators in the United States and elsewhere.”
Continue Reading CFTC and DOJ Charge BitMEX and Executives With Illegally Trading in Digital Assets and Ignoring BSA/AML Requirements

For years, lawyers have been in the cross hairs of prosecutors and regulators, who sometimes regard lawyers as potential gatekeepers responsible for preventing wrongdoing by clients. On April 29, 2020, the American Bar Association (“ABA”) issued an important opinion (“Opinion 491”) reminding lawyers that they are responsible for conducting sufficient inquiry into the facts and circumstances of a matter a client or prospective client asks them to undertake if there is a “high probability” that the client is seeking to use the lawyer’s services to commit a crime.

As we frequently blog, there are myriad ways that lawyers can hit the tripwire and face ethical or criminal liability for professional work performed for clients. The need for lawyers to be on guard against potential money laundering activity by clients is a primary focus of Opinion 491.
Continue Reading ABA Issues Formal Opinion on Lawyers as “Gatekeepers” for Client Criminality

Happy New Year! And, happy birthday to Money Laundering Watch, which is entering its fourth year.

Let’s look back2019 has been yet another busy year in the world of money laundering and BSA/AML. We are highlighting 12 of our most-read blog posts, which address many of the key issues we’ve examined during

Typical Virtual Currency Exchanges Do Not Require PA Money Transmitter Licenses

The Pennsylvania Department of Banking and Securities (“DoBS”) just released Guidance declaring that virtual currency, “including Bitcoin,” is not considered “money” under the Pennsylvania Money Transmission Business Licensing Law, otherwise known as the Money Transmitter Act (“MTA”). Therefore, according to the Guidance, the operator of the typical virtual currency exchange platform, kiosk, ATM or vending machine does not represent a money transmitter subject to Pennsylvania licensure.

This Guidance is important because it has implications beyond merely the burdens imposed by Pennsylvania law for obtaining a money transmitter license. As we previously have blogged (here, here and here), it is a federal crime under 18 U.S.C § 1960 to operate as an unlicensed money transmitter business, which is defined in part as a business “operated without an appropriate money transmitting license in a State where such operation is punishable as a misdemeanor or a felony under State law, whether or not the defendant knew that the operation was required to be licensed or that the operation was so punishable.” Thus, a state law violation can become a federal violation. Further, the Financial Crimes Enforcement Network (“FinCEN”) has issued Guidance declaring that administrators or exchangers of digital currency – including popular crypto currencies such as Bitcoin – represent money transmitting businesses which must register with FinCEN under 31 U.S.C. § 5330 as money services businesses (“MSBs”), which in turn are governed by the Bank Secrecy Act (“BSA”) and related reporting and anti-money laundering compliance obligations. Moreover, a failure to register with FinCEN as a MSB when required also represents a separate violation of Section 1960. Drawing on the FinCEN guidance, federal courts have upheld the convictions of individuals who ran virtual currency exchanges and consequently were convicted of violating Section 1960 for operating unlicensed or unregistered money transmitter businesses.
Continue Reading PA Department of Banking and Securities: Virtual Currency is not “Money”

Happy New Year! But while 2018 is still (just barely) with us, let’s take a look back.

2018 has been a very busy year in the world of money laundering and AML/BSA. We are highlighting 12 of our most-read blog posts, which address many of the key issues we’ve examined this year.

Address Emphasizes Role of SARs in Fighting Illegal Activity, Including Drug Dealing Fueling the Opioid Crisis

Kenneth Blanco, the Director of the Financial Crimes Enforcement Network (“FinCEN”), discussed last week several issues involving virtual currency during an address before the “2018 Chicago-Kent Block (Legal) Tech Conference” at the Chicago-Kent College of Law at Illinois Institute of Technology. Although some of his comments retread familiar ground, Blanco did offer some new insights, including the fact that FinCEN now receives over 1,500 Suspicious Activity Reports (“SARs”) a month relating to virtual currency.
Continue Reading FinCEN Director Addresses Virtual Currency and Touts Regulatory Leadership and Value of SAR Filings

The U.S. Department of Justice (“DOJ”) announced last week that it was disbanding the Financial Fraud Enforcement Task Force, established under the Obama Administration. In its place, pursuant to an Executive Order, the DOJ plans to establish the Task Force on Market Integrity and Consumer Fraud (“Task Force”). The purpose—according to a DOJ press

Exterior of the Robert F. Kennedy U.S. Department of Justice Building in Washington, D.C.

In a highly anticipated speech to the New York City Bar White Collar Crime Institute this morning, Deputy Attorney General Rod Rosenstein announced two new Department of Justice (“DOJ”) policies: first, a directive encouraging “coordination among Department

As we previously have blogged, the Financial Crimes Enforcement Network (“FinCEN”) became one of the first regulators to wade into the regulation of cryptocurrency when it released interpretive guidance in March 2013 stating that an administrator or exchanger of virtual currency is a Money Services Business (“MSB”). As a MSB, and according to FinCEN, an administrator or exchanger of virtual currency therefore is a “financial institution” subject to the Bank Secrecy Act (“BSA”) and its various AML-related requirements, unless a limitation or exemption applies.  Accordingly, the Department of Justice has prosecuted operators of cryptocurrency exchanges for a failure to register with FinCEN as a MSB, and FinCEN has brought civil enforcement proceedings against such exchanges for alleged failures to maintain adequate AML programs and file required Suspicious Activity Reports (“SARS”), among other alleged BSA violations.

Recently, regulators of all stripes across the globe have been moving swiftly to regulate cryptocurrency in various ways (see herehere, here, here, here, here, here, here, and here). Indeed, the Securities and Exchange Commission (“SEC”) has been very vocal and aggressive in claiming that many if not all Initial Coin Offerings (“ICOs”) involving cryptocurrency represent securities subject to the jurisdiction and supervision of the SEC, and already has filed several enforcement proceedings involving ICOs. Moreover the SEC just yesterday issued a statement that it considers exchanges for cryptocurrency to also be subject to its jurisdiction. Likewise, the U.S. Commodity Futures Trading Commission (“CFTC”) has asserted that cryptocurrencies are commodities subject to its jurisdiction; this week, a federal court agreed with this assertion in a CFTC enforcement action.  The CFTC claims that its jurisdiction reaches beyond cryptocurrency derivative products to fraud and manipulation in the underlying cryptocurrency spot markets.

But there is a potential problem with all of these regulators simultaneously rushing in to assert their respective power over cryptocurrency businesses, and it is a tension that does not seem to have attracted much public attention to date. Specifically, BSA regulations pertaining to the definition of a MSB, at 31 C.F.R. § 1010.100(ff)(8)(ii), flatly state that a MSB does not include the following:

A person registered with, and functionally regulated or examined by, the SEC or the CFTC, or a foreign financial agency that engages in financial activities that, if conducted in the United States, would require the foreign financial agency to be registered with the SEC or CFTC[.]

How can certain cryptocurrency businesses be subject to the claimed jurisdictions of FinCEN as well as the recent regulatory newcomers to this area, the SEC and the CFTC?
Continue Reading FinCEN Letter to U.S. Senate Committee on Finance Purports to Thread Needle of Potentially Competing Jurisdictions by Regulators over Cryptocurrencies