On March 15, 2023, the United States Attorney for the Southern District of New York unsealed a twelve-count Indictment that charges Ho Wan Kwok (“Kwok”) and his financier, Kin Ming Je (“Je”), with various sprawling schemes – including one involving cryptocurrency – in which the defendants solicited investments in several entities and other programs via fraudulent misrepresentations to hundreds of thousands of Kwok’s online followers. Moreover, the Indictment alleges that Kwok and Je misappropriated hundreds of millions of dollars in fraudulently obtained funds during the conspiracy.

Specifically, the Indictment charges Kwok with conspiracy to commit wire fraud, securities fraud, bank fraud, and money laundering. He was also charged with the underlying acts of wire fraud, securities fraud, international “promotional” money laundering (in violation of 18 U.S.C. § 1956(a)(2)(A)), international “concealment” money laundering (in violation of 18 U.S.C. § 1956(a)(2)(B)(i)), and “spending” money laundering (in violation of 18 U.S.C. § 1957), with the last charge resting on a single $100 million wire transfer. Je was also charged with these crimes, in addition to obstruction of justice.

In regards to the money laundering schemes, the Indictment alleges that the defendants attempted to conceal the source of their illicit proceeds by transferring “money into and through more than approximately 500 accounts held in the names of at least 80 different entities or individuals[,]” through bank accounts in the U.S., the Bahamas, and the United Arab Emirates (“UAE”).  Further, the Indictment alleges that the defendants used over $300 million of fraudulent proceeds for the benefit of themselves and their family members.  The Indictment therefore contains a detailed notice of forfeiture, listing numerous assets that allegedly constituted or were derived from proceeds traceable to the charged offenses.  These assets include numerous bank account balances collectively amounting to hundreds of millions of dollars, as well as a luxurious mansion in New Jersey, several extremely high-end automobiles, and a 46-meter “superyacht.”  The government’s press release includes photos of some of these assets, included in the visual above.

Continue Reading  Indictment Alleges Investor Fraud of Over $1 Billion – And Elaborate Money Laundering and Lavish Spending

The U.S. Department of Justice (“DOJ”) announced on March 15, 2023 that in a coordinated effort between U.S. Federal Bureau of Investigations, Europol, and German police, the darknet cryptocurrency mixing service ChipMixer has been shut down.  The operation involved the U.S. government’s court-authorized seizure of two domains that directed users to the ChipMixer service and one Github account.  In addition, German authorities seized $46 million in cryptocurrency, as well as ChipMixer’s back-end servers used to run the site. 

Further, the U.S. Attorney’s Office for the Eastern District of Pennsylvania filed a criminal complaint against ChipMixer’s suspected founder, Vietnamese national, Minh Quoc Nguyen (“Nguyen”), alleging that Nguyen openly flouted financial regulations and instructed users how to use ChipMixer to evade reporting requirements while obscuring his true name under a series of stolen and fictitious identities. The complaint also alleges that ChipMixer, described as a popular platform for laundering illicit funds gained from unlawful activities like drug trafficking, ransomware attacks (according to Europol, ransomware actors Zeppelin, SunCrypt, Mamba, Dharma, Lockbit have used ChipMixer), and payment card fraud, was used to launder more than $3 billion in cryptocurrency since 2017.  Nguyen has been charged with money laundering, operating an unlicensed money transmitting business, and identity theft in connection with the operation of ChipMixer. 

Continue Reading  Darkweb Cryptocurrency Mixer ChipMixer Shut Down for Allegedly Laundering $3 Billion Worth of Crypto

Rodeo Drive

Indictment Alleges Use of Shell Companies, Nominees, Foreign Bank Accounts and Real Estate

On December 7, 2022, the United States Attorney’s Office for the Eastern District of New York (“DOJ”) unsealed a seven-count indictment against Andrii Derkach.  In the corresponding press release, Derkach is described as a “Kremlin-backed Ukrainian politician and oligarch” who attempted to “influence the 2020 U.S. Presidential election on behalf of the Russian Intelligence Services.”  Derkach was charged with conspiracy to violate the International Emergency Economic Powers Act (“IEEPA”), bank fraud conspiracy, money laundering conspiracy, and four counts of money laundering.  His wife, Oksana Terekhova, is alleged to be a co-conspirator and is referred to as “Co-Conspirator 1” in the indictment.  The investigation was “coordinated through the Justice Department’s Task Force KleptoCapture, an interagency law enforcement task force dedicated to enforcing the sweeping sanctions, export controls, and economic countermeasures that the United States . . . has imposed in response to Russia’s unprovoked military invasion of Ukraine.”

In connection with the indictment, the DOJ is requesting both criminal forfeiture of two Beverly Hills condominiums at issue in the indictment, as well as civil forfeiture in a parallel proceeding.  If successful, the DOJ would seize both the condominiums and proceeds in an investment and banking account held by Derkach’s alleged business entity.  Derkach remains at large.

This appears to be another in the long line of actions and sanctions brought against alleged Russian oligarchs and Russian agents, especially those with close connections to Russian Intelligence Services, in response to Russia’s invasion of Ukraine (of which we have blogged about here and here).  As long as Russia remains active in Ukraine, it is likely that federal law enforcement will continue to focus on the actions and assets of high-profile Russian oligarchs and agents in the U.S.  Financial institutions should continue to remain vigilant, as we have blogged about here, in rooting out attempts to evade sanctions.

Continue Reading  Russian Agent’s Beverly Hills Condominiums Subject to Forfeiture Based on Alleged Violations of Bank Fraud, Money Laundering, and U.S. Sanctions Statutes

On Friday, the Department of Justice (“DOJ”) announced two developments:  First, the release of a 66-page report, The Role of Law Enforcement in Detecting, Investigating, and Prosecuting Criminal Activity Related to Digital Assets (the “Report”), issued under President Biden’s March 9, 2022 Executive Order on Ensuring Responsible Development of Digital Assets.  Second, the establishment of the Digital Asset Coordinator (“DAC”) Network, a nationwide group of prosecutors designated as legal and technical experts in digital asset cases.

We focus here on the regulatory and legislative recommendations of the Report, which seek to expand significantly the ability of the DOJ to investigate and prosecute offenses involving digital assets. The recommendations include increasing criminal penalties, extending statutes of limitations, expanding venue provisions, enhancing the government’s forfeiture powers, and prohibiting virtual asset service providers from “tipping off” the subjects of grand jury subpoenas received by the providers.  The recommendations also include making clear that the federal criminal law against maintaining an unlicensed money transmitter applies to peer-to-peer platforms that purportedly do not take custody or assume control over the digital asset being exchanged; ensuring that the Financial Crimes Enforcement Network (“FinCEN”) issues a final rule expanding the application of the Travel Rule under the Bank Secrecy Act (“BSA”) to digital asset transfers; and expanding or arguably clarifying that the BSA applies to platforms dealing in non-fungible tokens, or NFTs, including online auction houses and digital art galleries.

Continue Reading  DOJ Issues Report on Digital Asset Law Enforcement Seeking Expansive New Powers, and Launches New Crypto Prosecutor Network

On February 8, 2022, the Department of Justice announced the seizure of a record $3.6 billion in stolen BTC it alleges was tied to the 2016 hack of Bitfinex, a virtual currency exchange.  A husband-wife duo, Ilya “Dutch” Lichtenstein and Heather Morgan of New York, New York were arrested the same day and charged via a criminal complaint with conspiracy to commit money laundering and conspiracy to defraud the United States.  Lichtenstein and Morgan are being held on $5 million and $3 million in bail, respectively, and will be on house arrest pending trial.

The Statement of Facts by the government in support of the criminal complaint filed against the defendants reveals a vast and complicated web of transactions that allegedly permitted Lichtenstein and Morgan to transfer approximately 25,000 of the 119,754 BTC stolen by hackers—valued at “only” $71 million at the time of the theft but now worth about $4.5 billion—to various virtual currency exchangers.  According to the Statement of Facts, the stolen BTC was shuttled to an unhosted wallet (i.e., a cryptocurrency wallet not controlled by a third-party but by the user) with over 2,000 BTC addresses, then to various accounts at the “darknet market AlphaBay,” later to a number of accounts at four different virtual currency exchangers, then to more unhosted BTC wallets, and finally to accounts at six more virtual currency exchangers where it was converted into fiat currency, gift cards, and precious metals.  The defendants further allegedly liquidated BTC through a BTC ATM and purchasing non-fungible tokens.

As if the sheer volume and layers of accounts was not enough, the duo allegedly:

  • Moved the funds in a “series of small amounts, totaling thousands of transactions”;
  • Used software to “automate transactions” which allowed for “many transactions to take place in a short period of time”;
  • “Layered” transactions by depositing and withdrawing the BTC through many accounts to obfuscate the trail, including through extensive layering activity that employed the “peel” chain technique; and
  • “Chain hopped” by converting BTC to anonymity-enhanced virtual currency to cut and disguise the blockchain trail.


Continue Reading  A Record $3.6 Billion Seizure and the Twisting Paths of Money Laundering in the Digital World

Sentencing is a critical stage in the federal criminal process, particularly given the incredibly high rate of guilty pleas in federal court.  There is a very strong argument that sentencing far eclipses the importance of the increasingly rare trial in the federal criminal system.  If a federal criminal investigation cannot be “killed,” then in many cases – particularly in “white collar” cases – the focus early on for both the defense and the prosecution is the sentencing hearing, and how to maximize one’s position, because a federal charge often produces a conviction via plea, or less often, via trial.  Stated otherwise, federal criminal defense is often all about sentencing.

At sentencing, sometimes defendants – and, less often, the prosecution – will make arguments regarding “similarly situated” defendants, and the sentences that they received.  Sometimes these arguments resonate with the sentencing court; sometimes not.  Regardless, these arguments can be tricky because reliable “statistics” are elusive, and it’s not always clear that justifiable comparisons are being drawn by either side.  We therefore were interested when the U.S. Sentencing Commission (“the Commission”) recently issued the Judiciary Sentencing Information (“JSIN”) platform.  Although it is difficult to draw clear conclusions from the JSIN platform, the data is nonetheless fascinating, and we discuss in this blog potential insights into sentences for money laundering and Bank Secrecy Act (“BSA”) offenses.

We have reviewed the data and created summary charts for your consideration.  Because the Commission has invited federal judges to use the JSIN platform when sentencing, it by definition is relevant to defense attorneys and prosecutors.
Continue Reading  U.S. Sentencing Commission Data on Money Laundering and BSA-Related Offenses Reveals:  Courts Often Sentence Below the Guidelines Range

Caracas, Venezuela

Indictment Alleges $1.6 Billion in Corrupt Contracts, Funneled Through Shell Companies and Correspondent Accounts, and Paid With Gold Sold on Behalf of Venezuela

On October 21, 2021, a grand jury indictment was unsealed in the Southern District of Florida charging two Venezuelan and three Colombian citizens with one count of conspiracy to commit money laundering and four counts of money laundering.  The indictment revealed an alleged bribery scheme involving a former Venezuelan state governor and Venezuelan government authorities that provide food and medicine to citizens in need.  A portion of the $1.6 billion in contracts secured by alleged bribes was laundered into or through the United States through a web of accounts and businesses.  This indictment serves as yet another example of the United States Department of Justice’s (“DOJ”) use of money laundering charges to combat corruption in Venezuela (as we have blogged about repeatedly: here, here, here, here, here and here).  It also represents another example of DOJ using the money laundering statutes to charge foreign government officials at the highest levels when the Foreign Corrupt Practices Act cannot apply.
Continue Reading  (More) Money Laundering Charges Announced for Alleged $1.6 Billion Venezuelan Corruption Scheme

Art & Antiquities; Beneficial Owners; Foreign Corruption — and More

We are really pleased to be moderating, once again, the Practising Law Institute’s 2021 Anti-Money Laundering Conference on May 11, 2021, starting at 9 a.m. This year’s conference again will be entirely virtual — but it will be as informative, interesting and timely as