Katherine Ross

OneCoin co-founder Karl Sebastian Greenwood faces 20 years in prison, according to the US Department of Justice on Tuesday, Sept. 12.&nbsp;



OneCoin is the crypto scheme that was revealed as a fraud back in 2017. It proved to have no functioning blockchain and had no chance of displacing bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) as an asset, despite claims to the contrary. 



“Greenwood and his co-conspirators, including fugitive Ruja Ignatova, conned unsuspecting victims out of billions of dollars with promises of a ‘financial revolution’ and claims that OneCoin would be the ‘Bitcoin killer,” US attorney Damian Williams <a href="https://www.justice.gov/usao-sdny/pr/co-founder-multibillion-dollar-cryptocurrency-scheme-onecoin-sentenced-20-years-prison">said</a> in a press release.&nbsp;



The sentencing comes after a <a href="https://blockworks.co/news/former-onecoin-executive-sentencing-ok">US judge ruled in April</a> that the sentencing could cover the global loss of the crypto scheme — which totaled $4 billion — though only $50 million of that was linked to US losses. Over three million people fell victim to their scheme.



Greenwood was accused of pocketing over $300 million. In addition to the prison term, Greenwood has to pay $300 million in forfeiture.



He’s been accused of purchasing luxury clothes with the proceeds as well as making a down payment for a yacht. He also flew around the world in the “OneCoin” plane making videos of his travels.



“Greenwood also lied to investors about the utility of the tokens included in trader packages, claiming that they could be used to secure positions in OneCoin’s ‘mining pools,’ depicted in promotional materials as computer hardware used to ‘mine’ OneCoins,” the press release said.



Prior to the sentencing, Greenwood faced a maximum of 60 years in prison.



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crypto fraud

OneCoin co-founder faces 20 years in prison

Casey Wagner

Former FTX exec Ryan Salame has pleaded guilty to charges related to his role at the failed crypto exchange.&nbsp;



<a href="https://blockworks.co/tag/ryan-salame">Salame</a> appeared in court Thursday to plead guilty to charges of conspiracy to defraud the Federal Elections Committee and operating an unlicensed money transmitting business. The combined charges carry a maximum of ten years in prison.&nbsp;



“Ryan Salame agreed to advance the interests of FTX, Alameda Research, and his co-conspirators through an unlawful political influence campaign and through an unlicensed money transmitting business, which helped FTX grow faster and larger by operating outside of the law,” US Attorney <a href="https://blockworks.co/tag/damian-williams">Damian Williams</a> said in a statement. “Today’s guilty plea reflects the commitment I made in December that my Office would continue to pursue swift justice against individuals at FTX and its affiliates who engaged in criminal conduct.”&nbsp;



Salame entered his guilty plea in Manhattan Thursday afternoon, weeks before former CEO Sam Bankman-Fried is set to stand trial on Oct. 2.&nbsp;



As part of his plea, Salame admitted to making $10 million in political contributions and falsely labeling them “loans.” He noted that <a href="https://blockworks.co/tag/sam-bankman-fried">Bankman-Fried</a> endorsed this action.&nbsp;&nbsp;



Salame’s plea marks the fourth former <a href="https://blockworks.co/tag/ftx">FTX</a> executive to opt for a guilty plea over a jury trial. Caroline Ellison, former FTX CEO, pleaded guilty to seven offenses, including charges of money laundering and wire fraud.&nbsp;



Bankman-Fried’s co-founder Gary Wang was the first to enter a guilty plea. In December, Wang pleaded guilty to four counts, including wire fraud and conspiracy to commit money laundering.&nbsp;



Nishad Singh, another co-founder, pleaded guilty to five charges, including securities and wire fraud, in February. He is scheduled to be sentenced on Nov.13.&nbsp;



Ellison, Wang and Salame do not yet have sentencing hearings scheduled.



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Damian Williams

Former FTX exec Ryan Salame pleads guilty weeks before Bankman-Fried’s trial

A judge sentenced Nathanial Chastain, the former OpenSea manager who front-ran his employer’s NFT listings, to three months in prison on Tuesday.&nbsp;



Chastain, a former OpenSea manager, <a href="https://blockworks.co/news/opensea-nft-nate-chastain-wire-fraud">was convicted in a New York court in May</a>, found guilty on charges of wire fraud and money laundering. The jury’s verdict cemented the first known insider trading-like case in the NFT sector.&nbsp;



Prosecutors had sought roughly 21 to 27 months for Chastain’s sentencing. The value of the ether (<a href="https://blockworks.co/price/eth">ETH</a>) proceeds Chastain earned have fluctuated wildly in tune with the market, making pinning down his precise ill-gotten gains more difficult. 



Chastain made roughly $50,000 “using his knowledge of confidential information to purchase dozens of NFTs in advance of them being featured on OpenSea’s homepage,” the <a href="https://www.justice.gov/usao-sdny/pr/former-employee-nft-marketplace-charged-first-ever-digital-asset-insider-trading-scheme">FBI</a> said in 2022.&nbsp;



Chastain was charged with a count of wire fraud and a count of money laundering that same year.



“<a href="https://blockworks.co/tag/nfts">NFTs</a> might be new, but this type of criminal scheme is not,” US Attorney Damian Williams said at the time.&nbsp;



Chastain resigned from <a href="https://blockworks.co/tag/opensea">OpenSea</a> back in 2021, with OpenSea going on to say that it would impose new practices to prevent similar future misconduct. Chastain’s lawyer had previously argued that he did not violate any company rules with his trades.



Chastain’s defense claimed the case was “unfair” prior to the start of the trial, but the judge overseeing the case denied his motions, allowing the case to proceed.



 “Put simply, the trial in this case is about whether Chastain committed the charged crimes; it is not about whether the prosecution is fair or unfair,” <a href="https://blockworks.co/news/opensea-ceo-nft-insider-trading-case-unfair-ahead-of-trial">Judge Jesse Furman then said</a>.



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Former OpenSea manager sentenced in NFT insider trading case

Sam Bankman-Fried once again faces campaign finance charges that had previously been dropped by federal prosecutors, according to the superseding indictment filed Monday.



Prosecutors allege Bankman-Fried used more than $100 million of stolen customer funds to line the pockets of candidates and politicians.&nbsp;



US Attorney Damian Williams informed the court last week that his team intended to seek a superseding indictment, typically filed when new evidence has become available, to “make clear that Mr. Bankman-Fried remains charged with conducting an illegal campaign finance scheme,” court filings show.&nbsp;



Bankman-Fried and his associates donated across party lines to various candidates and political action committees (PACs). Prosecutors say Bankman-Fried told other executives to make contributions to avoid limits set on individual donors.&nbsp;



Read more: <a href="https://blockworks.co/news/the-gop-also-got-millions-from-ftx-execs">Not just Democrats: FTX exec gave tens of millions to GOP causes</a>



Federal Election Commission <a href="https://www.fec.gov/data/receipts/individual-contributions/?contributor_name=Sam+Bankman-Fried">data</a> shows that <a href="https://blockworks.co/tag/sam-bankman-fried">Bankman-Fried</a> personally gave more than $40 million in political donations in 2022. Ryan Salame, Bankman-Fried’s former co-CEO, and Nishad Singh, former director of engineering at FTX, were also big donors. Salame gave nearly $23 million almost exclusively to Republicans and related PACs, while Singh coughed up $8 million during the 2022 midterm election cycle.&nbsp;



Politicians who received FTX-linked donations have <a href="https://blockworks.co/news/doj-claws-back-ftx-donations">already started to hand over the cash</a> after the Department of Justice made it clear these entities are not immune to clawbacks.&nbsp;



Reps. Marc Molinaro, R-NY, Elise Stefanik, R-NY, Brian Fitzpatrick, R-Penn., and Bob Latta, R-Ohio., reported that they had surrendered Bankman-Fried’s donations to US Marshals after receiving a letter from the DOJ to do so. Recovered funds will be used to repay creditors, victims and customers.&nbsp;



The new indictment comes after the disgraced <a href="https://blockworks.co/tag/ftx">FTX</a> founder has spent his first few days at the Metropolitan Detention Center in Brooklyn, New York. <a href="https://blockworks.co/news/sbf-bail-decision">Bankman-Fried’s $250 million bail was revoked last week</a> after a federal judge found he had attempted to tamper with witnesses.&nbsp;



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New indictment alleges Sam Bankman-Fried gave more than $100M to politicians

<div id="highlights-block_63601587044c0" class="highlights">
 <ul>
 <li>US Attorney Damian Williams has led several crypto federal complaints</li>
 <li>New York has one of the most comprehensive crypto policies in the country</li>
 </ul>
 
</div>



The US Department of Justice has tapped a new head for its longstanding probe of <a href="https://cms.blockworks.co/us-judge-orders-tether-to-prove-what-backs-usdt/" target="_blank" rel="noreferrer noopener">stablecoin issuer Tether</a>, Bloomberg reported Monday.&nbsp;



US Attorney Damian Williams of the Southern District of New York has taken over the investigation, according to Bloomberg. The DOJ first began investigating the stablecoin issuer for suspected fraud in July 2021.&nbsp;



The impetus for the move is not clear. <a href="https://www.bloomberg.com/news/articles/2022-10-31/tether-bank-fraud-probe-gets-fresh-look-by-justice-department" target="_blank" rel="noreferrer noopener">Bloomberg</a> reported the Southern District’s deep experience with technological monetary fraud and evolving digital assets know-how likely play a role.&nbsp;



Though federal regulations — or state, for that matter — are scant at the moment and a work in progress, Tether and related stablecoin heavyweights have faced skepticism from industry participants around their reserves. Tether, for its part, has increased its disclosures and said it has moved away from backing its stablecoin with illiquid assets.&nbsp;



The Southern District of New York has become a magnet for crypto cases. Between 2020 and 2021, more than 25% of all federal complaints related to cryptocurrencies were filed in the district, according to <a href="https://www.uscourts.gov/statistics/table/c-3/federal-judicial-caseload-statistics/2021/03/31" target="_blank" rel="noreferrer noopener">federal data</a>.&nbsp;



It would not be Williams’ first legal foray into digital assets. He has been the lead attorney on the <a href="https://cms.blockworks.co/ex-coinbase-employee-accused-of-insider-trading-pleads-not-guilty/" target="_blank" rel="noreferrer noopener">charges against</a> a former Coinbase employee for alleged insider trading <a href="https://www.justice.gov/usao-sdny/pr/three-charged-first-ever-cryptocurrency-insider-trading-tipping-scheme" target="_blank" rel="noreferrer noopener">filed</a> in July.&nbsp;



He also led the investigation into charges against BitMEX employee Gregory Dwyer, who <a href="https://www.justice.gov/usao-sdny/pr/high-ranking-employee-cryptocurrency-exchange-pleads-guilty-bank-secrecy-act-violations" target="_blank" rel="noreferrer noopener">pleaded guilty</a> to bank secrecy act violations in August. Williams was also behind the <a href="https://www.justice.gov/usao-sdny/pr/former-employee-nft-marketplace-charged-first-ever-digital-asset-insider-trading-scheme" target="_blank" rel="noreferrer noopener">first-ever</a> charges brought against an NFT marketplace employee for alleged insider trading.&nbsp;



“Web3 is not a law-free zone,” Williams said at the time. “Our message with these charges is clear: Fraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street. And the Southern District of New York will continue to be relentless in bringing fraudsters to justice, wherever we may find them.”



New York — which handles many patent, bankruptcy and other financial-related investigations at the federal level — is known for having one of the most comprehensive crypto policies in the country. The New York State Department of Financial Services established its stringent regulatory process, BitLicense, in 2015.&nbsp;



By the end of 2016, many crypto companies had halted operations within the state.&nbsp;



“When the New York crypto regulations were first enacted, many crypto businesses found the requirements overly expensive and onerous,” cryptocurrency exchange Gemini wrote in a <a href="https://www.gemini.com/cryptopedia/new-york-cryptocurrency-regulations#section-adoption-and-approval" target="_blank" rel="noreferrer noopener">regulatory report</a>. “This led to what some termed the ‘Great Bitcoin Exodus,’ with companies including Shapeshift and Kraken deciding to stop serving customers in New York.”&nbsp;



The Department of Justice did not immediately return requests for comment.



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Tether Fraud Investigation Gets New Leader: Bloomberg

Ornella Hernandez

<div id="highlights-block_6297ac2cee459" class="highlights">
 <ul>
 <li>The case is considered to be first indictment in a digital asset insider trading scheme</li>
 <li>Chastain resigned as OpenSea’s product manager in September</li>
 </ul>
 
</div>



The Department of Justice has indicted former OpenSea head of product Nathanial Chastain with insider trading in connection to NFTs in Manhattan federal court on Wednesday. Chastain was charged with one count of wire fraud and one count of money laundering.



<a href="https://www.justice.gov/usao-sdny/pr/former-employee-nft-marketplace-charged-first-ever-digital-asset-insider-trading-scheme" target="_blank" rel="noreferrer noopener">According</a> to the indictment, Chastain was accused of buying dozens of NFT (non-fungible tokens) with the prior knowledge that the assets would be featured on the NFT marketplace.&nbsp;



He then sold them at a profit two to five times the original purchase price using anonymous digital currency wallets and anonymous accounts on OpenSea.



Reuters <a href="https://www.reuters.com/technology/opensea-employee-charged-with-insider-trading-nfts-2022-06-01/" target="_blank" rel="noreferrer noopener">reported</a> that Chastain acquired up to 45 NFTs between June and September 2021.



US Attorney Damian Williams stated that “NFTs might be new, but this type of criminal scheme is not,” adding that Chastain’s “betrayal” and other insider trading crimes would be stamped out — “whether it occurs on the stock market or the blockchain.”



Chastain <a href="https://cms.blockworks.co/openseas-nate-chastain-calls-it-quits-after-insider-trading-allegations/" target="_blank" rel="noreferrer noopener">resigned</a> from his position after being suspected of profiting from insider information in September 2021. His suspicious wallet activity on Etherscan was initially flagged by perceptive Twitter users.



A spokesperson for OpenSea told Blockworks that Chastain was asked to leave because his behavior was &#8220;in violation of our employee policies and in direct conflict with our core values and principles.&#8221;



OpenSea admitted that an employee used inside knowledge to outsmart the market, and the company’s CEO Devin Finzer publicly accepted Chastain’s resignation in a blog post. At the time, Finzer claimed that OpenSea put new rules in place to protect against this.



This case is being handled by the Office’s Securities and Commodities Fraud Task Force, with investigation aid from the National Cryptocurrency Enforcement Team.



Each of the charges carry a potential maximum sentence of 20 years in prison.



Update on June 6, 2022 at 1:49 pm ET: Chastian was asked to leave OpenSea before his resignation.



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Damian Williams

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