Ben Strack

While law enforcement professionals expect the prevalence of crypto investigations to rise, most don’t feel well enough equipped for such a future.&nbsp;



Respondents of a survey commissioned by blockchain intelligence firm TRM Labs estimate that 40% of offenses investigated by their agencies involved crypto. They expect that number to be 51% by 2027.



US law enforcement organization staffers accounted for 93% of the more than 300 people surveyed. They were employed for at least one year at such entities, and were involved in one or more crypto-related investigations in the past 12 months.&nbsp;



While more than half of federal agency respondents polled currently use blockchain analytics tools, just 11% of the state agencies surveyed are doing so.



Read more: <a href="https://blockworks.co/news/irs-rising-crypto-tax-evasion-cases">Crypto tax evasion cases are on the rise: Bloomberg</a>



Roughly 61% said they lack sufficient technology to meet the most cutting-edge threats from crypto criminals. Though nearly 90% say their organizations provide some crypto-related training, 99% reported needing more.&nbsp;



Ari Redbord, TRM Labs’ global head of policy, said the <a href="http://www.trmlabs.com/tackling-crypto-crime-2023-survey-of-law-enforcement">survey</a> reflects the lawful and illicit facets of crypto ecosystem growth. There is no such thing as “crypto crime,” he argued.



“Crypto, like cash, is used in the commission of all kinds of criminal activity,” Redbord told Blockworks. “That is why we are seeing crypto used in more and more cases. That is why every investigator and every prosecutor needs to have the tools and training necessary to investigate the blockchain.”



About $1.7 billion worth of crypto was stolen through hacks between January and November of 2023, TRM Labs data <a href="https://www.trmlabs.com/post/hack-hauls-halve-from-2022">shows</a> — on pace to be <a href="https://blockworks.co/news/crypto-hacks-2022">less than half the amount seen last year.</a>&nbsp;



The bridge connecting the HTX exchange and Ethereum <a href="https://blockworks.co/news/htx-hack-ethereum-crypto-assets">was exploited for about $87 million</a> in crypto assets last month. This came about two weeks after <a href="https://blockworks.co/news/poloniex-wallets-crypto-hack">crypto exchange Poloniex suffered unauthorized withdrawals</a>.



The Internal Revenue Service (IRS) <a href="https://www.irs.gov/compliance/criminal-investigation/irs-ci-counts-down-top-10-cases-of-2023">listed</a> four crypto-related cases among its top 10 cases in 2023.&nbsp;



Perhaps more notably on the crypto-related crime front, FTX founder <a href="https://blockworks.co/news/sam-bankman-fried-found-guilty#">Sam Bankman-Fried was found guilty</a> of wire fraud and other charges in November. That same month, competitor exchange <a href="https://blockworks.co/news/binance-changpeng-zhao-deal-unpacked">Binance pleaded guilty</a> to operating as an unlicensed money transmitting business and violating sanctions laws.



Read more: <a href="https://blockworks.co/news/binance-settlement-message-to-crypto-industry">Yellen: Historic Binance settlement “sends message” to crypto industry</a>



Nearly four of five survey respondents called investment in blockchain analytics a “critical” or “high” priority.“



Yet, not all these intentions have been translated into action,” the <a href="https://blockworks.co/tag/trm-labs">TRM Labs</a> report states. “Over half of respondents identified the lack of investigators, expertise and funding as the top three obstacles that remain to be overcome for law enforcement to gain the upper hand in fighting crypto crime.”



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TRM Labs

99% of law enforcement needs more crypto-focused training: Survey

Shalini Nagarajan

Binance said its investigative team aided in capturing ISIS-linked individuals in Tajikistan and Turkey.



The crypto exchange said it played a role in the arrest of several individuals linked to the Islamic State Khorasan Province (IKSP), an affiliate of the broader militant group, including ranking member Shamil Hukumatov.



“These ISKP members were actively involved in imminent attack planning, and their arrests are regarded as a huge win for counterterrorism efforts both regionally and globally,” Binance said in a <a href="https://www.binance.com/en/blog/ecosystem/binance-aids-tajikistans-efforts-to-combat-the-financing-of-terrorism-against-an-islamic-state-affiliate-5224099286084242998">blog</a> on Friday.&nbsp;



Since Dec. 2022, Tajikistan&#8217;s Financial Monitoring Department and TRM Labs collaborated with the exchange to mitigate risks from the IKSP, the blog said.



Additional agencies from Tajikistan, like the State Committee for National Security, also participated in the operation.



Tigran Gambaryan, head of financial crime at Binance, <a href="https://fortune.com/crypto/2023/08/25/binance-says-intel-shared-with-authorities-led-to-capture-of-senior-isis-members-in-asia/">told</a> Fortune that the probe entailed scrutinizing a Telegram channel frequented by ISIS affiliates and subsequently identifying the cryptocurrency wallet a terrorist leader used for receiving donations.



A Binance spokesperson told Blockworks that the company’s investigations team members perform routine open-source threat intelligence scans.&nbsp;



“It was during these routine scans that this particular Telegram group was identified,” they added.



Nonetheless, specifics about how Binance managed to locate the individual were not disclosed.



A spokesperson for the Financial Monitoring Department said that intelligence and investigative assistance from Binance was instrumental in advancing its counterterrorism efforts.



“This led to successful arrests of key ISKP members that we’ve been targeting for a while now,” the spokesperson added.



The move highlights Binance&#8217;s involvement in collaborating with law enforcement to track down crypto assets related to organized crime.



Markus Thielen, Matrixport&#8217;s research chief, noted that Binance has cooperated with law enforcement on multiple occasions to halt illicit activities and identify the individuals responsible for such transactions.



He expects illicit activities to shift to mixers and decentralized exchanges.



“The result will likely be that more of those illicit activities will move to mixers, such as Tornado Cash, and other decentralized exchanges,” he told Blockworks.



Tornado Cash was <a href="https://blockworks.co/news/us-treasury-bans-citizens-from-using-mixing-service-tornado-cash">sanctioned</a> by the US Treasury last year, meaning that US residents are prohibited from dealing with the crypto mixer.



Binance has previously faced allegations of circumventing legal frameworks, including claims that it bypassed US sanctions to permit trading for customers in <a href="https://blockworks.co/news/crypto-traders-in-iran-skirted-binance-ban-following-us-sanctions">Iran</a> and <a href="https://www.wsj.com/finance/binance-cryptocurrency-russia-sanctions-ddb948c3">Russia</a>. Additionally, reports suggested the exchange <a href="https://blockworks.co/news/binance-china-evade-kyc">enabled users in China</a> to evade local regulatory barriers.



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Binance

Binance, TRM Labs provided key intel in ISIS members’ arrest

Crypto-related hacks took a nosedive in the first quarter this year, new data from TRM Labs showed.



In a striking decline, about $400 million was pilfered in nearly 40 incidents, marking a 70% drop compared to the corresponding period in 2022.



A <a href="https://www.trmlabs.com/post/crypto-hacks-down-70-in-q1-2023" target="_blank" rel="noreferrer noopener">report</a> published on May 22 revealed that the average size of hacks dropped to $10.5 million from nearly $30 million in the same quarter a year ago. Meanwhile, hacking victims successfully recouped over half of the stolen funds during this period.



For instance, in March, a hacker discovered a <a href="https://tenderfi.medium.com/march-7-postmortem-170373e93cd1" target="_blank" rel="noreferrer noopener">bug in DeFi protocol Tender.fi&#8217;s code</a> and managed to snatch $1.5 million. But instead of running away with the loot, the hacker actually reached out to Tender.fi and struck a deal to return the money. The catch was a bug bounty worth 62.15 ether ($850,000)



TRM Labs said there is no single straightforward explanation for the decline in hacks, but two events may have dampened the enthusiasm of potential attackers.



In 2022, the top ten hacks reportedly accounted for about 75% of the total stolen funds. It’s important to note that quarterly numbers don&#8217;t accurately predict yearly losses.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1496" height="1285" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/05/trm-chart.jpg?w=1024&amp;h=1024" alt="" class="wp-image-56814" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/05/trm-chart.jpg?w=1496 1496w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/trm-chart.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/trm-chart.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/trm-chart.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/trm-chart.jpg?w=299 299w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/trm-chart.jpg?w=304 304w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/trm-chart.jpg?w=255 255w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/trm-chart.jpg?w=80 80w" sizes="auto, (max-width: 1496px) 100vw, 1496px" /><figcaption class="wp-element-caption">Source: TRM Labs</figcaption></figure>



<h2 class="wp-block-heading">Eisenberg’s arrest in Mango Markets exploit</h2>



Crypto investor Avraham Eisenberg, who employed a &#8220;highly profitable trading strategy&#8221; to <a href="https://blockworks.co/news/mango-markets-mangled-by-oracle-manipulation-for-112m">siphon off over $110 million</a> worth of crypto from DeFi trading platform Mango Markets, was arrested in Puerto Rico in Dec. 2022.



Shortly after the incident occurred in mid-October, the self-proclaimed game theorist <a href="https://twitter.com/avi_eisen/status/1581326197241180160" target="_blank" rel="noreferrer noopener">openly admitted</a> to his role in depleting Mango Markets&#8217; funds.



Despite Eisenberg returning a portion of the funds, apparently in exchange for avoiding legal repercussions, the SEC didn&#8217;t let him off the hook. The agency <a href="https://www.sec.gov/news/press-release/2023-13" target="_blank" rel="noreferrer noopener">charged</a> him with breaking anti-fraud and market manipulation rules in securities laws.&nbsp;



On top of that, Mango Markets didn&#8217;t hold back either and <a href="https://blockworks.co/news/mango-markets-wants-eisenberg-to-pay">slapped Eisenberg with a lawsuit</a>, demanding $47 million in damages plus interest.



“Avraham’s prosecution may have signaled to would-be attackers that even an agreement from the victim not to pursue legal action may not confer protection,” TRM Labs said.



<h2 class="wp-block-heading">US Treasury’s sanctions against crypto mixer Tornado Cash</h2>



Decentralized crypto mixer Tornado Cash was <a href="https://blockworks.co/news/us-treasury-bans-citizens-from-using-mixing-service-tornado-cash">added to the US Treasury’s blocked list</a> last year. It was accused of facilitating the laundering of billions of dollars in virtual currency, including $455 million reportedly stolen by North Korean hackers.&nbsp;



As a consequence, the Treasury froze Tornado Cash&#8217;s US assets and prohibited American companies and individuals from conducting any business with them.



“The use of sanctions by the US government against crypto targets may have raised the potential costs of carrying out such attacks and made it more difficult to launder the proceeds,” TRM said.



However, the blockchain intelligence company said while crypto hacks have slowed down, the trend may only be temporary.



&#8220;The amount stolen and number of incidents in the first quarter of 2023 mirrors that of the third quarter of 2022. That was followed by a record-setting number of hacks that turned 2022 into a record year,&#8221; TRM added.



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Avraham Eisenberg

Arrests and Sanctions Drove Lower Crypto Hacks in Q1

Ava Labs hired Justin Kim and Roi Hirata to lead its businesses in South Korea and Japan, respectively, in new roles created as part of the Avalanche blockchain developer’s push into the Asia Pacific region.&nbsp;



Kim was previously an investment banker at Korea Development Bank for more than 13 years.&nbsp;



“As Korea is home to multinational conglomerates, leading gaming companies and highly crypto-native demographics, we have so many opportunities on the horizon,” Kim said in a statement.&nbsp;



Hirata previously founded two startups and was working in an advocate role with Chainlink Labs in the Japan and Singapore regions until January.



He joins as Japan’s number of on-chain transactions doubled year over year from July 2021 to June 2022 relative to the previous year, according to Chainalysis.



Ari Redbord, head of legal and government affairs for blockchain intelligence firm TRM Labs, was named vice chair of the Commodity Futures Trading Commission’s (CFTC) Technology Advisory Committee.



The new committee is tasked with taking on issues at the intersection of technology, law, policy and finance. Redbord will give opening remarks in the decentralized finance section of the committee’s inaugural meeting on March 22.



<a href="https://www.linkedin.com/in/ari-redbord/" target="_blank" rel="noreferrer noopener">Redbord</a> was assistant United States Attorney for the District of Columbia at the Department of Justice from 2008 to 2019, according to his LinkedIn profile. He went on to become senior advisor to the under secretary for terrorism and financial intelligence at the US Department of the Treasury.&nbsp;



“Contributing to conversations that serve to develop crypto-related regulatory standards and encourage a more open financial system while thwarting bad actors and illicit activity is our primary focus,” he said in a statement.



The announcement came as TRM Labs added <a href="https://www.linkedin.com/in/chrisbrummerlaw/" target="_blank" rel="noreferrer noopener">Chris Brummer</a> as a senior adviser.&nbsp;



Brummer, a Georgetown law professor with a focus on how policy makers and industry can build regulatory frameworks for DeFi and blockchain-based technologies, is set to help the company find ways to make finance more inclusive.



TRM Labs’ new senior adviser is an advisory council member for blockchain, crypto and digital currencies at PayPal. He is also a senior adviser at crypto-focused investment firm Paradigm, as well as a board member of K2 Integrity and Fannie Mae.



<h2 class="wp-block-heading">Execs formerly at Crypto.com, Coinbase move to exchange</h2>



Crypto platform Okcoin has appointed new leaders as part of global expansion efforts.&nbsp;



The company hired <a href="https://www.linkedin.com/in/erald-ghoos-55024a9/" target="_blank" rel="noreferrer noopener">Erald Ghoos</a> as general manager of Okcoin Europe and <a href="https://www.linkedin.com/in/drenold/" target="_blank" rel="noreferrer noopener">David Renold</a> as CEO of OKG Payments, the company’s Ireland-based affiliate.



Ghoos previously was chief operating officer and chief compliance officer at Crypto.com — a dual-role he was in from 2017 to 2020. He started his career at AXA Bank Europe as an engineer and then program manager.



Renold formerly held leadership roles at Coinbase, including operations lead of e-money up until last month. The executive also spent about 20 years at UBS, ending his tenure there in 2018 as head of international payments and cash management.



Blockchain firm Enjinstarter hired <a href="https://www.linkedin.com/in/vasseh/" target="_blank" rel="noreferrer noopener">Vasseh Ahmed</a> as a managing director for the Middle East and North Africa region.&nbsp;



Founded in 2021, the Singapore-based company has launched more than 50 Web3 projects. It now seeks to add more, with a focus on complementing the UAE’s focus on impact and sustainability initiatives, the company said.



Up until January, Ahmed worked as head of digitization strategy at Dubai-based digital bank Zand.



<a href="https://www.linkedin.com/in/tsivarev/" target="_blank" rel="noreferrer noopener">Anthony Tsivarev</a> joined the TON Foundation as director of developer relations.&nbsp;



He joins the foundation from <a href="http://fslabs.io/" target="_blank" rel="noreferrer noopener">First Stage Labs</a>, a venture builder for TON-based projects. Tsivarev is set to lead the development of the TON ecosystem across DeFi, dApps and social applications.



Blockchain analytics firm Crystal appointed Jordan Alexander as its new associate director of product.



The Amsterdam-based company builds products that look to streamline crypto compliance operations and aid investigations into financial crime. Alexander’s hire signals the firm’s effort to enter the US market, according to the company.



Alexander was previously a product lead at cybersecurity software company Avast, where he designed solutions to identify and combat security threats.



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Ava Labs

Crypto Hiring: Avalanche Developer Adds Execs Amid Asia-Pacific Push

While enforcement actions against crypto-related entities aren&#8217;t anything new, industry participants said the recent <a href="https://blockworks.co/news/doj-busts-crypto-exchange">measures lobbied against exchange Bitzlato</a> show a persistent focus on controlling illicit activity in the sector — with a twist.



Law enforcement has, for the past 18 months, combatted what Ari Redbord, head of legal and government affairs at TRM Labs, called “the illicit underbelly of the overwhelmingly lawful crypto economy.”&nbsp;



The US Treasury department had implemented sanctions against crypto exchanges <a href="https://home.treasury.gov/news/press-releases/jy0364" target="_blank" rel="noreferrer noopener">Suex</a>, <a href="https://home.treasury.gov/news/press-releases/jy0471" target="_blank" rel="noreferrer noopener">Chatex</a> and <a href="https://home.treasury.gov/news/press-releases/jy0701" target="_blank" rel="noreferrer noopener">Garantex</a> within the last two years — each of which operated out of Federation Tower in Moscow, Russia.



These exchanges, while largely <a href="https://blockworks.co/news/doj-busts-crypto-exchange">unknown and considered insignificant</a> in crypto industry circles, <a href="https://blockworks.co/news/us-justice-department-to-launch-national-cryptocurrency-enforcement-team">have been prime targets</a> of US law enforcement aided by blockchain intelligence firms with government contracts such as <a href="https://blockworks.co/tag/trm-labs">TRM</a> and <a href="https://blockworks.co/tag/Chainalysis">Chainalysis</a>.



Garantex’s average monthly inflows, however, <a href="https://blockworks.co/news/ofac-sanctions-eased-crypto-crime">more than doubled</a> after the US took action against it last April, Chainalysis data showed, as Russia’s government did not enforce the sanctions.



Illicit crypto transaction volume overall rose for the second consecutive year in 2022, according to a Chainalysis <a href="https://blog.chainalysis.com/reports/2023-crypto-crime-report-introduction/" target="_blank" rel="noreferrer noopener">report</a> published earlier this month. Such activity hit an all-time high of $20.1 billion — up from roughly $18 billion in 2021.



Experts in illicit finance find the Bitzlato case more significant, according to Nick Smart, director of blockchain intelligence at Crystal, a compliance and risk management specialist.



“I think a lot of the reaction to Bitzlato has been a bit confused across the industry, and sort of misses why this is a bigger deal than at first glance,” Smart told Blockworks.&nbsp;



<h3 class="wp-block-heading">Treasury uses new tool</h3>



The Treasury’s Financial Crimes Enforcement Network (FinCEN) last week went a different route than sanctions. It identified Bitzlato as a “primary money laundering concern” pursuant to section 9714(a) of the Combating Russian Money Laundering Act — passed as part of the 2020 National Defense Authorization Act.



The designation came the same day the US Department of Justice (DOJ) <a href="https://blockworks.co/news/doj-busts-crypto-exchange">charged</a> Anatoly Legkodymov, a Russian national and senior executive of Bitzlato, with allegedly processing more than $700 million in illicit funds.



Bitzlato’s <a href="https://bitzlato.com/" target="_blank" rel="noreferrer noopener">site</a> has been shut down and could not be reached for comment. 



“OFAC sanctions are certainly one tool, but 9714 specifically targets Russian illicit finance,” said Redbord, a former senior adviser to the under secretary for terrorism and financial intelligence at the Treasury department.



This action is “very significant,” Redbord said, adding that it was the first designation under 9714(a), which allows the Treasury department to take severe action against a foreign financial institution to combat Russian money laundering.



French and US law enforcement authorities led the take-down of Bitzlato’s France-based digital infrastructure and interrogated platform managers, Europol said Monday.&nbsp;



About 46% of the assets exchanged through Bitzlato — worth roughly $1 billion — had links to criminal activities, Europol said. It added that roughly 1.5 million bitcoin transactions were made from Bitzlato users and the Hydra network, which the DOJ and German authorities took down in 2022.



Five individuals had been arrested as of Monday.



“[The] arrest of the founder, and with international cooperation in jurisdictions often enjoyed by Russian business people has a much bigger message,” Smart said, adding “particularly for other Russian P2P exchanges with similarly poor reputations, who must now be wondering ‘who’s next?’”



Money laundering service providers are crucial to the wider crypto crime ecosystem, according to Andrew Fierman, Chainalysis’s head of sanctions strategy.&nbsp;



“If cybercriminals cannot reliably convert the cryptocurrency generated by their activities into cash, the incentives to commit those crimes plummet,” he told Blockworks.



The powers granted under 9714(a) differ from traditional sanctions in that they provide FinCEN with a menu of special measures with which they can order financial institutions to comply. These range from information collection and record keeping, as well as prohibiting the opening of certain types of accounts or the transmittal of funds.&nbsp;



The special measures give compliance teams across the crypto industry valuable information to keep their platforms safe from illicit activity, Fierman said.



“This is also another proof point for the US government’s — together with their allies — ability to go after the Russian crypto crime ecosystem,” he added. “The overall disruption of the wider crypto crime ecosystem is what makes this action so significant.”



<h3 class="wp-block-heading">A sign of more to come?</h3>



Treasury Deputy Secretary Wally Adeyemo said in a statement last week that the designation marked a unique step taken only “a handful of times” in the Treasury’s history for what he called “some of the <a href="https://www.fincen.gov/resources/statutes-and-regulations/311-special-measures" target="_blank" rel="noreferrer noopener">most egregious</a> money laundering cases.”



The only other crypto-related entity the Treasury department designated a “primary money laundering concern” was Costa Rica-based Liberty Reserve in 2013. That was done under Section 311 of the USA Patriot Act.&nbsp;



Liberty Reserve founder Arthur Budovsky <a href="https://www.justice.gov/opa/pr/founder-liberty-reserve-pleads-guilty-laundering-more-250-million-through-his-digital" target="_blank" rel="noreferrer noopener">pleaded guilty</a> in 2016 to conspiring to commit money laundering.



“Because of its significant operations in, and connection to, Russia and Russian illicit finance, Bitzlato threatens US national security, the integrity of the US and international financial sectors, and businesses and institutions worldwide,” Adeyemo said. “Identifying Bitzlato as a ‘primary money laundering concern’ effectively renders the exchange an international pariah.”



Adeyemo added that “we will not hesitate” to expose and hold accountable virtual asset service providers going forward.



A Treasury department spokesperson declined to comment further.&nbsp;



Hacks on DeFi targets and cross-chain bridges last year resulted in a record $3.6 billion in stolen funds through November 2022, according to TRM Labs.&nbsp;



“This is certainly not the last time we will see the use of 9714 and similar authorities against non-compliant exchanges, darknet markets, darknet mixers — like Helix and Bitcoin Fog — and other money laundering concerns,” Redbord said.



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chainalysis

Bitzlato May Make Crypto Scoff, but Law Enforcement Thinks Otherwise

Sebastian Sinclair

<div id="highlights-block_6303483625462" class="highlights">
 <ul>
 <li>Crypto industry software developer “Banteg” revealed Friday the team behind Uniswap has banned 253 wallet addresses as part of its efforts to abide by US sanctions</li>
 <li>The Uniswap dex protocol on Ethereum is open and permissionless to use but websites used to access it may not be</li>
 </ul>
 
</div>



Uniswap Labs, via its compliance provider TRM Labs has blocked 253 crypto wallet addresses over the last four months, claiming they belong to criminals and hackers or interfere with US government sanctions.



According to software developer and DeFi platform Yearn core contributor Banteg, around 30 of the 253 addresses on Uniswap have fallen victim to blockchain intelligence firm TRM’s “collateral damage,” the developer <a href="https://twitter.com/bantg/status/1560711591104057349?s=20&amp;t=108_KmWQlo19DipJHQ_IDA" target="_blank" rel="noreferrer noopener">tweeted</a>.&nbsp;



Earlier this month, prominent crypto users <a href="https://cms.blockworks.co/defi-web-apps-block-users-hit-by-tornado-cash-dust-attack/" target="_blank" rel="noreferrer noopener">reported being blocked</a> — at least temporarily — by web apps of major DeFi protocols including Aave which claimed its API, maintained by TRM, had made “incorrect calls” to block innocent addresses suspected of engaging with the now-sanctioned Tornado Cash mixing service.



Learn: <a href="https://cms.blockworks.co/crypto-mixers-and-privacy-coins-can-they-resist-censorship/#tornadocash">How Tornado Cash Works</a>



Uniswap, the company, partnered with TRM Labs in April of this year. The banned addresses on app.uniswap.org are said to be divided between <a href="https://twitter.com/bantg/status/1560711579217313793/photo/1" target="_blank" rel="noreferrer noopener">seven categories</a> featuring two risk levels, high and severe.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">some blocked addresses live an interesting life, appearing on all lists, which sounds like a very unlikely combination of criminal activities. <a href="https://t.co/MRbMWw7ezr">pic.twitter.com/MRbMWw7ezr</a>&mdash; banteg (@bantg) <a href="https://twitter.com/bantg/status/1560711579217313793?ref_src=twsrc%5Etfw">August 19, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Uniswap has been running TRM Labs’ code for its front end and back end services following its move to end a program of manually hard-coding a list of blocked addresses, a screenshot of Uniswap’s engineer <a href="https://twitter.com/bantg/status/1560711564801544193/photo/1" target="_blank" rel="noreferrer noopener">Jordan Frankfurt</a> on GitHub shows.



The decentralized exchange developer shared the logs of the <a href="https://gist.github.com/banteg/1657d4778eb86c460e03bc58b99970c0" target="_blank" rel="noreferrer noopener">253 addresses</a> from its server on Friday, shortly before making them private from those outside its platform.



Around 11.8% of those wallets include an associated Ethereum Name Service ID which are designed to make the lengthy string of characters involved in blockchain addresses human readable.&nbsp;



Most of the addresses are considered to be involved with stolen funds, or some other nefarious criminal activity. Blockworks attempted to contact Uniswap Labs, but has not yet received a response.



Banteg also said he had discovered an address belonging to no one individual or entity, used as a “burner address,” which ended up being blocked as part of Uniswap’s banned list of wallets.



“Both ownership and being a counterparty of a ‘bad’ address are checked and can contribute to blocking,” Banteg said. That’s despite Frankfurt claiming Uniswap has “scaled back” its efforts to only block addresses that are sanctioned directly and aren’t considered counterparties.



The issue of downstream counterparties has proven to be a thorny one since dozens of prominent people with known Ethereum addresses have been sent small amounts of ether by one or more users of Tornado Cash — a technique known as a &#8220;<a href="https://cms.blockworks.co/defi-web-apps-block-users-hit-by-tornado-cash-dust-attack/" target="_blank" rel="noreferrer noopener">dust attack</a>&#8221; meant to underscore the unintended consequences of the US governments <a href="https://cms.blockworks.co/decentralized-or-not-officials-say-tornado-cash-responsible-for-illicit-activity/" target="_blank" rel="noreferrer noopener">unprecedented move</a>.



The <a href="https://docs.uniswap.org/protocol/reference/deployments" target="_blank" rel="noreferrer noopener">Uniswap protocol itself</a>, running on Ethereum, is immutable and permissionless — meaning it cannot be changed and is free for anyone to use via alternative means. There are front ends not maintained by Uniswap Labs and it’s also possible to run a front end locally on any computer, or to access the Ethereum smart contracts directly.



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sanctions

Wallets Banned by Uniswap Labs for Alleged Crimes

<div id="highlights-block_62fa11710b204" class="highlights">
 <ul>
 <li>Recent regulator actions are the culmination of efforts to bolster authority in the space made in the past year</li>
 <li>Defendants in current case against alleged crypto scheme Forsage could challenge SEC’s jurisdiction, lawyers say</li>
 </ul>
 
</div>



Regulation by enforcement will continue in the absence of concrete crypto legal frameworks, according to industry executives and lawyers, as regulators are seeking to spotlight recent investor protection issues in the space.&nbsp;



Crypto-related cases and enforcement actions have picked up in recent weeks. The SEC most recently charged 11 people for allegedly creating and promoting <a href="https://cms.blockworks.co/sec-charges-11-in-alleged-300m-crypto-pyramid-scheme-forsage/" target="_blank" rel="noreferrer noopener">a fraudulent crypto pyramid and Ponzi scheme, called Forsage</a>, that raised more than $300 million from retail investors.



The regulator, along with the US Department of Justice (DOJ) also <a href="https://cms.blockworks.co/sec-charges-former-coinbase-product-manager-with-insider-trading/" target="_blank" rel="noreferrer noopener">charged a former Coinbase employee</a>, along with his brother and his friend, with insider trading last month. The SEC alleges in the complaint that <a href="https://cms.blockworks.co/qa-the-sec-classified-9-tokens-as-securities-now-what/">nine different crypto tokens are securities</a>.



On June 30, the DOJ charged six people with crypto fraud offenses in cases involving more than $100 million in losses. One was the largest known NFT scheme charged to date, involving an alleged so-called “rug pull” scheme involving the Baller Ape Club NFTs.&nbsp;&nbsp;



Much of the latest enforcement activity has been in the works for a while, according to Ari Redbord, head of government affairs at <a href="https://www.trmlabs.com" target="_blank" rel="noreferrer noopener">TRM Labs</a>.&nbsp;&nbsp;



“These aren’t necessarily new frauds or scams; they’re frauds or scams that are now finding their way through the enforcement system or the criminal justice system,” he said. “It feels very much like a lot is going on right now, but some of it is the culmination of what started six months or a year ago.”&nbsp;



<h3 class="wp-block-heading">Regulation by enforcement on a backdrop of regulatory uncertainty</h3>



The SEC renamed its cyber team in the agency’s Division of Enforcement to the Crypto Assets and Cyber Unit, in May. The regulator revealed at the time that it would add 20 people to the team responsible for protecting investors in crypto markets and cyber-related threats, bringing its headcount to 50.



“The SEC has already turned up the heat, and I would expect that heat to continue and possibly get even hotter as the SEC attempts to expand its authority over an industry already inundated with regulatory uncertainty,” said <a href="https://www.linkedin.com/in/adam-pollet-8168073/" target="_blank" rel="noreferrer noopener">Adam Pollet</a>, a partner in Eversheds Sutherland’s securities enforcement and litigation practices.



<a href="https://www.linkedin.com/in/patrick-daugherty-232701b/" target="_blank" rel="noreferrer noopener">Patrick Daugherty</a>, a former SEC lawyer and partner at Foley &amp; Lardner, added: “Fraud cases are easy cases. I expect the SEC to bring easy cases to chalk up easy wins.”



The Department of Justice in February <a href="https://cms.blockworks.co/fbi-doubles-down-on-crypto-crimes-with-new-unit/" target="_blank" rel="noreferrer noopener">named a director for its National Cryptocurrency Enforcement Team</a> — a new unit focused on digital asset seizure and blockchain-based lawbreaking.



<a href="https://www.linkedin.com/in/ari-redbord-4054381b4/" target="_blank" rel="noreferrer noopener">Redbord</a>, who, before TRM Labs, was a US prosecutor and an official at both the DOJ and the US Department of the Treasury, said that recent events such as the collapse of <a href="https://cms.blockworks.co/tag/terra/" target="_blank" rel="noreferrer noopener">Terra’s algorithmic stablecoin UST</a> and the LUNA token have spurred regulators to want to shine a light on consumer protection issues and stability risk in the space.



“It’s difficult to get anything through Congress, so you’re not necessarily going to get any clear legal framework any time soon,” he added.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“You see regulation by enforcement action for better or worse because without clear legal frameworks, regulators are going to sort of interpret their own authorities themselves.”</blockquote>



Though guidelines are fairly clear in the anti-money laundering space, having a clear regulatory framework in place is critical in the securities space, Redbord said.&nbsp;



Unlike the DOJ, which must prove wire fraud, he added, the SEC must also show that the co-conspirators traded on insider information involving securities.



Sens. Cynthia Lummis, R-Wyo., and Kirsten Gillibrand, D-N.Y., in June <a href="https://cms.blockworks.co/bipartisan-crypto-bill-hits-congress-with-focus-on-cftc-jurisdiction-taxes/" target="_blank" rel="noreferrer noopener">introduced</a> the <a href="https://www.gillibrand.senate.gov/imo/media/doc/Lummis-Gillibrand%20Responsible%20Financial%20Innovation%20Act%20%5bFinal%5d.pdf" target="_blank" rel="noreferrer noopener">Responsible Financial Innovation Act</a>, which has a section on “securities innovation.”



“That is something that is going to be negotiated and iterated on and discussed for some time,” he said.&nbsp;



<h3 class="wp-block-heading">What’s next in the Forsage case?</h3>



Though industry watchers expect the SEC to ramp up enforcement actions within the crypto space, they acknowledged not all cases will be easy.&nbsp;



Forsage, for example, continued to operate despite receiving cease-and-desist actions from the <a href="https://www.sec.gov.ph/pr-2020/sec-issues-cease-and-desist-order-against-forsage/" target="_blank" rel="noreferrer noopener">SEC of the Philippines</a> in September 2020 and the <a href="https://csimt.gov/news/commissioner-downing-orders-forsage-to-cease-and-desist/" target="_blank" rel="noreferrer noopener">Montana Commissioner of Securities and Insurance</a> in March 2021.



The <a href="https://forsage.io" target="_blank" rel="noreferrer noopener">alleged scheme’s website</a>, which was operating at the time the charges were filed, now appears to be shut down.&nbsp;



Founders of Forsage were last known to be living in Russia, the Republic of Georgia and Indonesia. Pollet said the defendants may challenge the jurisdiction of the SEC, to the extent that they surface at all.



The SEC can ask the court to enter a temporary restraining order or an asset freeze against operators of an alleged fraudulent scheme to prevent further dissipation of investor funds while the litigation proceeds, he added. But it does not appear the regulator has done so, Pollet said, noting that it could be because the relevant assets reside outside the US.



An SEC spokesperson declined to comment beyond <a href="https://www.sec.gov/litigation/complaints/2022/comp-pr2022-134.pdf">the complaint</a>.



Redbord said getting Forsage co-founders Mikail Sergeev and Sergey Maslakov— last known to be living in Russia — into a US courtroom would be especially difficult.



Sergeev, along with another defendant in the SEC case, Lola Ferrari, moved on to a new and similarly suspect project, dubbed Express Smart Game, while another Forsage creator, Vladimir “Lado” Okhotnikov, funneled traffic from the Forsage YouTube channel to his new (alleged) scam, Meta Force, the complaint notes.



“It becomes something of a sort of name and shame,” Redbord said, “where you want to ensure that these individuals — and Forsage in particular — are known out there as entities not to do business with.”



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Department of Justice

Crypto Industry Eyes SEC’s ‘Regulation by Enforcement’ Ramp Up

<div id="highlights-block_624716ff21750" class="highlights">
 <ul>
 <li>Lead agent in the 2016 Bitfinex hack investigation joins blockchain intelligence solutions provider</li>
 <li>Chainlink Labs adds the ex-CTO at Diem Association and a former VP at LinkedIn to its leadership ranks</li>
 </ul>
 
</div>



FTX Europe appointed Marcel Lötscher to the company’s newly created head of regulatory strategy role, and he will step into the position on Oct. 1. He will join the company to continue FTX&#8217;s global expansion into Europe and the Middle East.



Lötscher, who holds a doctoral degree in collective investments, is former head of the securities and markets division at the Financial Market Authority (FMA) of Liechtenstein and a member of its executive board.



Patrick Gruhn, head of FTX Europe, highlighted the different regulations across European countries. He told Blockworks that cryptoassets are deemed a financial instrument in Germany, for example, but are treated like commodities in Austria and Switzerland.



“If we have the same rules in all European countries, that makes it easier for crypto firms to sell their product, and at the end of the day, also to be scalable,” Lötscher said.



Crypto lending and borrowing platform Celsius appointed Guillermo Bodnar as its chief technology officer.



Bodnar most recently worked as chief solutions officer at software development company Globant. Before that, he was chief information officer of Arbinet, where he built the largest computer-based telecommunications exchange and trading platform.



Celsius CEO Alex Mashinsky founded Arbinet and worked with Bodnar at the company. He noted in a statement that he and Bodnar will focus on “unlocking financial freedom for the next 100 million crypto users.”



Blockware Mining named Jackie Price as its chief operating officer. She is set to lead the Chicago-based company’s corporate partnerships, government affairs, strategic planning, marketing and investor relations.



Price previously served as chief marketing officer of the Chamber of Digital Commerce, one of the largest digital asset industry trade associations, and was also formerly a senior executive at public relations and marketing consultancy firm Edelman.



Izumi World has named a former marketing executive at Gatorade, Samsung, Verizon, Xbox and Rarible as its chief marketing officer.



Jamie Davies spent more than two decades as director of marketing for Gatorade and Samsung. He was also formerly head of brand and innovation marketing at Verizon and a senior advertising manager at Xbox.



A game in which players capture and train magical beasts called Izumis from live-tracked locations in the real world, <a href="https://www.izumiworld.com/" target="_blank" rel="noreferrer noopener">Izumi World</a> seeks to be a leading augmented reality game in the play-to-earn and traditional gaming spaces. It also plans to launch a non-fungible token (NFT) collection in the second quarter.



Chainlink Labs has added the former chief technology officer at Diem Association and an ex-vice president at LinkedIn to its leadership ranks.&nbsp;



Dahlia Malkhi, who before working at Diem spent about 10 years at Microsoft Research and co-founded VMware Research, has joined the blockchain oracle solutions provider as its chief research officer.



Chainlink Labs also announced this week that Mike Derezin, who spent more than a decade at LinkedIn, joined the company late last year as its chief operating officer.



Pete Stephens has joined digital asset custodian Komainu as its chief technology officer.&nbsp;



He previously served as head of technology for Switzerland’s SIX Digital Exchange. He focused on capital markets post-trade technology in roles at DrumG Technologies, UBS AG, IBM and PwC.



Stephens joins Komainu shortly after its introduction of Komainu Yield and will be responsible for expanding the company’s staking services and the buildout of additional yield generating offerings.



TRM Labs named former IRS-Criminal Investigations (IRS-CI) Special Agent Chris Janczewski as head of global investigations.



Janczewski was the lead agent in the <a href="https://cms.blockworks.co/couple-arrested-as-government-recovers-3-6b-in-stolen-bitcoin/" target="_blank" rel="noreferrer noopener">Bitfinex hack investigation</a> while at IRS-CI, focusing on the alleged conspiracy of two individuals to launder $4.5 billion in cryptocurrency stolen during 2016. He signed a seizure warrant that recovered $3.6 billion in cryptocurrency, the largest seizure in United States government history.



TRM provides blockchain intelligence solutions to help financial institutions, cryptocurrency businesses and public agencies combat crypto-related fraud and financial crime.&nbsp;



Casey Wagner contributed to this story.



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Blockware Mining

The Latest in Crypto Hiring: FTX Names Head of Regulatory Strategy

Jacquelyn Melinek

<div id="highlights-block_621d0bb093c84" class="highlights">
 <ul>
 <li>This investment highlights the significance financial institutions investing in crypto technology to mitigate associated risks, Esteban Castaño, co-founder and CEO of TRM, said to Blockworks</li>
 <li>TRM’s vision aligns with JPMorgan’s ambitions to build compliant and secure blockchain products, Umar Farooq, CEO of Onyx by JPMorgan, said in a statement</li>
 </ul>
 
</div>



Blockchain intelligence company TRM Labs has added JPMorgan Chase &amp; Co. to its list of investors after the bank announced its strategic investment on Monday.



The total amount invested by JPMorgan was not disclosed, and neither organization was available for immediate comment.



TRM provides blockchain intelligence to help traditional financial institutions as well as crypto-focused businesses and public agencies analyze and manage crypto-related fraud and crime.



“I think it shows that financial institutions are not investing in just crypto and potential use cases but the technology to mitigate any associated risks,” Esteban Castaño, co-founder and CEO of <a href="https://www.trmlabs.com" target="_blank" rel="noreferrer noopener">TRM</a>, said to Blockworks. “It reflects the long term mindedness of the industry and figuring out what’s the right answer for crypto in terms of risk management, trust and safety.”



The company was founded in 2017 and recently closed its <a href="https://cms.blockworks.co/trm-labs-lands-60-million-series-b-round/" target="_blank" rel="noreferrer noopener">$60 million Series B</a> in December 2021. The round at the time was led by Tiger Global and included other major investors and financial players including American Express’ Amex Ventures, Citi Ventures, PayPal Ventures, Visal, Block <a href="https://cms.blockworks.co/jack-dorseys-square-to-change-its-name-to-block/" target="_blank" rel="noreferrer noopener">(formerly Square Inc.</a>) and Jump Capital.



“People often cite that financial institutions are ‘here’ and I think that’s more true now than ever before,” Castaño said. “Today we see countless financial institutions that have tangible projects in flight for crypto related projects and services and they’re making investments in risk management infrastructure so those products can be successful, trusted and safe for consumers.”



JPMorgan has spent the last six years exploring the possibilities and applicability of blockchain technology, Umar Farooq, CEO of Onyx by JPMorgan, said in a statement. TRM’s vision aligns with JPMorgan’s ambitions to build compliant and secure blockchain products, Farooq added.



Earlier this month, JPMorgan took a jump into the metaverse after launching a virtual lounge in the popular blockchain-based metaverse Decentraland. The “Onyx lounge” was unveiled with a report from the bank outlining metaverse-related growth opportunities, Blockworks previously <a href="https://cms.blockworks.co/jpmorgan-enters-the-metaverse-with-virtual-decentraland-lounge/" target="_blank" rel="noreferrer noopener">reported</a>.



Separately, two JPMorgan research analysts Kenneth Worthington and Reginald Smith said in a report they see 2022 potentially as “the year of the blockchain bridge…or the year of financial tokenization.” The analysts also said they expect the evolution of crypto markets to accelerate this year, particularly for financial services, Blockworks <a href="https://cms.blockworks.co/jpmorgan-2022-could-be-year-of-the-blockchain-bridge/" target="_blank" rel="noreferrer noopener">reported</a> in January.



“Trust and safety is a prerequisite for crypto to be successful in the long run,” Castaño said. “Blockchain intelligence builds greater trust and safety and enables crypto to become the next dominant financial system of the world.”



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Esteban Castano

JPMorgan Chase Strategically Invests in Blockchain-focused TRM Labs

Macauley Peterson

<div id="highlights-block_61afc985294b3" class="highlights">
 <ul>
 <li>Tiger Global led a funding round with participation the venture capital arm of American Express, Visa, Citigroup, along with DRW Venture Capital, Jump Capital, Marshall Wace, Block (formerly Square, Inc.) and PayPal Ventures.</li>
 <li>TRM Transaction Monitoring is used by major crypto firms like FTX US, Circle and MoonPay to detect suspicious activity and comply with Anti-Money Laundering (AML) regulations</li>
 </ul>
 
</div>



San Francisco-based TRM Labs announced today its Series B raise of $60 million. Born from the famed <a href="https://www.ycombinator.com/" target="_blank" rel="noreferrer noopener">Y Combinator</a> incubator program in 2019, TRM has grown its team to a headcount of 60, while revenue is up 600% year-over-year.



The company works with financial institutions, cryptocurrency-focused companies, and public sector agencies on issues of fraud and financial crime. Its toolkit includes services for monitoring and screening cryptocurrency wallets and transactions, to help companies manage risk and comply with regulations.



Tiger Global, helmed by billionaire Chase Coleman, led the funding round. &#8220;TRM is well-positioned to lead the industry as the premier blockchain intelligence solution,&#8221; said Tiger Global’s John Curtius, in a statement.



Block, which recently <a href="https://cms.blockworks.co/jack-dorseys-square-to-change-its-name-to-block/" target="_blank" rel="noreferrer noopener">changed its name</a> from Square Inc., was among the participants in the Series B. Mike Brock, who leads Block’s TBD division, noted of TRM Labs’ business, that “risk and compliance is a crucial piece of the puzzle as financial institutions, blockchain-based businesses, and government entities look to bring crypto into the world of finance.”



Multiple other venture firms and prominent individual investors participated in the round. Venture capital funding came from B Capital Group, Bessemer Venture Partners, Blockchain Capital, Cap Table Coalition, Castle Island Ventures, Initialized Capital, Operator Partners. Among 50 individual investors were Emilie Choi, President and COO of Coinbase, Frank Slootman, Chairman and CEO of Snowflake along with Snowflake’s CFO Michael Scarpelli.



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