• NY Crypto Crime

    Author : Criminal Defense Associates September 25, 2018

    Bitcoin, blockchain, cryptocurrency – all of this sounds like jargon in a sci-fi movie. But it's actually a new form of banking, combining money with the internet. It also happens to be a new frontier for criminal enterprise.

    What is Cryptocurrency?

    It was actually an accidental invention which resulted in a decentralized, digital cash system. It is similar to a peer-to-peer network for file sharing (think Napster back in the early 2000's, but with cash instead of music). It involves confirmation of a transaction, done by ‘miners,' although the actual process is somewhat more complex than that. It uses block-chain technology to keep track of the exchanges. And while block-chain technology has the reputation of being highly secure, cryptocurrency is also plagued with fraud and theft. In fact, more than 56% of all cryptocurrency crime happens within the United States.

    New York Crypto-Crime

    Recently, Manhattan District Attorney Cyrus Vance announced the guilty plea of Louis Meza for his role in an armed robbery of $1.8 million in cryptocurrency. According to court records and various news reports, Louis Meza met his victim, a business associate who had revealed earlier that he was a ground-floor investor in Ethereum, a cryptocurrency with meteoric growth. When they were leaving the restaurant, Meza told his victim that he had called an Uber to take him home, and asked him to share. A few blocks later, a gunman popped up and demanded the victim give him his phone and apartment keys. According to an anonymous source in the DA's office, the gunman also demanded he gives him a 24-word password to his device that allows users to store their digital currency offline (and ostensibly safe from hackers). Eventually, Meza was successful and stole $1.8 million in cryptocurrency. Unfortunately, he made two fatal errors that resulted in his arrest and conviction. He was seen by his victim's apartment building cameras, and – stupidly - bragged about being a major cryptocurrency player the next day. In fact, he had transferred the funds to an account using his own name at a prominent U.S. digital currency exchange, which law enforcement discovered and recovered.

    But the digital currency has always struggled with criminal activity. In 2008, E-Gold was created, claiming to be a digital currency that was simultaneously backed by actual gold. Founders created a payment system that allowed easy and anonymous transfers, which made it a major player in criminal schemes (including human trafficking and investment scams). Ultimately, E-gold's founders pled guilty to money-laundering charges, and the company closed.

    Crimes in cryptocurrency are inherently difficult for prosecutors to prove. The state carries the burden of proof to show where the cryptocurrency is, how it got there, and who moved it. Wallets that make the currency available offline, as in Meza's case, sometimes mean that money is forever shielded from law enforcement and investigators. If the state cannot show where the money came from and where it is, then they cannot prove their case. Meza's case is unusual in that he voluntarily moved the money to an online, tracking system and used his own name. Because cryptocurrency is decentralized, often there are no regulations or enforcement against ‘banks' who use noncompliant procedures. Prosecutors have stated that, even when they are able to trace the money, sometimes it is in the name of Mickey Mouse who lives at 123 Main Street. Bitcoin boasts its exchanges are ‘100 percent anonymous.' Until the nature of digital currency changes, it seems likely that criminals will continue to use and target cryptocurrency, to the chagrin of prosecutors everywhere.

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