Financial Firms Move to Integrate Cryptocurrencies, Blockchain Solutions Announced Across Markets, Agencies Target Crypto Crimes as Threats Continue

BakerHostetler

Payment Firms Adopt Cryptocurrencies, Company Purchases $1.5 Billion in Bitcoin

By: Veronica Reynolds

According to a press release, last week the Office of the Comptroller of the Currency provided conditional approval to Protego Trust Bank for a trust charter to custody digital assets. The move will enable Protego clients to “hold, trade, lend and issue digital assets.” In related news, startup MetalPay, a peer-to-peer cryptocurrency payments platform, has filed with the Office of the Comptroller of the Currency to become a U.S. national bank. The application was filed for “First Blockchain Bank and Trust, N.A.” The company reportedly plans to submit additional applications with the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Bank of San Francisco, with the goal of accepting cash deposits (in addition to cryptocurrency deposits) that are insured by the FDIC. Such a move would reportedly make it the first FDIC-insured crypto bank.

This week, a large global financial services firm announced plans to support select cryptocurrencies on its payments network. According to its blog, the company intends to select cryptocurrencies that focus on consumer protection and compliance. Responding to other recent cryptocurrency announcements by numerous traditional payment platforms, Gartner, in a recent blog post, suggests a future where credit card brands move beyond bitcoin trading to stablecoin payments, which are less volatile than bitcoin.

A Virginia bank announced this week that its customers may now buy and redeem bitcoin at its ATMs. Such transactions will be accompanied by an 8 percent fee. And a New York bank known for being the world’s largest custodian of assets announced plans to custody cryptocurrencies, with plans to treat digital assets like any other asset. To implement the solution, the bank is working to develop “a client-facing prototype … designed to be the industry’s first multi-asset digital custody and administration platform for traditional and digital assets.”

In news that made worldwide headlines, a recent SEC filing by a global auto manufacturer made public its purchase of $1.5 billion in bitcoin, with the company confirming its plans to accept payment in bitcoin. The large purchase will likely serve as a liquidity reserve to accept bitcoin payments. Commenting on its recent filing, the company explained it bought the bitcoin in order to obtain “more flexibility to further diversify and maximize returns on [its] cash.”

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Blockchain Enterprise Initiatives Announced Across Global Markets

By: Robert A. Musiala Jr.

A recently published research paper “proposes a new and novel track and trace blockchain-enabled Medledger system that leverages the Hyperledger Fabric blockchain platform using chaincodes (smart contracts)” to improve security in the pharmaceutical supply chain. An abstract of the paper notes that implementing blockchain in the pharma supply chain enhances “efficiency and safety with high integrity, reliability, and security that reduces the likelihood of meddling with stored data.”

According to a recent press release, a major German bank has teamed up with a major German software firm to integrate the R3 Corda blockchain into the software firm’s cloud platform to promote new supply chain and trade finance solutions. In another press release from Germany, an IoT provider announced that it has deployed SECORA Blockchain near-field communication technology to help record and secure data on physical items to a blockchain database. The solution aims to help prevent counterfeiting in the consumer goods, business-to-business products, IT goods and luxury goods industries.

In the Asia-Pacific region, a Big Four accounting and consulting firm recently announced that it had joined the Financial Blockchain Shenzhen Consortium, a nonprofit organization dedicated to the use of blockchain for financial applications. According to a press release, as part of this initiative, the firm will seek to deploy its proprietary blockchain solutions for supply chain traceability and financial statement audits.

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US and Foreign Agencies Take Action Against Cryptocurrency Fraud Schemes

By: Teresa Goody Guillén

Late last week, the founder of a pair of cryptocurrency hedge funds in New York, New York, with over $100 million in investments, pleaded guilty to securities fraud. According to a press release, the defendant drained almost all the assets from the cryptocurrency fund he operated, spending investors’ money on “indulgences and speculative personal investments,” and tried to steal investor money from one fund to pay back investors in the other fund. The charge carries a maximum term of 20 years in prison.

A Serbian man has been extradited from Serbia to the United States to face allegations in Texas that he and others defrauded investors of more than $70 million in a scheme involving fraudulent investments in binary options and cryptocurrency mining. The defendant and over a dozen others were indicted by a federal grand jury on charges of conspiracy to commit wire fraud and conspiracy to commit money laundering in July 2020. If convicted, the defendants could face up to 20 years in prison.

A former phone company employee was recently charged with conspiracy to commit wire fraud for his role in a subscriber identification module (SIM) swap scam, where the defendant switched SIM cards linked to customers’ phone numbers to a different phone number in an attempt to access customers’ various personal accounts, including email accounts, bank accounts and cryptocurrency accounts as well as any other accounts that use two-factor authentication. In another alleged SIM-swapping scheme, it is reported that a criminal gang stole over $100 million in cryptocurrencies by a series of SIM-swapping attacks targeting high-profile victims in the United States. There are eight arrests reported in this international sweep, which follows a yearlong investigation jointly conducted by law enforcement authorities from the United Kingdom, the United States, Belgium, Malta and Canada, with international activity coordinated by Europol.

German prosecutors reportedly confiscated more than $60 million worth of bitcoin from an alleged fraudster, but he will not give them the password to unlock the funds. The man had been sentenced to more than two years in jail for covertly installing software on other computers to harness their power to “mine,” or produce, bitcoin.

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Report Details North Korea Links to Crypto Hacks, Ransomware Connections

By: Jordan R. Silversmith

According to a confidential UN report, hackers working on behalf of the North Korean government stole cryptocurrencies valued at more than $300 million in cyberattacks from 2019 to November 2020 and used those funds to pay for nuclear weapons. A crime syndicate working on behalf of the North Korean government, the Lazarus Group, reportedly played a major role in the thefts, having stolen around $275 million worth of cryptocurrency from an exchange in 2020, representing half of all cryptocurrency stolen in 2020. Hackers working for the North Korean government, such as the Lazarus Group, reportedly continue to launder stolen cryptocurrencies through over-the-counter brokers in China and are also reported to be exploring new money laundering techniques involving DeFi platforms.

Recent blockchain analysis has found connections between four of 2020’s largest ransomware strains. The four prominent strains – Maze, Egregor, SunCrypt and DoppelPaymer – all use the RaaS model for ransomware, meaning that affiliates perform the ransomware attacks and pay a percentage of each victim payment to administrators and creators of the strains. Researchers have pointed out that many RaaS hackers switch between different strains and that there may be major overlap between affiliates migrating back and forth between the major ransomware strains.

While physical attacks involving cryptocurrencies are rare, Hong Kong police recently reported that a gang lured a cryptocurrency trader to an office for a deal and then robbed her of HK$3.5 million (US$448,770) in cash at knifepoint. Meanwhile, cyberattacks are continuing apace in 2021, with the latest being an attack on a Yearn Finance DAI vault that resulted in a loss of $11 million of cryptocurrency value.

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