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The Roundtable: Crypto Crime's Many Masks

From fraud to assault-and-battery, and from robbery to money laundering, crypto-related crime can take any number of forms.

It is estimated that more than 34 million Americans have used some form of crypto in the last year. As that number grows, so does the percentage of people who will find themselves victims of crypto-related crime. For years, this crime was closely associated with money laundering, illegal activity on the dark web, and ransoms. But as three experts tell Roundtable's Rob Nelson, crypto crime can take a number of other, more pedestrian forms, and continues to grow along with the use of digital currencies. In this segment, the panel discusses the expanding universe of crypto crime as adoption gains pace.

The lawyer David Nissman discusses the origins of money laundering statues, and why they may be insufficient or inappropriate to regulating crypto.

"The thing about the money laundering statute is that, once again, it's very broad," he says. "I was in the [government] when we got that law passed in the 1990s. There were some earlier money laundering laws specific to drugs, but the general one that we have now is a statute called 1956 and 1957. Basically, if you commit one of those enumerated crimes, and then you do anything with that money—you put in a bank account, you make an investment, you use it to support your own business—all of a sudden that second act, what you did with the money, becomes money laundering."

He continued, "I had a case like this in crypto. The IRS Criminal Investigation Division was investigating a money laundering case with respect to some individual that had bought some Bitcoin from the person that became my client. The IRS is very, very aggressive on money laundering cases with respect to crypto."

Fellow lawyer Jeffrey Alberts notes that much of the crime taking place is a result of people trusting broker institutions of the exact sort that crypto was meant to eliminate.  

"Cryptocurrency was originally created as a way to do something called disintermediation," he says. "The idea was, I want to give you money right now. We do it through the banking system, but this cool new technology's been created, where I can give you money directly without any intermediary, that's a bank, but now people are frequently wanting to get involved in cryptocurrency, in DeFi, in NFTs. So they take their cryptocurrency tokens and they give them to some other company or some other group." 

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"What's gonna happen is often they're giving their money to people that they don't know very well," he continues. "Sometimes those people aren't registered with any regulators here in the United States. So those people can just take all the cryptocurrency they're being given. And it's a standard crime. They run away, they keep the cryptocurrency and the people that sent them their cryptocurrency are out of are out of luck. You're likely to see fraud in that area increase in the future." 

Watch the full discussion below:

Roundtable Guests:

Jeffrey Alberts, Partner, Pryor's Cashman Litigation Group

Tracy Hoyos-Lopez, Attorney

David Nissman, Attorney