What the launch of the FBI’s crypto task force means for the digital asset space?

On February 17, at the Cyber ​​Security Conference in Munich, Deputy Attorney General of the United States Lisa Monaco announced the formation of the new task force “dedicated to cryptocurrency” within the Federal Bureau of Investigation (FBI). Four months after the launch of the Justice Department’s National Cryptocurrency Enforcement Team (NCET), it marks another major step in the US government’s crusade against criminal misuse of cryptocurrencies.

What will the task force look like?

The name of the new task force that Monaco has unveiled is the Virtual Asset Exploitation Unit (VAXU). It will bring together staff from the various units of the FBI with crypto expertise to conduct investigations that use blockchain analysis and could lead to seizures of virtual assets. There are still not many details available on the details of the VAXU’s operation, but in her speech, Monaco clearly emphasized the fight against cyberransomware as the main priority:

“Ransomware and digital extortion, like many crimes fueled by cryptocurrency, only work if the bad guys are paid, meaning we have to break their business model […] The currency may be virtual, but the message to companies is concrete: if you report to us, we can track the money and not only help you, but hopefully prevent the next victim.”

The VAXU also plans to partner with foreign task forces to track down multinational criminal networks operating in crypto.

Relationship with the NCET

In fact, despite its primary affiliation with the FBI, VAXU will be part of the National Cryptocurrency Enforcement Team (NCET), launched in October 2021, to deal with money launderers and cyber criminals. According to the official release, the NCETs mission is to “handle complex investigations and prosecutions of criminal cryptocurrency abuse, especially crimes committed by virtual currency exchanges, mixing and tumbling services, and money laundering infrastructure actors.”

The mission of the NCET includes investigating and prosecuting cryptocurrency cases, identifying areas for increased investigation and prosecution focus, building relationships with crypto-adjacent units and officers in the law enforcement system, and collaborating with industry players.

In essence, the NCET has a mandate to participate in almost every relevant case, regardless of who is investigating it. The addition of the FBI-backed VAXU will further expand the unit’s capabilities and cement its status as one of the key forces in the crypto law enforcement game.

NCET’s new look

On February 17, Eun Young Choi, ex-senior counsel to the Deputy Attorney General, appointed to lead the NCET. Choi spent more than nine years as a cybercrime coordinator at the US law firm for the Southern District of New York, dealing with cryptocurrency while investigating money laundering and online fraud.

To name one, Choi served as the lead prosecutor in the case of illegal crypto exchange Coin.mx, an unlicensed virtual currency exchange whose operator, Anthony Murgio, was convicted to 66 months in prison. She also successfully filed the appeal in the case against Ross Ulbricht, the founder of the Silk Road, who has been serving his life sentences since 2015.

Speaking to Coin-Crypto, Sujit Raman, a partner in the privacy and cybersecurity practice at law firm Sidley Austin, emphasized the consistency of the current US law enforcement approach. As early as 2018, the Ministry of Justice publicly explained that “cybercriminals are increasingly using virtual currencies to further their activities and hide their assets,” and announced that it plans to “continue to evaluate the emerging threats posed by rapidly evolving cryptocurrencies that target malicious actors often use.”

Detailed internal evaluation and analysis within DOJ led to the publication of a comprehensive crypto enforcement strategy by the Trump administration in October 2020. Raman noted:

“The launch of the NCET and of the FBI’s Virtual Asset Exploitation Unit are therefore significant and important extensions of the mindsets that senior officials have been pursuing for some time, across administrations.”

Executive synergies

Michael Bahar, chairman of global law firm Eversheds Sutherland’s Cybersecurity practice, told Coin-Crypto there will be a synergistic effect on future collaboration between the DOJ and other regulatory bodies. Bahar noted:

“The growing experience and expertise within the Department of Justice will also spread to regulators such as the Securities and Exchange Commission and financial regulators. Indeed, we can now expect the Department of Justice to further strengthen its involvement with state and local law enforcement and regulatory agencies in the United States and worldwide.”

As Raman explains, these relationships between the DOJ and agencies such as the SEC, Commodity Futures Trading Commission (CFTC), Financial Crimes Enforcement Network (FinCEN), and Internal Revenue Service (IRS) already exist and although there are limits to the amount of criminal enforcers can work with civilian regulators, “those partnerships will only deepen.” But in Raman’s view, the DOJ and its task forces will not drive the actual regulation surrounding digital assets:

“DOJ is a law enforcement agency. It is not likely to play a very important role in establishing a legislative framework to govern the crypto industry on a large scale.”

Both experts agree that these developments pose no threat to the legitimate crypto industry. On the contrary, skilled law enforcement can help her become a more transparent and safe zone for investment.

The signal that DOJ activity is sending is pretty clear: it’s time to comply. “If you’re into cryptocurrency, you need to demonstrate that you can do it in a compliant way, by tailoring your compliance programs to the unique risks posed by cryptocurrencies and the underlying blockchain technology,” explains Bahar.

The ongoing centralization and coordination of federal law enforcement’s investigation and prosecution efforts in the virtual currency space makes it clear: While the burgeoning crypto industry is here to stay, law enforcement is adapting its strategies in response.

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