Caroline Ellison, the former boss of trading firm Alameda Research, has been sentenced to two years in prison for her involvement in one of the largest crypto related financial frauds. She was accused of helping former FTX boss Sam Bankman-Fried steal billions of dollars from customers’ funds at the cryptocurrency exchange.
Bankman-Fried himself was sentenced to 25 years in prison in March this year. His cryptocurrency exchange, FTX, collapsed in November 2022 after the fraud was revealed.
Ellison had already apologised and shown remorse for her actions, and had become a key witness for the US government as prosecutors took Bankman-Fried, her former boyfriend, to court, according to the Financial Times. She had already pleaded guilty to fraud and money laundering changes.
The report says Judge Lewis Kaplan at the New York federal court suggests a lighter sentence was due to her cooperation in the trial against Bankman-Fried. She tearfully told the court, “To all the victims and everyone I harmed . . . I am so, so sorry,” as quoted by the FT.
“She walked the jury through spreadsheets, documents and private Signal chats that painted a picture of a years-long criminal conspiracy by the one-time crypto billionaire, revealing that Bankman-Fried had directed her and her former colleagues to steal roughly $10bn of customer deposits.” according to the FT.
FBI involved in investigating fraud perpetrators based in Southeast Asia
Authorities in a number of US states have said they have seized $6 million worth of cryptocurrencies from cybercriminals based abroad who had targeted American citizens.
The DoJ press release provided detail stating that the “perpetrators in Southeast Asia targeted one or more individuals in the United States and fraudulently obtained millions of dollars’ worth of cryptocurrency through a cryptocurrency confidence investment scheme.”
The FBI was involved in the investigation and was able to locate victims’ funds worth $6 million in crypto on the blockchain, according to the press release.
One of the attorneys indicated that protecting US victims of crypto-related fraud would, if necessary, involve the FBI even if the origins of the scams are based outside the US.
The press release pointed out that these investment schemes and scams are nothing new and provided an outline of how they usually work in the hope of raising public awareness and preventing at least some from becoming victims.
In a cryptocurrency confidence investment scheme, cybercriminals identify and contact their potential victims and build a relationship of trust with them. They lure the victim into investing in fake crypto schemes by promising huge profits. Once the victim has transferred funds from their real bank account into a crypto account, they lose control of their money sooner or later, and eventually lose all of their investments.
Fine for Worldcoin in South Korea
Regulators in South Korea have imposed a fine of approximately $829,000 on the cryptocurrency firm Worldcoin Foundation and its affiliate Tools For Humanity (TFH) “for violating the country’s laws on personal information protection,” according to CoinTelegraph.
South Korea’s Personal Information Protection Commission (PIPC) has accused the firm of illegally acquiring biometric information such as iris scans from its customers in the country.
PIPC has said customers were asked to submit this information when downloading and registering on the firm’s portal. The regulator said that the firm had no legal basis for processing this information, according to the report.
Customers were not informed about the purpose of the data collection, its retention period, and whether the data will be shared with other entities including those based in a foreign country, the regulator has said.
Tools For Humanity has welcomed the decision and said it was a result of many constructive discussions it had held with the regulators in South Korea, the report adds.
SEC action against TrueCoin and TrustToken
And finally, some more fines as the SEC has announced “settled charges against TrueCoin LLC and TrustToken Inc. for their fraudulent and unregistered sales of investment contracts involving TrueUSD (TUSD), a purported stablecoin.”
A SEC press release said, “from November 2020 until April 2023, TrueCoin and TrustToken engaged in the unregistered offer and sale of investment contracts in the form of the crypto asset TUSD and profit-making opportunities with respect to TrueUSD on TrueFi.”
They have also been accused of falsely claiming that the investment opportunity was safe and trustworthy, and that TUSD was backed by the US dollar or its equivalents, according to the press release.
Jorge G. Tenreiro, Acting Chief of the SEC’s Crypto Assets & Cyber Unit has said, “TrueCoin and TrustToken sought profits for themselves by exposing investors to substantial, undisclosed risks through misrepresentations about the safety of the investment,”
The two companies have agreed to settle the charges without admitting or denying them and will pay a civil penalty of $163,766 each.
