On October 8, 2020, the Attorney General’s Cyber Digital Task Force announced the release of a publication entitled Cryptocurrency: An Enforcement Framework (the “Enforcement Framework”). The Enforcement Framework describes the DOJ’s three areas of focus for illicit activity involving cryptocurrency: (1) financial transactions associated with the commission of crimes; (2) money laundering and the shielding of legitimate activity from tax, reporting, or other legal requirements; and (3) crimes, such as theft, directly implicating the cryptocurrency marketplace itself. The Enforcement Framework further describes the DOJ’s efforts to combat the threats posed by crimes involving cryptocurrency, highlighting its partnerships with the Securities and Exchange Commission (“SEC”), the Commodity Futures Trading Commission (“CFTC”), and agencies within the Department of the Treasury to enforce federal law in the cryptocurrency space. Finally, the Enforcement Framework describes the ongoing challenges that the government faces in cryptocurrency enforcement, particularly with respect to (i) the unique business models employed by cryptocurrency exchanges and platforms; (ii) activities that obscure the government’s ability to trace funds, like “mixing” and “tumbling” digital assets; and (iii) efforts aimed at jurisdictional arbitrage.
The DOJ’s release of its Enforcement Framework comes in the wake of a criminal indictment unsealed on October 1, 2020 concerning Bitcoin Mercantile Exchange (“BitMEX”), an online trading platform for trades in futures contracts and other derivative products tied to the value of cryptocurrencies. In cooperation with the CFTC, the U.S. Attorney’s Office for the Southern District of New York brought criminal charges against BitMEX’s three founders and another key employee for violations of the Bank Secrecy Act (“BSA”) by willfully failing to establish, implement, and maintain an adequate Anti-Money Laundering (“AML”) program to prevent illicit activities on its trading platform. The CFTC also commenced an enforcement action that same day against BitMEX, its affiliates and subsidiaries, and the founders, based upon BitMEX’s failure to register its trading platform and its failure to implement an AML program.