What Crypto Capital is and what it has to do with money laundering through BTC
Cryptocurrencies have become one of the favorite tools of scammers and drug dealers, which has repeatedly hit both bitcoin’s reputation and its price. As a result, it is not surprising that the entire financial structure of Global Trade Solutions together with Crypto Capital managed to build a large money laundering network through BTC.
Any innovative technology has two sides of the coin, and one never knows for what purpose this or that invention will be used. Something similar has happened to Bitcoin. That is the first decentralised Internet payment network, which, together with financial freedom, gave attackers another way to leave their transactions unnoticed.
Silk Road Experience
Although Bitcoin is an absolutely transparent and easily traceable payment system, if the sender and the recipient do not move their money in fiat, it is quite problematic to determine the identity of the initiator of the transaction.
Users of Silk Road, one of the most popular marketplaces on the darknet, where you could easily buy LSD, marijuana, porn, mockups for weapons and various malware, used this property at one time.
During its existence from 2011 to 2013, the total
trading volume on Silk Road reached more than 9.5 million BTC, while the alleged owner of the marketplace earned 600,000 BTC through mediation. At the current rate, it is about $4.5 billion.
However in 2013, FBI employees shut down the Silk Road site, which caused an immediate response of the market. In October 2013, the value of Bitcoin fell 8.6% to $124.
Crypto Capital and Money Laundering
6 years later a similar situation took place. The price of bitcoin, however, was not $124, but $7500. At the end of October 2019, Polish law enforcement officers arrested Crypto Capital processing company CEO Ivan Manuel Molin Lee on suspicion of participating in the international drug cartel and money laundering through the Bitfinex
At the same time, several other large exchanges, including Binance, Kraken, BitMEX, Coinapult and Cex.io, used Crypto Capital payment services.
It is worth noting that at the end of 2018, the owners of Bitfinex and the issuer of the stable-coin Tether hided the fact of loss of access to $850 million of corporate and client money, which allegedly “stuck” with the processing company Crypto Capital. Moreover, according to the latter, the money was eventually frozen by the authorities of Portugal, Poland and the United States.
The whole story looks even more suspicious, given that Tether and Bitfinex were featured in money laundering cases in the Panama Papers.
Also, according to the Polish Ministry of Justice, the authorities blocked the bank accounts of Crypto SP. Z O.O. and seized $350 million allegedly owned by the company and NESP SP. Z O.O., which, in turn, may be associated with Crypto Capital.
Shadow on Crypto Capital is also imposed by the fact that one of its clients was the notorious Quadriga CX crypto exchange, the CEO of which allegedly mysteriously died and took away all the user's private keys for $200 million.
The twist with Crypto Capital does not end there. Earlier, according to SynQ analysts, the owner of the parent company Global Trade Solutions - Reginald Fowler and his partner, Ravid Yosef, were accused of bank fraud by US prosecutor. Therefore, the reputation of these financial institutions is far from being spotless.
Fraudulent transactions and Bitcoin’s reputation
It is too early to say how huge the network of laundries is. In order to be able to do that, it is necessary to wait for a court decision. However, it is obvious that the use of bitcoin and other coins to whitewash money received as a result of criminal activity negatively affects the reputation of cryptocurrencies and the state of the cryptocurrency market as a whole. After all, even hacking a crypto-exchange somehow implies the whitewashing of stolen money in the future.
For example, a cyber attack on the notorious Japanese crypto exchange Mt. Gox, which in 2013-2014 serviced more than 70% of transactions in BTC, led to a collapse of bitcoin’s price by 23% to $37. Then in March 2013, the crypto exchange lost 850,000 BTC - 7% of all bitcoins, and depositors of the trading platform are still trying to get their money back.
Since any stolen money requires whitewashing, an intergovernmental organisation combating money laundering and terrorist financing - FATF has come out with a number of requirements for cryptocurrency transactions. We are talking about the mandatory KYC/AML procedure, which involves the identification of the sender of the payment, as well as the exchange of crypto-exchanges information about their customers.
Among other things, FATF recommend stopping the activities of various mixers and toggle switches, which allow fraudsters to hide the real recipients and senders of payments. Also the use of anonymous currencies is to be limited.
What to expect on the cryptocurrency market in the near future?
Using the mentioned isolated cases, states are trying to limit the use of cryptocurrencies. Hiding behind the fight against money laundering, the fight against illegal drug and arms trafficking, governments want to try to take control of the financial system of the future, which is being born right before our eyes and poses a threat to the fiat money market. Vivid examples of the “world banking elite” in panic are hysterical attempts to ban Libra from Facebook or Gram from Telegram messenger, which boldly declared themselves an alternative to the world of fiat money. Understanding this, we can expect further attacks on the cryptocurrency market by those in power and with assistance by world media.
We must not forget that the lion's share of the money is laundered through
cash and the banking system, which in all its operations uses only fiat money. For example, in 2018, according to the Wall Street Journal, the Estonian branch of Danske Bank laundered about $ 230 billion. From 2010 to 2014, Deutsche Bank laundered $80 billion. Those are just a revelation of recent years and we haven’t taken into account the fact that, according to the UN Office on Drugs and Crime, the annual volume of dubious transactions reaches $2 trillion, and where basically everything is sold for dollars.
Obviously, the time has come to start regulating the cryptocurrency market. The main role in regulation, however, should be played by society, and not by a handful of powerful world bankers. Additional regulation may dampen the reputation of cryptocurrencies and prevent the use of digital assets in illegal activities. And market leaders such as Binance, Kraken and Coinbase, who can put a barrier to criminal money, should play a major role. As a result, it will save the market from unnecessary manipulations, bringing confidence to the owners of digital assets.