Weekly Roundup

Weekly Roundup

Coinbase settles with New York Financial Regulator for $100 million

On January 4th, the New York Department of Financial Services (DFS) announced that they had reached a settlement agreement with popular cryptocurrency exchange Coinbase Global Inc. for a grand total of $100 million – further compounding the ongoing regulatory turmoil facing the crypto-realm. The agreement was reached after a lengthy investigation revealed significant shortcomings in the company’s anti-money laundering (AML) compliance program, centered on inappropriate know your customer (KYC) due-diligence. These failings include allowing customers to open accounts without conducting proper background checks and failures in performing timely reviews of transaction monitoring alerts and timely filings of suspicious activity reports (SARs).1 All told, Coinbase will pay a $50 million civil money penalty in addition to being forced to invest an additional $50 million to systematically improve its compliance program over the next two years.

            This announcement comes just a few short months after the state of New York hit the crypto division of online brokerage Robinhood Markets Inc. with a major penalty in its own right for similar improprieties that also included the violations of various cybersecurity regulations. At the time, the $30 million penalty levied against Robinhood was the first crypto enforcement action taken by the NYDFS. Following this groundbreaking measure, the NYDFS subsequently released a set of guidelines for American financial institutions to follow in order to seek approval with them before branching into the cryptocurrency space.

            The penalty against Coinbase will also see a DFS appointed Independent Monitor work with Coinbase to enhance its AML compliance program for at least an additional year.1 NYDFS Superintendent Adrienne Harris expressed her desire to use the state of New York’s role in this matter to set the tone nationwide on how to address these violations and bring order to the crypto industry.4

Ex-Bolivian Oligarch Convicted, Sentenced by U.S. court

            A U.S. federal court sentenced former Bolivian Interior Minister Arturo Murillo to six years in prison for taking part in a bribery scheme with a Florida-based company. Murillo pleaded guilty in October of 2022 to receiving over half a million dollars in bribes from the unnamed company to secure a contract with Bolivia’s defense ministry in order to secure a lucrative tear gas contract.3 Murillo then proceeded to launder the funds received through the U.S. financial system. Another Bolivian official and three Americans from the Florida-based company have also pleaded guilty to their involvement in the same scheme.

            Bolivian officials are satisfied with the verdict and are requesting extradition so that Murillo serves his time in a Bolivian prison. “Justice has spoken in the United States. We are satisfied with this judicial decision and we are going to make efforts for judicial actions (of extradition),” said Bolivian Attorney General Wilfredo Chavez.

Ukrainian Billionaire Tied to Money Laundering Released on Bail

            One of the richest men in Ukraine, Kostyantyn Zhevago, was released on bail in France this week ahead of his upcoming extradition hearing on January 19th. The 48-year-old billionaire is facing embezzlement and money laundering charges and was arrested in France in late December at Ukraine’s request. These developments are the latest in a lengthy saga that began when Ukrainian authorities initially issued a warrant for his arrest in 2019, followed by an international warrant in 2021 as part of the country’s recent efforts to clean up its “oligarch-dominated economy.”2 Zhevago is suspected of having direct ties to the disappearance of a reported $113 million from the now bankrupt Finance & Credit Bank of Ukraine. The funds in the case are believed to have been laundered through multiple international outlets.

            Zhevago – who has never been jailed before – insists he did nothing wrong and requested of the court that he not be extradited, this before the French court ultimately agreed to release him on a bail of 1 million euros with the stipulation that he not leave France while awaiting his extradition hearing. The billionaire and his legal team justified the lofty price tag for two weeks of freedom by claiming it was very difficult to run his business from inside jail. Now of course there is the possibility that the business Zhevago will be conducting for the next two weeks could help further shroud the money trail which investigators and prosecutors are attempting to follow.

Citations

  1. Daley, Edmund et al “Coinbase Reaches $100 Million Settlement with NYS Department of Financial Services over Anti-Money Laundering Compliance Failures.” Mintz, 6 Jan. 2023. 
  2. Jabkhiro, Juliette. “Ukrainian Billionaire Zhevago to Be Released on Bail Pending French Extradition Hearing.” Reuters, Thomson Reuters, 5 Jan. 2023. 
  3. O’Boyle, Brendan, and Daniel Ramos. “U.S. Court Sentences Ex-Bolivian Interior Minister to 6 Years in Bribery Scheme.” Reuters, Thomson Reuters, 5 Jan. 2023. 
  4. Sun, Mengqi. “New York Financial Regulator Notches $100 Million Settlement with Coinbase.” The Wall Street Journal, Dow Jones & Company, 5 Jan. 2023. 
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Weekly Roundup

Coinbase settles with New York Financial Regulator for $100 million On January 4th,

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