The U.S. Department of Justice seized over $225 million in cryptocurrency linked to extensive investment fraud operations. This significant action represents the largest ever cryptocurrency seizure in the entire history of the U.S. Secret Service. State investigators utilized advanced blockchain analysis to successfully trace the funds that were stolen from over 400 victims. The funds were then laundered through a very complex network of cryptocurrency addresses to obscure their illicit origin. This major multi-agency action involved the U.S. DOJ, the FBI, the Secret Service, and important private partners.
The official complaint alleges these crypto addresses were part of a very sophisticated blockchain-based money laundering network.
This network executed hundreds of thousands of transactions to disperse the proceeds of cryptocurrency investment fraud schemes. Investigators discovered one hundred forty-four OKX accounts were used in the scheme, many tied to Vietnamese documents. The photos for these documents were taken in the same location, which strongly suggests organized fraud ring operations. One specific case highlighted a bank CEO who was tricked into wiring over forty-seven million dollars from his bank.
Despite the complex obfuscation methods, blockchain investigators could still map out the entire money laundering network. They successfully used LIFO, which is Last-In-First-Out tracing, to follow the funds through ninety-three deposit addresses. The stolen funds were then moved through thirty-five different intermediary wallets before they were finally consolidated together. Eventually, the illicit funds were all consolidated into seven final USDT wallet groups holding millions of dollars each.
The stablecoin issuer Tether played a critical role by freezing the tokens that were linked to these groups.
Tether then burned the frozen tokens and reissued the equivalent amount directly to the United States government. This important mechanism enabled the civil forfeiture recovery and can only be used when legal grounds exist. The U.S. Department of Justice invoked two separate federal statutes to allow for the forfeiture of property. These statutes allow for the forfeiture of property involved in money laundering and derived from illegal wire fraud. The next step in this process should be to identify the many victims and use the seized amounts for restitution.
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