DOJ Targets Crypto-Criminals and Names First Director of National Cryptocurrency Enforcement Team

Types : Alerts

Last week, the U.S. Department of Justice (“DOJ”) announced that Eun Young Choi would serve as the first Director of the National Cryptocurrency Enforcement Team (“NCET”). Choi is the former Senior Counsel to the Deputy Attorney General and previously served as an Assistant U.S. Attorney for the Southern District of New York prosecuting cybercrime, fraud, and money laundering offenses. By creating the NCET, the DOJ is establishing a specialized unit to investigate and prosecute cryptocurrency related crimes and assembling a team of subject matter experts who can assist in U.S. Attorney’s Offices and state and local law enforcement across the country. It may also be signaling that DOJ is placing an increased emphasis on prosecuting crypto related crimes.

According to the DOJ, cryptocurrency is the primary demand mechanism for ransomware payments and the preferred form of “dark market” payment for illegal drugs, weapons, and hacking tools. The NCET is responsible for investigating and prosecuting criminal misuses of cryptocurrency, particularly crimes committed by virtual currency exchanges, money laundering infrastructure actors, and what are known as “mixing” and “tumbling” services, which obfuscate the data linking an individual’s identity to her cryptocurrency transfers.

The NCET will also foster the development of DOJ expertise in cryptocurrency and blockchain technologies and will provide critical support for international, federal, state, and local law enforcement authorities. As cryptocurrency becomes more widely adopted, cryptocurrency related crimes are similarly likely to become increasingly common. However, the technological capability and expertise necessary to investigate and prosecute these crimes may lag behind crypto’s public adoption. The NCET aims to close that gap.

The mission of the NCET will overlap with existing DOJ enforcement initiatives, including the Money Laundering and Asset Recovery Section (MLARS) and Computer Crime and Intellectual Property Section (CCIPS). Indeed, recent high-profile ransomware attacks (such as the Colonial Pipeline disaster, which took down the largest fuel pipeline in the U.S.), money laundering operations (like the one that culminated in the recent arrest of Ilya Lichtenstein and Heather Morgan for allegedly laundering $4.5 billion in stolen bitcoin) and cyber-fraud and theft attacks (such as the recent theft of $1.7 million worth of NFTs through coordinated phishing attacks), show that crypto is increasingly becoming the currency of modern crime. And the NCET stands at the intersection of DOJ’s emerging enforcement priorities.

The creation of the NCET can also be seen as an extension of the Biden Administration’s commitment to making cybersecurity a top priority. In May, Biden issued an Executive Order on Improving the Nation’s Cybersecurity. The Order called for more information sharing, standardized reporting measures, and for the federal government to partner with the private sector in order to adapt to the continuously changing threat environment. The Biden Administration has also shown a willingness to issue sanctions against exchanges involved in the facilitation of ransomware attacks and payments. With the creation of NCET, it appears the Biden administration and the DOJ intend to bring both civil and criminal enforcement actions to bear against cyber-criminals in connection with its efforts to protect U.S. cybersecurity. The confluence of increased government scrutiny and increased public adoption of crypto (for both legitimate and nefarious purposes) will make it critical that stakeholders in the crypto-space be adequately prepared should they receive an inquiry from DOJ.

Montgomery McCracken’s Crypto attorneys regularly advise clients on complying with state and federal regulations and handling civil and criminal investigations. If you have any questions about the blockchain, cryptocurrency, or other digital assets, we are available to assist.