The Coin Laundry Investigation Uncovers Cryptocurrency Misuse
The latest investigative report titled The Coin Laundry, produced by the International Consortium of Investigative Journalists (ICIJ), has brought to light the illicit flow of funds into major cryptocurrency exchanges across the globe. This extensive collaboration involved journalists from over 35 countries, unveiling a burgeoning underground economy. The findings indicate a pervasive issue where regulators are failing to keep up with the rapidly changing technology and the cunning criminals who take advantage of it. The ICIJ and its partners also highlighted a growing trend where offenders can easily convert significant amounts of cryptocurrency into cash without ever engaging with traditional banking systems. Below are some notable revelations from The Coin Laundry investigation.
Emergence of Crypto-to-Cash Services in Canada
A novel method for laundering funds has surfaced in Canada, characterized by storefronts that allow individuals to convert cryptocurrency into cash. These establishments are increasingly appearing in urban areas and often provide exchange services without requiring clients to reveal their identities or the source of their funds. In a joint investigation by ICIJ media partners CBC/Radio Canada, the Toronto Star, and La Presse, the operation of these crypto-to-cash services was scrutinized. The investigative team conducted a test transaction with 001k.exchange, a Ukraine-based service that operates in several North American cities. An undercover journalist from the Toronto Star created a Telegram account to pose as a potential customer and arranged to exchange 2,000 USDT, a cryptocurrency linked to the U.S. dollar, to observe the process. After receiving a cryptocurrency address, the reporter transferred the USDT and visited a midtown Toronto location to collect her cash, doing so without presenting any form of identification, a clear infraction of Canadian anti-money laundering regulations. Instead, the only requirement was to provide the serial number from a Canadian $5 bill for customer identification. A video captured the moment of cash handover, showcasing the teller providing the funds after merely verifying the bill’s serial number. The remittance business claimed that the employee was conducting personal transactions outside official operations. 001k.exchange has not responded to inquiries from the media outlets involved.
Binance Reduces Cooperation with European Authorities
The Coin Laundry report also delved into the relationship between cryptocurrency exchanges and law enforcement, particularly regarding the tracing of illicit funds. In Belgium, ICIJ media partners De Tijd and Knack reported that Binance, the world’s largest cryptocurrency exchange, has ceased its cooperation with local police and judicial bodies concerning criminal investigations. Typically, exchanges are expected to assist law enforcement in identifying and freezing suspicious transactions on their platforms. A 2023 Europol report indicated that Binance had previously been one of the more cooperative exchanges, but reports from De Tijd and Knack revealed a recent decline in collaboration. Law enforcement sources indicated that Binance has stopped responding to requests for information related to dubious accounts. Kevin Wiliquet, a crypto specialist with the Belgian federal police, noted that this sudden refusal to cooperate was a recent development. Following increased scrutiny from the Belgian Financial Services and Markets Authority, Binance decided to transfer its Belgian clientele to its Polish division in 2023. This transition has resulted in the company’s data being distributed across various international jurisdictions, including the Seychelles, complicating law enforcement’s efforts to obtain user information. Belgian magistrates contend that Binance’s blockchain operates without borders, suggesting that requests for assistance should not require foreign intervention, yet Binance has largely ignored requests for information from Belgium and other EU nations. Other significant exchanges appear to be following a similar trend, creating obstacles for European law enforcement agencies. In a statement, Binance emphasized its commitment to cooperating with law enforcement agencies worldwide, including in Belgium.
Scams in South America
In Ecuador and Colombia, a multimillion-dollar cryptocurrency investment scam was uncovered by ICIJ partner CONNECTAS, alongside Vistazo and El Espectador. This scam involved a former television actress, a Christian church, and a purportedly fraudulent online business school that falsely promised investors quick profits. Instead, thousands of individuals found themselves burdened with debt. The ADN Business School lured participants with dubious promises related to foreign exchange trading, sports betting, and cryptocurrency investments. Reports indicate that $176 million in at least 36 distinct cryptocurrencies was lost before prosecutors managed to freeze these assets. The Ecuadorian prosecutor’s office confirmed that they traced the lost funds back to Binance, where the alleged masterminds of the ADN Business School scheme had established several wallets. Unfortunately, the perpetrators moved the funds before legal action could be initiated, leaving victims with only $500 worth of cryptocurrency recovered so far. Investigators cited two significant challenges that hindered the recovery of funds: the absence of an institutional wallet address and the slow response in asset seizure.
In Uruguay, ICIJ media partner Búsqueda detailed another criminal case involving an accused crypto fraudster, a former rugby player named Gonzalo Campomar, who allegedly swindled millions from affluent investors before fleeing the country. Along with his alleged accomplice, Martín Cajal, Campomar was charged with orchestrating an investment scheme that promised high returns of 2% per month from cryptocurrency investments. Campomar left Uruguay in October 2024, shortly after the initial complaints from unhappy investors emerged. While the total number of victims and the amount of money involved in the scheme remain unclear, at least one law firm in a suburb of Montevideo reported receiving complaints from victims who ultimately did not pursue legal action due to the unclear origins of their lost funds. Cajal did not respond to Búsqueda’s inquiries, and Campomar stated he would share his side of the story in court when the time is right.
