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Bitcoin seized by the German government continues to spook the markets, a crypto executive pleads guilty to money laundering failures, and a former Crypto.com compliance officer is accused of extortion.
The German government is officially no longer a “Bitcoin billionaire” after selling off most of its holdings of the asset, which were previously worth around $2bn.
On Wednesday (July 10), the German government sent thousands more Bitcoin to several exchanges to convert into cash, continuing a flash sale that began last week.
According to blockchain intelligence firm Arkham, wallets that belong to the German government moved more than $600m of Bitcoin over the course of the day.
Coinbase and Kraken were among the largest recipients of the seized Bitcoin, alongside Flow Traders, an institutional crypto exchange, and Cumberland, a market maker and subsidiary of high-frequency trading firm DRW.
Collectively, the wallets controlled by the German government have now sold almost 75 percent of their original holdings of seized Bitcoin.
Last week, Bitcoin saw its largest seven-day decline since the collapse of FTX in November 2022, at one point shedding more than 15 percent of its value.
The German government was widely blamed for the losses, and fears spread that this week would see another downturn.
However, so far the market has managed to absorb the heavy selling, and, according to Arkham, one of the biggest buyers has been BlackRock, the world’s largest asset management firm.
In January, BlackRock launched a Bitcoin exchange-traded fund (ETF), which climbed to $1bn in assets under management (AUM) in its first four days of trading.
By the end of May, the ETF held $20bn worth of Bitcoin, and as of Monday (July 9), its total holdings were worth $18bn.
Where did all the Bitcoin come from?
In January this year, police in Saxony announced that they had secured almost 50,000 Bitcoin from two suspects associated with an online streaming platform.
The two suspects — a German male, 40, and Polish male, 37 — are said to have been key personnel at Movie2K, an entity suspected of copyright infringement, money laundering and other criminality.
According to the Saxony authorities, the two suspects had substantial control of Movie2K until May 2013, and are thought to have purchased Bitcoin using the proceeds of the platform.
Following a joint investigation by the Dresden Public Prosecutor's Office, the Saxony State Criminal Police Office and Leipzig’s serious crime and corruption force, the suspects agreed to voluntarily hand over the Bitcoin.
“This is the most extensive seizure of Bitcoin by law enforcement authorities in the Federal Republic of Germany to date,” the Saxony police noted in a press statement.
However, the case remains under investigation, and “no further information will be provided” until the investigation is complete, the authorities added.
Germany’s Federal Criminal Police Office (BKA) is also assisting in the investigation, as is the US Federal Bureau of Investigation (FBI) and a Munich-based forensic IT company.
Paxful executive pleads guilty to money laundering failures
A co-founder and former chief technology officer (CTO) of Paxful, a peer-to-peer (P2P) crypto exchange, has pleaded guilty to money laundering failures in the US.
Artur Schaback, a 36-year-old of Tallinn, Estonia, was accused of conspiracy to fail to maintain an effective anti-money laundering (AML) programme — a key requirement under the Bank Secrecy Act.
From 2015 to 2019, Paxul operated as a P2P exchange and money transmitting business, where users could use fiat currency, gift cards and prepaid cards to purchase crypto-assets.
According to US prosecutors, Schaback allowed customers to open accounts and trade on Paxful without gathering sufficient know your customer (KYC) information.
He also marketed Paxful as a platform that did not require KYC, presented “fake” AML policies that he knew were not enforced at Paxful and failed to file a single suspicious activity report.
“As a result of his failure to implement AML and KYC programs, Schaback made Paxful available as a vehicle for money laundering, sanctions violations and other criminal activity, including fraud, romance scams, extortion schemes and prostitution.”
Schaback is scheduled to be sentenced on November 4, 2024 and faces a maximum of five years in prison. He will also resign from Paxful’s board of directors.
Crypto.com enters legal battle with former compliance officer
A former Crypto.com compliance officer is now facing his previous employer in court, after being accused of extortion, money laundering and seven other charges.
Jose Luis Alonso Melchor, 33, was fired from Crypto.com after he allegedly obtained damaging information about the company and threatened to publish it.
Melchor, who was arrested by police in Malta, is said to have come into possession of information related to an attachment order of a fellow employee.
An attachment order is a means by which an employer can deduct payments from an employee’s salary in order to pay a debt or settle a court order.
According to local media in Malta, Melchor disclosed information about the attachment order to the employee it was addressed to.
After being fired, Melchor allegedly sent a number of emails to Crypto.com, threatening to publish sensitive information that he had obtained as a compliance officer at the firm.
He is further alleged to have demanded €44,000 to compensate for his loss of employment and to not publish the information in question.
A Crypto.com spokesperson told Vixio: “The employee in question was reported to the authorities immediately upon discovery of his actions and his employment terminated.
“We continue to cooperate fully with law enforcement and have no further comment as the matter is pending litigation.”
Crypto.com, the brand name of Foris DAX MT, is registered in Malta. It is regulated in a number of jurisdictions, including the UK, where it is one of 44 crypto companies on the Financial Services Register of the Financial Conduct Authority (FCA).
