[co-author Timothy Whittle]
On October 6, 2021, the U.S. Department of Justice (DOJ) announced its plans for increased scrutiny of the cryptocurrency market with the creation of a National Cryptocurrency Enforcement Team (NCET) to pursue criminal investigations and actions against cryptocurrency misuse. The NCET will focus on “crimes committed by virtual currency exchanges, mixing and tumbling services, and money laundering infrastructure actors” and will also aid in the tracing and recovery of assets lost to ransomware payments and other fraud and extortion.
The creation of the NCET follows DOJ’s October 8, 2020, publication of “Cryptocurrency: An Enforcement Framework,” which provides an overview of emerging threats and enforcement challenges related to cryptocurrency. The published framework detailed three enforcement focus areas: (1) financial transactions associated with the commission of crimes; (2) money laundering and the shielding of legitimate activity from tax, reporting, or other legal requirements; and (3) crimes, such as theft, directly implicating the cryptocurrency marketplace itself.
The NCET will report to Kenneth A. Polite Jr., Assistant Attorney General for the Criminal Division. The team will combine the expertise of the Money Laundering and Asset Recovery Section and the Computer Crime and the Intellectual Property Section to target cryptocurrency exchanges, infrastructure providers, and other entities to address “the misuse of cryptocurrency and related products to commit or facilitate criminal activity.” DOJ also announced its intention to grow its expertise in cryptocurrency and blockchain technologies across the agency to increase enforcement in “dark markets.”
DOJ explained the NCET will work closely with other federal agencies, such as the Securities and Exchange Commission, the Commodity Futures Trading Commission, and the Department of Treasury, to pursue the following goals:
- Investigate and prosecute cryptocurrency cases, comprising a central part of a nationwide enforcement effort to combat the use of cryptocurrency as an illicit tool.
- Develop strategic priorities for investigations and prosecutions involving cryptocurrency, in consultation with the USAOs, Department components, and investigative agencies involved in cryptocurrency investigations.
- Identify areas for increased investigative and prosecutorial focus, including professional money launderers, ransomware schemes, human traffickers, narcotics traffickers, and financial institutions working with cryptocurrency.
- Build and enhance relationships with cryptocurrency focused AUSAs and prosecutors with other Department litigating components and offices to pursue cryptocurrency investigations and prosecutions.
- Develop and maintain relationships with federal, state, local, and international law enforcement agencies that investigate and prosecute cryptocurrency cases.
- Train and advise federal prosecutors and law enforcement agencies in developing investigative and prosecutorial strategies. Such training and advice will include providing guidance concerning search and seizure warrants, restraining orders, criminal and civil forfeiture allegations, indictments, and other pleadings.
- Support the coordination and sharing of information and evidence among law enforcement offices to maximize the effectiveness of the Department’s investigations, prosecutions, and forfeitures involving cryptocurrency.
- Collaborate and build relationships with private sector actors with expertise in cryptocurrency matters to further the criminal enforcement mission.
The announcement of the NCET is part of a broader federal effort to increase cryptocurrency-related enforcement. In June 2021, DOJ announced it seized roughly $2.3 million worth of bitcoins following a ransomware cyber attack. In September 2021, the Department of the Treasury issued its first-ever sanctions against a cryptocurrency exchange for facilitating financial transactions for ransomware actors.
Cryptocurrency exchanges, traders, and financial institutions engaged in the cryptocurrency market should be prepared to navigate an increasingly complex enforcement environment owing to the federal government’s growing security interests in “financial systems, blockchain technology, tracing transactions, and applicable criminal statutes.”