Blockchain & Cryptocurrency , Cryptocurrency Fraud , Fraud Management & Cybercrime

Cryptohack Roundup: Defense Calls Sam Bankman-Fried

Also: FinCEN Wants to Track Mixer Funds, Warns Against Hamas' Crypto Use
Cryptohack Roundup: Defense Calls Sam Bankman-Fried
Image: Shutterstock

Every week, ISMG rounds up cybersecurity incidents in digital assets. This week: Sam Bankman-Fried says he'll testify in his criminal trial, FinCEN proposed recording crypto transactions involving mixers and warned against virtual assets use by Hamas, a financial investigation firm used NFTs to track stolen funds, Atomic Wallet froze $2 million of $100 million in hacked funds and an advocacy group challenged the SEC's case against Binance.

See Also: User Entity & Behavior Analytics 101: Strategies to Detect Unusual Security Behaviors

Sam Bankman-Fried's Trial

The trial of former FTX CEO Sam Bankman-Fried moves to the final stages, but not without the Adderall-popping former wunderkind taking the stand. If convicted of fraud and other charges against him, Bankman-Fried faces a potential maximum sentence of 115 years in prison.

After the prosecution presents the final aspects of its case Thursday, the defense will begin presenting its own witnesses. Bankman-Fried lawyer Mark Cohen reportedly said that his team will not take more than three days to question Bankman-Fried and three other witnesses, which includes an attorney based in the Bahamas, a litigation consulting firm employee and an undisclosed individual to detail the job roles of former FTX employees. The defense's case could take "perhaps an hour," excluding Bankman-Fried's testimony, Cointelegraph reported Judge Lewis Kaplan as saying.

The prosecution's case over the past three weeks included testimony from former FTX employees and some of his closest friends as well as customers, investors, government officials and law enforcement agents who said Bankman-Fried consciously committed fraud.

FinCEN on Crypto Mixers

The Treasury's Financial Crimes Enforcement Network proposed a rule that would mandate financial institutions in the United States, including cryptocurrency businesses, impose "special measures" and report transactions involving cryptocurrency mixing services. The document identifies mixers as a "primary money laundering concern," since the tool often provides anonymity to threat actors, allowing them to launder their ill-gotten gains. North Korean hackers are prolific users of mixers (see: North Korea Nabs $200M in Crypto Theft So Far In 2023).

FinCEN's definition of mixing activity does not just include the use of mixing services, but also other methods that obscure the trail of funds on the blockchain, such as cross-chain and multi-chain transactions, splitting of one transaction into multiple smaller transactions, using programmatic code to coordinate transactions, creating single-use wallets, exchanging cryptocurrency with multiple other cryptocurrencies or digital assets, and introducing delays in transactional activity to hide connections between participants in each transaction. The agency is taking written comments over the next 90 days.

FinCEN Warning on Hamas' Crypto Use

FinCEN issued a warning to financial institutions to be on the lookout for suspicious activity related to fundraising campaigns by Hamas involving virtual currency and fictitious charities. Virtual asset service providers must report the suspicious transactions at the earliest to aid its "whole-of-government" response to "deny Hamas the ability to raise and use funds worldwide," FinCEN said. Analysis from Chainalysis says Hamas isn't an avid cryptocurrency user.

Using NFTs to Track Stolen Funds

A financial investigation firm found a novel way to warn users and exchanges about interacting with cold wallets associated with a hack: it permanently attached to them non-fungible tokens containing a legal document that details the illicit nature of the wallet and also helps law enforcement track the movement of funds in the wallet. The Singapore High Court allowed Intelligent Sanctuary to use this method in a theft case involving $3 million, 95% of which has already been recovered, the company said.

Atomic Wallet

Atomic Wallet, which suffered a $100 million hack earlier this year, froze $2 million in "suspicious deposits" in a joint effort with undisclosed "major" crypto exchanges and intelligence firms Chainalysis and Crystal, Cointelegraph reported. The threat actor reportedly used "sophisticated" methods, such as bridges and mixers, to move the funds, it said, without providing additional details.

Advocacy Group Challenges SEC Case Against Binance

The Chamber of Digital Commerce partnered with digital assets firms, other associations, legal experts and legislators to challenge the U.S. Securities and Exchange Commission's lawsuit against Binance, asking it to dismiss the lawsuit. In a friend-of-the-court filing, the groups argue the SEC exceeded its jurisdiction since digital assets do not constitute investment contracts and token transactions do not meet the criteria for Exchange Act registration requirements.

They also criticized the agency's method of regulation through enforcement, pushing back against its move to oversee the cryptocurrency sector without congressional authorization. The SEC's actions are "paralyzing the market and sending digital asset innovation overseas," said Cody Carbone, vice president of policy at the Chamber of Digital Commerce.


About the Author

Rashmi Ramesh

Rashmi Ramesh

Assistant Editor, Global News Desk, ISMG

Ramesh has seven years of experience writing and editing stories on finance, enterprise and consumer technology, and diversity and inclusion. She has previously worked at formerly News Corp-owned TechCircle, business daily The Economic Times and The New Indian Express.




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