With intriguingly coincidental timing, as cryptocurrencies reach mainstream and grab the world's attention, the US Justice Department has unsealed a grand-jury indictment that shows a Long Island woman has been indicted on charges that she tried to funnel money to ISIS using Bitcoin.
The Eastern District of New York press release details the crimes...
Long Island Woman Indicted for Bank Fraud and Money Laundering to Support Terrorists - Defendant Stole and Laundered Over $85,000 Using Bitcoin and Other Cryptocurrencies
As alleged in the indictment and court filings, the defendant defrauded numerous financial institutions and obtained over $85,000 in illicit proceeds, which she converted to Bitcoin and other cryptocurrencies. She then laundered and transferred the funds out of the country to support the Islamic State of Iraq and al-Sham (“ISIS”), which has been designated by the U.S. Secretary of State as a foreign terrorist organization. After consummating the scheme, the defendant attempted to leave the United States and travel to Syria.
...“As alleged, the defendant Zoobia Shahnaz engaged in a bank fraud scheme, purchased Bitcoin and other cryptocurrencies and laundered money overseas, intending to put thousands of dollars into the coffers of terrorists,” stated Acting United States Attorney Rohde. “The indictment reflects the resolve of this Office, together with our law enforcement partners, to investigate and prosecute anyone who would seek to support terrorists, including those who would perpetrate financial crimes to do so.”
...Specifically, Shahnaz obtained a loan for approximately $22,500 by way of materially false representations. She also fraudulently applied for over a dozen credit cards, which she used to purchase approximately $62,000 in Bitcoin and other cryptocurrencies online. She then engaged in a pattern of financial activity, culminating in several wire transactions, totaling over $150,000, to individuals and apparent shell entities in Pakistan, China and Turkey. These transactions were designed to avoid transaction reporting requirements, conceal the identity, source and destination of the illicitly obtained monies, and, ultimately, benefit ISIS.
This plays so perfectly into the narrative that anyone and everyone who uses cryptocurrencies is a criminal that one could be forgiven for being skeptical of the 'false flag'-like nature of the timing of the release.
The trouble with the narrative is two-fold - Bitcoin is not anonymous... and Cryptocurrencies are not a major source of funding for terrorists.
As we detailed previously, even the IRS can track you down through the distributed ledger that tracks every transaction ever in memoriam. Last month Alt-Market.com founder Brandon Smith warned that Bitcoin may not be all that it’s cracked up to be in terms of its purported anonymity:
For years, one of the major original selling points of bitcoin was that it was “anonymous.” It always surprised me that so many people in the liberty movement bought into this scam.
Surely after the revelations exposed by Edward Snowden and organizations like Wikileaks, it is utterly foolish to believe that anything in the digital world is truly “anonymous.”
The feds have been proving there is no anonymity, even in bitcoin, for some time, as multiple arrests using bitcoin tracking have indeed occurred when the FBI decided it was in their interest. Meaning, when the feds want to track bitcoin transactions, they can, and it does not matter how well the people involved covered their actions.
Because every transaction exists on a public blockchain ledger, an enterprising organization – say like the NSA or IRS – could conceivably implement blockchain analysis tools to track down Bitcoin fund transfers around the globe.
Of course, with ISIS having been hammered to shell of its former self by Russia and its allies the following "how does ISIS fund itself" infographic is out of date, but provides some context for the 'threat' that donations... let alone donations via cryptocurrencies... represent.
Even The Fed has argued that the payments flows within the crypto-space are not relevant.
However, we fully expect to see a congressional probe demanded sooner rather than later to crackdown on Bitcoin as funding source of terrorism (besides, the US and Saudis don't like competition).
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Coincenter's Peter Van Valkenburgh has issued a statement about the arrest:
Coin Center statement on Long Island money laundering arrest.All we have to go on so far is the unsealed indictment, which does not mention cryptocurrencies, and the statements of the prosecutor. Based on what we know so far though, here are our thoughts:
Thankfully she got caught before she was able to move money to ISIS. This suggests that law enforcement has the tools necessary to deal with this sort of money laundering even when it involves cryptocurrency.
The unsealed indictment doesn’t have enough facts in it to draw strong conclusions about how important Bitcoin actually was to the scheme. We know she bought it with fake credit cards and a bogus line of credit from a bank, but that’s about all.
From the statement of the prosecutor, it looks like she still tried to use wire transfers and shell companies in order to get the money to ISIS. This may suggest that a simple bitcoin transfer didn't work to accomplish her ends, and that the old ways (wire fraud) remain the best ways when it comes to evading sanctions.
We await further information.
http://www.zerohedge.com/news/2017-12-14/long-island-woman-indicted-funding-isis-bitcoin....
Summary: A woman applied for loans using fake ID's and applied for more than a dozen credit cards to obtain $62,000 in bitcoin and other crypto. In total she sent more than $150,000 to people with terrorist affiliation in foreign countries via "wire transfers".
I'm not certain how compelling people will find this story. It seems to implicate crypto but the part of the narrative describing her using "wire transfers" seems to imply she used a bank to send the funds.
