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00:00 Well the case of Sam Bankman-Fried highlights how cryptocurrency is being used more and more to commit crimes
00:06 The untraceable currency can be used for money laundering as we've seen and even for financing terrorism
00:11 We get more on that part of the story from Siobhan Silk
00:14 They once dealt in sacks of cash, but these days crypto is increasingly the currency of choice for criminals
00:23 It's typically linked to fraud ransomware attacks the narcotics trade and the exchange of child abuse images
00:29 But armed groups are also using crypto networks to help finance their activities
00:34 It's unknown just how much terrorism funding flows through the cryptocurrency space in
00:40 2022 a UN official said up to a fifth of terrorist attacks could be linked to crypto financing
00:46 But other experts put the figure much lower in any case US and Israeli authorities are taking it extremely seriously
00:53 Hamas is known to have been using crypto since 2019
00:58 The Palestinian group has solicited cryptocurrency donations on social media
01:02 Including according to Israeli police in the immediate aftermath of the October 7th attacks in the following days
01:09 Israel froze multiple cryptocurrency accounts believed to belong to Hamas
01:13 It wasn't the first time the country had targeted accounts linked to militant activities last year
01:19 Its National Bureau for counterterror financing ordered the seizures of millions of euro worth of crypto wallets
01:25 It said were linked to the Islamic Jihad movement Hezbollah and the Quds Force branch of the Iranian Armed Forces
01:31 The US has repeatedly targeted accounts linked to armed groups in the Middle East
01:36 the Department of Justice has seized wallets belonging to the Islamic State group al-qaeda and
01:41 Hamas's military wing the Al Qasam Brigade
01:44 Crypto backed funding for armed activities may be happening beyond the Middle East just this month Nigerian authorities
01:51 accused the crypto exchange of finance of involvement in terrorism financing
01:56 Both regular criminals and armed groups are believed to use large-scale money laundering networks to help cover their tracks
02:03 The pan-european policing agency Europol warns these networks are a significant threat
02:09 They offer services that allow other criminals to operate in the crypto space and help them to cash out their digital assets
02:16 That is convert their crypto to hard currency
02:21 And for more on this story, let's bring in Renato Mariotti a former prosecutor and the US Justice Department's
02:27 Securities and commodities fraud section. Thanks so much for being with us here on France 24
02:32 You know, we saw Sam Bankman-Fried getting his comeuppance today. First of all, what's your reaction to this sentence of 25 years in prison? I
02:41 Think it's right what I would have expected for this case. It's obviously a very substantial
02:46 Sentence it's a significant sentence
02:50 But that said this is a very large fraud one of the largest frauds we've ever seen in the United States
02:56 One of the largest frauds there's ever been in the world. So it's definitely a substantial offense
03:01 And frankly despite the fact some victims now see the prospect of getting
03:07 Repaid some of the money that they lost there were still very substantial losses to victims
03:13 In general terms, how difficult is it to catch people who are using?
03:19 cryptocurrency illegally and then to prosecute them
03:22 well people who are
03:25 Let's say one-off criminals. You were talking about in the last segment a very very challenging
03:30 For example people who are using that as a way of extorting someone else. It can be challenging
03:35 To trace and that's the sort of thing that
03:38 Increasing law enforcement resources are being put towards in the United States. Sam Bankman-Fried is in a different category, right?
03:45 He was a businessman who is not hard to find not hard to trace not hard to locate
03:49 And really the question was was his business
03:52 itself
03:54 Engaging in widespread fraud and I think this was an astonishing case
03:58 for the United States Justice Department
04:01 SEC and CFTC combined to bring the amount of resources they brought to bear were massive and this was very
04:09 quickly worked from beginning to end if you recall
04:13 The collapse of FTX was less than two years ago
04:17 Well, so these can be very sophisticated schemes. So are the authorities around the world equipped to
04:24 Recognize what's happening in the first place?
04:27 They're a step behind right now, but I think part of the answer is
04:33 Regulation and non-enforcement. Okay. In other words, this is an example of the enforcement of criminal laws against a
04:41 Fraudster that I think is uncontroversial
04:43 But in the United States what we've been doing at least
04:48 Up to date is a lot of enforcement matters as opposed to having a comprehensive regulatory
04:54 Framework, which by the way a lot of other
04:57 Nations have done there are nations around the world that are adopting frameworks that are introducing frameworks and I do think more and more crypto
05:05 Commerce is moving out of the United States as a result
05:09 I think that we need to have more regulation more oversight more monitoring of the industry
05:14 Rather than a wild west where when there is a bad actor like Sandbank McFree
05:21 They ultimately are relying on criminal prosecution to make victims whole
05:24 We know that last month Nigerian authorities clamped down on cryptocurrency firms over allegations that they were being used for
05:32 You know money laundering and even financing terrorism
05:35 So help us understand why cryptocurrency can be used so effectively in criminal endeavors
05:42 Is it because it's untraceable?
05:44 Well, it certainly can be more difficult to trace that is true
05:49 Also, you can own cryptocurrency without owning a bank account
05:54 Which certainly is part of its appeal particularly in the third world
05:59 You know, there are still many many millions of people around the world that don't have access to banks and to bank accounts
06:05 But nonetheless, obviously that also makes it, you know easier for criminals to use
06:11 Obviously at the same time there's an upside in terms of the way in which it enables certain new
06:18 Technology, there's smart contract technology, for example built into certain tokens
06:23 So there's definitely an upside
06:25 But when tech new technologies entered and we saw this with the Internet when the Internet first exploded in the early days of the Internet
06:32 It was a Wild West
06:34 Certainly Internet fraud still exists, but law enforcement is adapted. It just took them some time to do so
06:41 So we have an international audience, you know, so how is the US Securities and Exchange Commission?
06:46 Regulating cryptocurrency and is it similar to regulations in other parts of the world?
06:53 It's not similar. It's an important distinction in the United States. It's not settled which
06:59 Regulatory body is regulating the space
07:02 And so the SEC as you point out the Securities and Exchange Commission is filing lawsuits against entities
07:09 At times for activity that it's not clear is illegal. There's been some real fights
07:15 There have actually been some losses by the SEC here in the United States
07:18 At the same time in the United States the Commodity Futures Trading Commission. The CFTC is also bringing losses
07:25 So it's not clear to the industry what the rules are and who the regulator is in other parts of the world
07:31 It's very different. For example in the UK
07:33 They have a regulatory framework that that is being introduced in Parliament that essentially
07:38 creates a structure and has the
07:42 The the industry regulated by one of the same bodies that's regulating other financial instruments in the UK
07:49 So I think that's the approach that other parts of the world are adopting and I think that's why we're seeing
07:54 Crypto commerce leaving the United States and going to the UK the EU and some Asian countries
08:00 Okay, we want to thank you so much Renato Mariotti a former prosecutor in the US Justice Department securities and commodities commodities fraud section
08:08 Thanks so much for sharing your insight here on France 24
08:11 Thank you.