An alleged shadow banker for cryptocurrency exchanges could face up to 90 years in prison after pleading guilty to bank fraud, conspiracy to commit bank fraud and running an unlicensed money transfer business.
The Justice Department said on April 25 that Reginald Fowler, former co-owner of the NFL’s Minnesota Vikings, had cut the industry from 2013 to 2019, when US banks were cutting.
Fowler acted on behalf of Crypto Capital, according to the DoJ, claiming that the company has “provided fiat currency banking services to various cryptocurrency exchanges through a series of bank accounts opened under false pretenses” to enable these exchanges to send and receive fiat payments. .
Among those who used his services were Kraken, who finished his relationship with the company in early 2017, and Bitfinex, who wants him. The exchange had to borrow $625 million from its sister company, stablecoin issuer USDT Tether in 2019, after $850 million went out of its funds.
On October 25, 2019, Bitfinex released a statement saying it had been “a victim of fraud” by Crypto Capital after it was revealed that its funds had been seized during further investigations into Crypto Capital and its leaders.
Also see: PYMNTS Crypto Crime Series: Bitfinex Uses $3.6 Billion Seized in Hack Arrests to Cover Shadow Bank Losses
In April of the same year, the New York Attorney General’s office sued iFinex, the parent company of Bitfinex and Tether, for leaving the stablecoin issuer’s fiat cache underfunded. The company settled the case for $18.5 million last year.
In a 2019 filing, the New York Attorney General’s office said the legal efforts also include authorities in Poland, Portugal and the United States.
Read more: What should the chairman of the Senate Banking Committee, Sherrod Brown, ask Tether?
In the dark
Damian Williams, the United States Attorney for the Southern District of New York, announced the guilty plea this week: “Reginald Fowler helped process hundreds of millions of dollars in unregulated transactions on behalf of many cryptocurrency exchanges, providing safeguards anti-money laundering required from licensed institutions that ensure that the US financial system is not used for criminal purposes, and lying to US banks whose own policies would have prevented it otherwise.
Many major banks are now willing to process payments for cryptocurrency exchanges, and some of the largest financial institutions in the world are now offering crypto services to their customers. In addition, acting auditor of the currency Brian Brooks came to the banking regulator in 2020 from a position of general advisor at crypto exchange Coinbase.
Also see: Wells Fargo, JPMorgan, Goldman and others bolster their crypto workforce
The DoJ noted that Crypto Capital and other related companies, including Global Trading Solutions (GTS), “provided these services at a time when traditional banks were reluctant to transact cryptocurrency transactions,” the DoJ claimed the companies were “against banks lied to open accounts used to process cryptocurrency transactions without the banks’ knowledge.
Fowler told banks that GTS was a real estate company and that the funds flowing through it represented real estate investments and rent payments, and that others were doing the same, the DoJ said after announcing the plea.
“When the banks became aware of Fowler’s misrepresentation, they closed GTS’s bank accounts and Fowler transferred the system to new banks,” the DoJ said. In 10 months, it processed approximately $750 million in cryptocurrency transactions — nearly $600 million in US dollars, according to the statement.
“As cryptocurrency trading continues to grow,” Williams added, “Fowler’s guilty plea reflects this Bureau’s continued commitment to investigating and prosecuting those in the cryptocurrency industry who wish to continue operating in the shadows.”
Fowler’s plea also included charges of conspiracy to operate an unlicensed money transfer business and wire transfer fraud.