Global regulators continue to ramp up crypto-related enforcement actions
(Kitco News) - Global regulators continue to make up for years of inaction in regards to blockchain technology as the global crypto crackdown of 2022 continues to gain steam with new laws and enforcement actions coming every week.
On Monday, an order entered by a federal district in California cleared the U.S. Internal Revenue Service (IRS) to serve a John Doe summons to the crypto prime dealer SFOX.
The order will allow the IRS to obtain information regarding taxpayers in the United States who conducted at least $20,000 in crypto transactions between 2016 and 2021 using SFOX.
The main focus of this latest action is to “obtain information about possible violations of internal revenue laws by individuals whose identities are unknown,” according to the order, which basically means that the move is designed to ensure that U.S. citizens pay the proper amount of taxes for their cryptocurrency dealings.
“The information sought by the summons approved today will help to ensure that cryptocurrency owners are following the tax laws,” Deputy Assistant Attorney General David A. Hubbert of the Justice Department’s Tax Division said.
The order does not allege any wrongdoing by SFOX in regards to its digital currency business and is mainly focused on obtaining information related to active users of the platform whose identities are unknown.
2017 ICOs are not out of the hot seat
Evidence that U.S. regulators continue to deal with a backlog of enforcement actions could be found in Tuesday's announcement that the Securities and Exchange Commission has charged Dragonchain (DRGN) with welling $16.5 million in unregistered securities during its initial coin offering (ICO) in 2017.
According to the suit, the SEC is targeting Dragonchain founder and CEO Joe Roets along with three entities associated with Roets: Dragonchain Inc., Dragonchain Foundation, and The Dragon Company.
The SEC has alleged that the named parties “raised approximately $14 million from approximately 5,000 investors around the world, including the United States,” during the ICO phase in 2017, and then “offered and sold approximately $2.5 million worth of DRGNs” between 2019 and 2021 “to cover business expenditures to further develop and market Dragonchain technology, some of which occurred after a state regulator found DRGNs to be securities.”
Through the suit, the SEC is seeking permanent injunctions, disgorgement with prejudgement interest, civil penalties, and conduct-based injunctions against Roets and his affiliated entities.
In response to the charges, Roets penned an open letter back on May 25 saying he is confident he has a “very strong case” against the charges and suggested that the SEC was “picking and choosing projects to target, often singling out the ones with the biggest opportunity to disrupt incumbent interests, while giving a free pass to others.”
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Criminal coding is a punishable offense
On the global front, authorities in the Netherlands have reaffirmed that developers can be held responsible for the code they created if its “sole purpose” is to commit crimes or facilitate criminals.
According to the statement released by the Netherlands’ Fiscal Information and Investigation Service (FIOD), “if a tool has been created for the sole purpose of committing criminal acts, for example, to conceal criminal flows of money, then putting online/making available a developed tool may be punishable."
?? New info from the Netherlands agency that arrested tornado cash developer Alexey Pertsev— DeFi Education Fund (@fund_defi) August 17, 2022
We wanted to get this *troubling* statement from the FOID out there (which raises more questions than it answers) while we're chasing down more info + assessing next steps
h/t @sccanavos pic.twitter.com/qbJK4F49vR
This development follows last week’s arrest of an unidentified Tornado Cash developer, who many suspect is Alexey Pertsev, following the announced sanction of the cryptocurrency mixer by U.S. regulators.
According to the Defi Education Fund, these comments from the FOID “could have far-reaching implications for all software developers, who could be held responsible for potential illicit uses of their software.”