The increasing use of cryptocurrencies and other digital assets has given rise to complex legal issues relating to regulatory status (including requirements to register as broker-dealers, commodity pool operators, commodity trading advisors, investment advisers, investment companies, securities exchanges, and money service businesses), compliance (including valuation, custody and reporting), corporate law (such as maintain shareholder records), securities transactions (including initial coin offerings and M&A transactions), fund formation, the launch of ETFs and derivatives, venture capital, taxation, anti-money laundering, litigation and regulatory enforcement.
Rome LLP offers sophisticated and knowledgeable legal counsel to clients navigating this rapidly evolving space. At the heart of our cryptocurrency and blockchain practice is a deep understanding of the technologies that drive blockchain and related developments in distributive computing networks.
What Is Cryptocurrency?
Cryptocurrency is a digital currency secured through blockchain technology. The technology behind crypto is decentralized and creates an immutable ledger online of all transactions. However, since it is decentralized and relatively new to the market, crypto has little oversight from state or federal regulators. The lack of oversight is evolving and the SEC has taken a much more focused interest and regulatory approach towards various cryptocurrency companies.
As stated by Gary Gensler of the Securities and Exchange Commission, the cryptocurrency market is “rife with fraud, scams and abuse.” Resultantly, investors are at risk for fraud such as Ponzi-like schemes, and may be vulnerable to digital hacking. While transactions utilizing blockchain technology are secure and difficult to change once entered into the ledger, the devices that are used to hold digital information may be prone to security and data breaches.
Risks of Fraud in the Cryptocurrency Space / Fraud on the Crypto Exchanges
There are thousands of cryptocurrencies currently on the market, but only a small portion have made waves with investors. These digital investments range in value from fragments of a dollar to tens of thousands in the case of Bitcoin. For most investors, cryptocurrency and digital investments are extremely speculative. Crypto exchanges have also been plagued by Ponzi schemes, deception, and other fraudulent activities. Critically, there is an evolving area of law, both regulatory and caselaw, that governs crypto exchanges’ obligations to their customers, such as when a depositor’s account is hacked.
Separate from the viability of legal claims, exchanges typically provide two types of insurance coverage: exchange insurance and client insurance. In the event of a hack, exchange insurance protects the exchange itself. This type of insurance typically covers exchange losses caused by a hack, such as lost funds and operational expenses. Client insurance, on the other hand, protects clients whose funds have been stolen as a result of a hack. Clients may be required to pay a premium for this type of insurance, which typically covers losses up to a certain amount, such as $100,000. At Rome LLP, we have considerable expertise in identifying and recovering from any and all available sources for aggrieved crypto owners.
Cryptocurrency Sim Card Swap Hack
In a recent case, T-Mobile has been hit with a multi-million-dollar lawsuit after Reginald Middleton lost millions of dollars when hackers gained unauthorized access to his account. The hackers used information supplied by T-Mobile to successfully circumvent the two-factor authentication measure, which allowed them to obtain a SIM card containing all of Middleton’s financial and personal information. Ultimately, $8.7 million in cryptocurrency was transferred out of Middleton’s account.
Rome LLP attorneys have deep insight into the mechanics of crypto transactions and work with the foremost forensics analysts to identify hacks and track the funds. While crypto is, typically, a “decentralized” currency, it remains trackable on a ledger, thereby often enabling the identification of the ultimate recipient of stolen tokens. Rome LLP attorneys are experienced in using all tools to track hacked funds.
Cryptocurrency Practice Areas
- Recovery of funds on behalf of defrauded investors in ICOs, capital raises in aid of ICOs,
- Recovery of funds in SIM-Card Swap Hacks
- Recovery of funds and/or damages resulting from hacked accounts on exchanges
- Cryptocurrency Ponzi Schemes
- All manner of cryptocurrency fraud, hacking, and investor fraud
Wire Transfer Fraud
For years, our firm has helped the victims of wire transfer fraud. We assist clients in identifying all potential sources for recouping wire fraud losses, from criminals acting intentionally to third parties acting negligently.
We represent companies and individuals who are the victims of wire transfer fraud.
For the past ten years, wire transfer fraud losses have increased consistently, with bad actors developing more sophisticated schemes each year with which they can defraud their victims. One of the highest reported types of wire transfer fraud has been Business Email Compromise / Email Account Compromise (BEC/EAC). Wire fraud in the form of BEC/EAC is a sophisticated type of scam that targets both businesses and individuals during the planning for and act of wiring funds from one bank to another.
The BEC/EAC scam often starts with the bad actor compromising legitimate business email accounts using a form of hacking or social engineering. With access to a legitimate email account, the bad actor can monitor conversations to detect the possibility of the need for a future wire transfer. At this point, the scam can unfold in a variety of ways, but the end result is often a party wiring funds not to the intended recipient, but instead to a bank account controlled by the bad actor.
The losses from BEC/EAC wire fraud are staggering.
The losses from BEC/EAC wire fraud are large and continue to have a major impact on businesses, and the impact on individuals can be devastating. Overall losses have increased each year from $1.29 billion in 2018 to a staggering $1.86 billion in 2020.
Real estate is a particularly high-risk sector for BEC/EAC wire fraud. In 2020, 13,638 people were victims of wire fraud in the real estate and rental sectors, with losses in excess of $213 million, according to the FBI. With wire fraud in the real estate sector, the bad actors often assume the identities of real estate agents, escrow officers, or closing attorneys, to encourage victims to wire funds to the criminal’s bank account.
For years, Kronenberger Rosenfeld has helped victims of wire fraud. Sometimes our firm’s goal is to identify those responsible for intrusions into email accounts or for establishing bank accounts for the fraud; however, our goal can also be to identify, or exclude, employees or others with close contact with a victim, as potential wrongdoers. Often the negligent actions of third parties lead to losses from wire fraud – from banks, to technology consultants, to payroll services. Our firm assists clients in identifying all potential sources for recouping wire fraud losses, including criminals acting intentionally and third parties acting negligently.
If you or your company is the victim of wire transfer fraud, we would be happy to help.