TRM Weekly Roundup | November 14, 2024
Welcome back to ✨The Weekly Roundup✨
In this edition, Ari Redbord , Angela Ang , and Isabella Chase give us all the details behind this week’s top stories in crypto policy, regulation, and enforcement:
And as always, don’t forget to read to the end to find out what’s 🆕 at TRM. Happy reading!
🚔 DOJ and FBI charge and arrest Nigerian national in case involving $2.4 million romance scam
On November 5, 2024, the U.S. Department of Justice (DOJ) announced the arrest of Nigerian national Franklin Ikechukwu Nwadialo, a key suspect in a large-scale romance fraud scheme that defrauded multiple US citizens out of more than USD 3.3 million.
Court documents reveal that Nwadialo, using fake personas, developed close relationships with his victims, presenting himself as a US military officer deployed overseas, unable to meet in person. Through these elaborate stories, he manipulated victims into believing he faced urgent financial issues, ranging from fines imposed by the military to funeral expenses and hospital bills. For example, he convinced one victim to transfer over USD 2.4 million in cryptocurrency, citing various emergency needs. Investigators traced the funds to a cryptocurrency wallet registered under Nwadialo’s real name, Nigerian passport, email address, and phone number, providing critical evidence of his identity and involvement.
Nwadialo’s scheme extended beyond the USD 2.4 million loss, as several other victims were defrauded of substantial sums under similar pretenses. In one instance, he convinced a victim to transfer USD 330,000 to help with his father’s “death expenses,” while another victim believed she was investing USD 270,000 in a cryptocurrency account managed by him. Yet another victim was persuaded to transfer USD 310,000 for supposed family emergencies, including his father’s funeral and his son’s school tuition. These complex frauds were further compounded by the use of sophisticated laundering tactics, with funds passing through multiple wallets and exchanges to obscure their origins. Despite these hurdles, FBI investigators were able to trace the funds across various chains, ultimately leading to an account linked directly to Nwadialo.
For more, read TRM’s blog post here.
🪙 Digital Chamber releases report on stablecoins and dollar dominance
On Tuesday, the Digital Chamber released a new report on "How Stablecoins Are Extending US Dollar Dominance.” The report highlights the transformative role of USD-linked stablecoins in both global finance and US dollar diplomacy.
As stablecoins become decoupled from the volatility of crypto markets, they are increasingly used for activities like cross-border payments, savings, and corporate cash management, especially in emerging markets. This widespread adoption helps sustain the dominance of the US dollar in digital finance, even as its influence declines in traditional foreign exchange reserves. By offering a stable, reliable currency option for users around the world, USD-linked stablecoins provide a modern avenue for reinforcing the dollar’s role in global finance, countering efforts by countries like China and Russia to promote alternatives to the dollar.
The report also emphasizes the urgent need for a clear, adaptive regulatory framework in the US to support the growing stablecoin ecosystem. While countries like the EU, UK, Singapore, and UAE have introduced regulations to balance innovation with consumer protection, the US risks falling behind as other jurisdictions pave the way for competitive non-USD stablecoins. The report urges policymakers to adopt flexible, risk-based rules that promote innovation and allow both banks and non-banks to issue stablecoins, preserving competition and accessibility. Establishing a robust framework would reinforce the dollar’s global role and support US economic influence in an increasingly digital world.
In September 2022, TRM’s Global Head of Policy Ari Redbord testified before the US House Financial Services Committee and made a similar argument stating, “One can imagine a world in which entrepreneurs create financial services products using a US dollar-backed stablecoin even where those products otherwise have little to do with the United States. However, that world will not come to fruition by default; through effective and targeted regulations that support stablecoin issuers, the US can promote the worldwide distribution of the dollar, including to many places that otherwise would have little nexus to the US financial system.” It feels like that world is much closer than it was in 2022.
🇺🇳 UN Counter-Terrorism Directorate releases report on terror financing trends
This week, the Counter-Terrorism Committee Executive Directorate (CTED) released a Tracker outlining the evolving methods used to finance Foreign Terrorist Fighters (FTFs) from 2014 to 2024, emphasizing how financing mechanisms have adapted in response to increased scrutiny and technological advancements.
The report highlights that early funding methods for FTFs involved personal funds, loans, and traditional money transfers. However, as global counter-terrorism measures increased, terrorist networks adapted by using more sophisticated techniques, including false identities, prepaid cards, and decentralized financing methods like mobile money and cryptocurrency. Over time, the scope of financing has expanded to cover a broader geographic area, with regional hubs emerging — particularly in Africa, Central Asia, and Southeast Asia. Recent trends include online fundraising campaigns on social media platforms and the use of virtual assets, which pose additional challenges for detection due to their anonymity and the ease with which funds can be transferred across borders.
TRM Labs contributed to the report with case studies highlighting how terrorist organizations, particularly ISIS, use cryptocurrency to finance their operations. One notable example involved ISIS fundraising in Tajikistan, where TRM Labs identified a campaign raising funds in USD on the TRON blockchain to recruit fighters for ISIL-K in Afghanistan. The campaign collected approximately 2 million USDT, and after blockchain tracing, TRM Labs notified the exchange used to cash out the funds. This led to the identification of the account operator and, subsequently, an arrest by Turkish authorities in June 2023. Another TRM Labs case study examined online fundraising campaigns involving ISIS detainees in camps. The campaigns were promoted in multiple languages and used various cryptocurrencies and privacy-enhancing techniques, including unhosted wallets and Monero transactions.
These case studies illustrate the adaptability of terrorist financing networks and the importance of advanced analytics in combating illicit financial activities associated with FTFs.
🐕 What could Trump’s new Department of Government Efficiency mean for crypto?
On Tuesday, President-Elect Trump announced on social media that Elon Musk and Vivek Ramaswamy will lead a “department of government efficiency,” giving the two private sector entrepreneurs charge of a promised effort to slash rules, bureaucracy, and spending throughout government. Let’s speculate a little on what the new DOGE could mean for crypto.
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Regulatory reduction
If DOGE aims to streamline government operations by reducing bureaucracy and excessive regulations, the initiative could lead to a more favorable regulatory environment for cryptocurrencies, potentially easing regulatory burdens and fostering innovation within the industry.
Potential for blockchain integration in government operations
DOGE could pioneer blockchain solutions within government operations, enhancing transparency and efficiency in public record keeping, logistics, and payments. Implementing blockchain for transparency would be especially relevant for areas such as voting systems, supply chains, and financial auditing. This may encourage the private sector to adopt similar technologies, especially if DOGE sets high standards for security and efficiency.
Enhanced government-business synergy in tech and crypto
With figures like Musk involved, DOGE could strengthen partnerships between the federal government and tech companies, fostering collaborative crypto research and development.
Long-term impact on crypto legitimacy and adoption
Having a high-profile government department with a strong tech affiliation could lend legitimacy to the crypto industry, making digital assets more attractive to traditional investors.
While DOGE has the potential to set a forward-thinking trajectory for crypto policy, its impact will depend on DOGE’s ability to walk the line between regulatory relaxation and maintaining sufficient protective measures.
Lots more to come on DOGE and the president’s key cabinet and regulatory nominations.
🇹🇼 Taiwan to strengthen VASP registration and compliance requirements in 2025
At last week’s FinTechOn conference in Taipei, Taiwan’s Financial Supervisory Commission’s Director of Securities Firms Division, Hsi-Ho Huang, provided more details on the new VASP registration rules set to take effect from January 2025.
The new rules, which were passed in July, will expand FSC registration requirements to overseas VASPs and criminalize non-compliance. VASPs will be required to register by September 2025 or face penalties.
Huang shared that the new framework will cover additional areas such as segregation of customer and proprietary assets, custody of fiat assets, complaints handling, listing and delisting procedures, market integrity, disclosures and record keeping, and information security. These will be on top of existing AML requirements that have been in force since 2021.
Speaking at the same event, FSC Chair Jin-lung Peng said that the regulator is on track to present a special law for crypto assets to the Executive Yuan, Taiwan’s apex administrative organ, by June 2025.
🇬🇧 FCA secures convictions against crypto scam cold callers
Last week, the UK’s Financial Conduct Authority (FCA) secured convictions against two individuals who defrauded 65 investors of over GBP 1.5 million through a fake cryptocurrency investment scheme.
The scammers cold-called victims and persuaded them to invest in a high-return crypto scheme. The UK’s 2023 Fraud Strategy extended the ban on cold calling to all financial products, and included a consultation aimed at strengthening the ban's effectiveness. While we await the findings from the consultation, which closed in September 2023, convictions like these play a crucial role in deterring future scams.
In other UK news, the FCA, Bank of England , and Payment Systems Regulator (PSR) outlined how they will use their new powers to oversee critical third-party IT providers. These new rules help the UK align with the EU’s Digital Operational Resilience Act (DORA), set to take effect on January 17, 2025, and with other international standards.
In our latest case study, Jessica Peck , Senior Counsel at the U.S. Department of Justice , shares her path from prosecuting violent crimes in New York to leading groundbreaking blockchain investigations, as the Acting Assistant Deputy Chief within the DOJ’s Computer Crime and Intellectual Property Section (CCIPS). Learn more about Ms. Peck’s story and see how her adaptability and expertise help shape the DOJ’s response to cyber threats. 👇
Global Head of Policy and Government Affairs at TRM Labs
5moWhat a huge week!