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Tax Investigators Identify Potential $1B Crypto Ponzi Scheme
US, UK other officials identified more than 50 criminal leads Investigation announcements could come as soon as this month
Ankita K.
2:48 13th May, 2022
Frauds

International tax officials have identified more than 50 leads to potential crypto tax crimes that may lead to official investigations in the coming weeks, including one case that could be a $1 billion Ponzi scheme.

Top criminal tax and financial crimes officials from the UK, US, Canada, Australia and the Netherlands, a group known as the J5, met in London this week to share intelligence and data to identify sources of cross-border illegal crypto activity. The officials specifically focused on emerging trends with decentralized finance and nonfungible tokens, or NFTs.

“Some of these leads I’m talking about, they involve individuals with significant NFT transactions revolving around potential tax or other financial crimes throughout our jurisdictions,” Jim Lee, the Internal Revenue Service’s chief of criminal investigations, told reporters Friday. One lead “appears to be a $1 billion Ponzi Scheme. That’s billion with a B and this lead also touches every single J5 country.”

The initiative highlights increasing scrutiny of risks, fraud and malfeasance in the burgeoning crypto industry. US Treasury Secretary Janet Yellen told lawmakers Thursday that the meltdown of the TerraUSD stablecoin highlighted the need for new regulations.

‘Significant Targets’

The J5 tax officials have also identified leads involving decentralized exchanges and financial-technology companies, Lee said. There could be announcements on “significant targets” as soon as this month, he added. The officials declined to give any more specifics about the leads, which have not yet become active investigations or involve any official charges.

The identification of potential crimes marks more bad news in what’s been a tumultuous week for crypto markets. Large price fluctuations roiled crypto markets and depressed total crypto asset valuations by about $270 billion, according to some estimates.

The ease at which crypto transactions can easily cross international borders has necessitated closer collaboration between countries that have struggled to keep pace with rapid shifts in technology in recent years. The IRS has pivoted to making crypto one of the agency’s top enforcement priorities, both domestically and internatially.

“NFTs are one of the new modern digital ways of trade-based money laundering,” Niels Obbink, of the Dutch Fiscal Information and Investigation Service, told reporters. “And since there is -- comparing with more well-known classic sectors -- less control and less supervision and a limited regulation that makes it vulnerable for fraud, it must have our attention.”

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