Shalini Nagarajan

Binance said its investigative team aided in capturing ISIS-linked individuals in Tajikistan and Turkey.



The crypto exchange said it played a role in the arrest of several individuals linked to the Islamic State Khorasan Province (IKSP), an affiliate of the broader militant group, including ranking member Shamil Hukumatov.



“These ISKP members were actively involved in imminent attack planning, and their arrests are regarded as a huge win for counterterrorism efforts both regionally and globally,” Binance said in a <a href="https://www.binance.com/en/blog/ecosystem/binance-aids-tajikistans-efforts-to-combat-the-financing-of-terrorism-against-an-islamic-state-affiliate-5224099286084242998">blog</a> on Friday.&nbsp;



Since Dec. 2022, Tajikistan&#8217;s Financial Monitoring Department and TRM Labs collaborated with the exchange to mitigate risks from the IKSP, the blog said.



Additional agencies from Tajikistan, like the State Committee for National Security, also participated in the operation.



Tigran Gambaryan, head of financial crime at Binance, <a href="https://fortune.com/crypto/2023/08/25/binance-says-intel-shared-with-authorities-led-to-capture-of-senior-isis-members-in-asia/">told</a> Fortune that the probe entailed scrutinizing a Telegram channel frequented by ISIS affiliates and subsequently identifying the cryptocurrency wallet a terrorist leader used for receiving donations.



A Binance spokesperson told Blockworks that the company’s investigations team members perform routine open-source threat intelligence scans.&nbsp;



“It was during these routine scans that this particular Telegram group was identified,” they added.



Nonetheless, specifics about how Binance managed to locate the individual were not disclosed.



A spokesperson for the Financial Monitoring Department said that intelligence and investigative assistance from Binance was instrumental in advancing its counterterrorism efforts.



“This led to successful arrests of key ISKP members that we’ve been targeting for a while now,” the spokesperson added.



The move highlights Binance&#8217;s involvement in collaborating with law enforcement to track down crypto assets related to organized crime.



Markus Thielen, Matrixport&#8217;s research chief, noted that Binance has cooperated with law enforcement on multiple occasions to halt illicit activities and identify the individuals responsible for such transactions.



He expects illicit activities to shift to mixers and decentralized exchanges.



“The result will likely be that more of those illicit activities will move to mixers, such as Tornado Cash, and other decentralized exchanges,” he told Blockworks.



Tornado Cash was <a href="https://blockworks.co/news/us-treasury-bans-citizens-from-using-mixing-service-tornado-cash">sanctioned</a> by the US Treasury last year, meaning that US residents are prohibited from dealing with the crypto mixer.



Binance has previously faced allegations of circumventing legal frameworks, including claims that it bypassed US sanctions to permit trading for customers in <a href="https://blockworks.co/news/crypto-traders-in-iran-skirted-binance-ban-following-us-sanctions">Iran</a> and <a href="https://www.wsj.com/finance/binance-cryptocurrency-russia-sanctions-ddb948c3">Russia</a>. Additionally, reports suggested the exchange <a href="https://blockworks.co/news/binance-china-evade-kyc">enabled users in China</a> to evade local regulatory barriers.



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Binance, TRM Labs provided key intel in ISIS members’ arrest

The Securities and Exchange Commissions’ crypto crime department is looking to boost its team with three new legal hires, signaling an intent to crack down further on the industry with enforcement actions.



A <a href="https://twitter.com/SEC_Careers/status/1645471918206615558" target="_blank" rel="noreferrer noopener">tweet</a> from the SEC’s official careers handle showed the agency’s Crypto Assets and Cyber Unit is looking to hire general attorneys in New York, San Francisco and Washington, DC.



The recruits would be responsible for conducting “fast-moving investigations” in cryptoasset securities and cyber issues, according to a <a href="https://www.usajobs.gov/job/717062700" target="_blank" rel="noreferrer noopener">job posting</a>.



Other responsibilities include drafting subpoenas, questioning witnesses, evaluating testimonial evidence and preparation of litigation-related documents. Depending on the location, salaries listed for the position range between $140,830 to $259,590.



The unit is continuing to hire after a string of enforcement actions against players in the industry in recent months. Nearly a year ago, the size of the same team <a href="https://www.sec.gov/news/press-release/2022-78" target="_blank" rel="noreferrer noopener">almost doubled</a> as it planned to grow to a staff of 50. The SEC said the division had brought dozens of cases against people looking to take advantage of crypto investors.&nbsp;



Since 2013, total fines imposed by the SEC against bad actors in the crypto market hit <a href="https://blockworks.co/news/sec-crypto-related-fines-hit-2-6b-through-2022">$2.6 billion</a> last year. Many of those enforcement actions were related to fraud and unregistered securities offerings. BUSD issuer Paxos, Terraform Labs and FTX have so far been among firms facing the wrath of the SEC’s protective measures.



Crypto industry execs including Coinbase CEO Brian Armstrong have called on regulators for clarity, saying that if they don’t, <a href="https://blockworks.co/news/coinbase-happy-to-go-to-court-with-sec">perhaps courts will need to</a> intervene.



The SEC isn’t the only US regulator that has a specialized unit designed to protect investors in the crypto market. The US Office of the Comptroller of the Currency (OCC), which supervises national banks, recently established a <a href="https://blockworks.co/news/occ-fintech-office-crypto">new fintech office</a> to supplement its knowledge on the latest technological evolutions including digital assets.&nbsp;



Called the Office of Financial Technology, it will serve to assist the US Treasury in analyzing developments related to crypto and contribute to oversight of fintech partnerships.



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SEC Unit to Boost Crypto Enforcement Team

Bessie Liu

The US Department of Justice has seized roughly $1 billion worth of bitcoin (BTC) from a man who “unlawfully obtained” more than 50,000 bitcoins from the Silk Road dark web internet marketplace in 2012.



James Zhong pleaded guilty in court on Nov. 4 to committing wire fraud and is set to be sentenced in February.



The whereabouts of the stolen 50,000 BTC remained unknown for more than 10 years, according to Damian Williams, US attorney for the southern district of New York.



Zhong had executed a detailed scheme designed to steal bitcoin from the Silk Road Marketplace — one of the first modern darknet markets. Silk Road operated as a Tor hidden service — a privacy tool that allows anonymous internet browsing.&nbsp;



Tyler Hatcher, a criminal investigator for the Internal Revenue Service (IRS) said following the heist, Zhong “attempted to hide his spoils through a series of complex transactions.”&nbsp;



But that didn’t prevent law enforcement from following the bitcoin trail. After obtaining a search warrant for Zhong’s residence in November 2021, authorities located the lost bitcoins in “an underground floor safe,” as well as on a single-board computer in a bathroom closet. The computer was beneath blankets in a popcorn tin stored in a bathroom closet.&nbsp;



The bitcoins were worth roughly $3.4 billion at the time of the seizure. Officials also found nearly $662,000 in cash.



“This case shows that we won’t stop following the money, no matter how expertly hidden —&nbsp; even to a circuit board in the bottom of a popcorn tin,” Williams said in a <a href="https://www.justice.gov/usao-sdny/pr/us-attorney-announces-historic-336-billion-cryptocurrency-seizure-and-conviction">statement</a>.



In February, a New York couple was indicted for stealing about 120,000 BTC, <a href="https://cms.blockworks.co/couple-arrested-as-government-recovers-3-6b-in-stolen-bitcoin/">much of which was recovered</a> by law enforcement.



Another Silk Road-related seizure in November 2020 netted the government 70,000 BTC.



The latest haul puts the US government significantly <a href="https://bitcointreasuries.net/">ahead of the largest corporate holders</a> of BTC — more than <a href="https://cms.blockworks.co/tag/Microstrategy/">Microstrategy</a>, Block.one or the soon-to-be-released surviving bitcoins from the bankrupt Mt. Gox crypto exchange.&nbsp;



Forfeited assets are likely to be administered by the Treasury Executive Office for Asset Forfeiture, which manages the Treasury Forfeiture Fund (TFF) — an account for where non-tax forfeitures are deposited.



Previously, seized assets have been auctioned off to various bidders. Most notably, in 2014, venture capitalist Tim Draper purchased 30,000 bitcoins for an undisclosed amount.



This story was updated on Nov. 7 at 3:18 p.m. ET, to clarify the current US dollar value of the bitcoin seized.



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