Global regulators continue to increase crypto-related enforcement actions
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(Kitco News) – Global regulators continue to make up for years of inaction on blockchain technology as the global crypto crash of 2022 continues to gather momentum with new laws and enforcement actions arriving every week.
On Monday, an order filed by a federal district in California authorized the US Internal Revenue Service (IRS) to issue a John Doe subpoena to crypto-prime trader SFOX.
The order will allow the IRS to obtain information on US taxpayers 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 from individuals whose identity is unknown,” according to the order, which basically means the move is designed to ensure that US citizens pay the correct amount of taxes for their cryptocurrency trading .
“The information requested by the subpoena approved today will help ensure that cryptocurrency owners comply with tax laws,” said Deputy Assistant Attorney General David A. Hubbert of the Justice Department’s Tax Division.
The order does not allege any wrongdoing by SFOX with respect to its digital currency business and is primarily focused on obtaining information related to active users of the platform whose identity is unknown.
2017 ICOs are not off the hot seat
Evidence that US regulators continue to deal with a backlog of enforcement actions can be found in Tuesday’s announcement that the Securities and Exchange Commission has charged Dragonchain (DRGN) with raising $16.5 million in unregistered securities during its initial coin offering (ICO) in 2017.
According to the lawsuit, the SEC is targeting Dragonchain founder and CEO Joe Roets along with three entities affiliated 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 worldwide, including the United States,” during the ICO phase in 2017, and then “offered and sold DRGNs worth approximately 2.5 million dollars” between 2019 and 2021 “to cover business expenses to further develop and market Dragonchain technology, some of which occurred after a government regulator found DRGNs to be securities.”
Through the lawsuit, the SEC seeks permanent injunctions, disgorgement with prejudgment interest, civil penalties and behavioral injunctions against Roets and his affiliates.
In response to the allegations, Roets wrote an open letter on May 25 saying he is confident he has a “very strong case” against the charges, suggesting the SEC “picked and chose projects to target, often singling out those with the greatest opportunity to disrupt current interests while giving others a free pass.”
Criminal coding is a criminal offence
On the global front, authorities in the Netherlands have confirmed 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 Dutch Tax Information and Investigation Service (FIOD), “if a tool has been created solely for the purpose of committing criminal acts, for example to hide criminal money flows, then putting online/making available a developed tool may be punishable.”
🚨 New info from the Dutch agency that arrested tornado cash developer Alexey Pertsev
We wanted to get this *disturbing* statement from FOID out there (which raises more questions than it answers) while we hunt for more info + consider next steps
h/t @sccanavos pic.twitter.com/qbJK4F49vR
— DeFi Education Fund (@fund_defi) 17 August 2022
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 US regulators.
According to the Defi Education Fund, these comments by FOID “could have far-reaching implications for all software developers, who could be held liable for potential illegal use of their software.”
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