Israel suspends crypto-laundering over French covid scam

An undercover operation in Israel has dismantled a crypto-powered money laundering ring suspected of defrauding the French government out of millions of euros.

Three alleged fraudsters were arrested in Israel over allegations that the laundered funds stemmed from crimes committed abroad, local police and the tax authorities for diamond entities said in a joint statement on Monday.

A key element of the criminal scheme was the stimulus incentives handed out by the French government during the COVID-19 pandemic, The Times of Israel reported.

The three allegedly took advantage of this program by creating fake businesses to apply for pandemic-related support. They could easily claim aid as the government quickly disbursed funds.

They then turned to the now-arrested suspects in Israel, who authorities say used the illegal funds to buy digital assets before converting them into various cryptocurrencies in an attempt to cover their tracks.

Eventually, the crypto was allegedly converted to fiat cash and sent back to the fraudsters in France.

The investigation into the scheme began last year, with French authorities taking the lead. The police in Israel followed up via an undercover operation earlier this year. An unknown number of other suspects have also been held for questioning.

The special crime unit Lahav 433 – Israel’s answer to the FBI – and the Yahalom unit of the tax authorities are conducting the investigation. They are cooperating with European authorities, including French law enforcement and Europol.

The total amount involved in the scheme is not yet clear, or how much the fraudsters in Israel were paid for allegedly laundering money. The three suspects will remain in custody “as long as necessary,” authorities said.

Money laundering is a small fraction of crypto activity, for now

Laundering illicit funds with cryptocurrency is a hot topic, considering the recent uproar surrounding crypto mixer Tornado Cash.

Earlier this year, blockchain analytics unit Chainalysis reported that cybercriminals laundered $8.6 billion in digital assets last year, accounting for 0.05% of all crypto transaction volume during the period.

Crypto launderers mostly rely on centralized exchanges with lax policies. Outside of the digital asset ecosystem, the United Nations estimates that $800 billion to $2 trillion of fiat currency is laundered each year, which works out to about 5% of global GDP, the firm noted.

“…Money laundering is a scourge on virtually every form of financial value transfer,” Chainalysis wrote. “Law enforcement and compliance professionals [should] Be aware of how much money laundering could theoretically shift to cryptocurrency as the technology increases.”

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