U.S.: Multiple SEC enforcement actions, new Treasury sanctions, more crypto-mining malware detected
Article by Marc D. Powers, Baker Hostetler From Mondaq
This week, the LA office of the SEC brought an action against a Cayman Islands business, ICOBox, and its founder based in Beverly Hills, California, Nikolay Zvodokimov, for violations of the registration and broker-dealer provisions of the federal securities laws. The defendants allegedly raised $14 million from more than 2,000 investors since August 2017 for the purpose of building a platform for the distribution of initial coin offerings (ICOs) on behalf of other companies. The defendants sold their own blockchain-based token in an ICO, which the SEC alleges was a “security” requiring registration. The SEC further alleged that the defendants facilitated ICOs for dozens of companies, raising more than $650 million without registering as a broker-dealer.
Also this week, the U.S. Attorney’s Office in New York announced the arrest of a Great Neck, Long Island, attorney and a Rhode Island resident for purportedly extorting a cryptocurrency startup. The government alleges that the attorney was assisting the Seattle-based startup in November 2017 with raising monies through an ICO. The attorney is charged with, shortly before the expected closing, threatening to “destroy” the business of the startup if they did not pay him an additional $8.75 million in ether. He thereafter introduced his cohort to the company and made threatening statements which caused the company to make a “loan” to the men that was not repaid.
The U.S. Treasury has imposed sanctions on three North Korean state-sponsored groups that it believes are responsible for multiple cyberattacks on critical infrastructure, including the theft of approximately $571 million from five different cryptocurrency exchanges in Asia. Separately, according to a recent report, North Korea is believed to be developing its own cryptocurrency in an effort to avoid international sanctions.
Finally, a new instance of crypto-mining malware was reported this week that demonstrates increasingly complex techniques to avoid detection. According to the report, the “malware is notable because of the way it loads malicious kernel modules to keep its cryptocurrency mining operations under the radar.”
