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2022 Crypto Investigations Wrap-Up
12/27/2022

In 2022, several notable federal indictments, sentences, and seizures related to cryptocurrency were made public in the United States. To understand the extent and nature of government activity in Web3, CertiK has conducted research and analysis on the state of federal and regulatory crypto investigations in 2022. The investigation of civil and criminal suits relating to cryptocurrency are an important part of CertiK's mission to secure the Web3 world.

2022 Crypto Investigations Wrap-Up

Analysis of Investigations in 2022

CertiK compiled all publicly available data on crypto investigations from various law enforcement and regulatory agencies for 2022. It is worth noting that the scope of the data collected is limited to investigations that have been publicly disclosed, as many investigations remain sealed and are not announced.

According to our data, there have been a total of 96 publicly disclosed crypto-related investigations in 2022. The Federal Bureau of Investigation (FBI) was responsible for the largest share of these cases, with 42 investigations, representing 43.3% of the total. The United States Secret Service (USSS) was the second-highest contributor, with 20 cases, or 20.6% of the total. It is worth noting that the data may include some cases that involved interagency collaboration. The chart below provides a breakdown of the number of investigations per agency in 2022.

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The disclosed status and outcome of crypto-related investigations varied among the different law enforcement and regulatory agencies. Most investigations resulted in charges and indictments, and some law enforcement agencies also announced seizures and sentences for their investigations. The Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), which are regulatory agencies, only announced charges and indictments, as they handle civil charges that do not follow the same legal process as law enforcement agencies.

The high number of charges and indictments in 2022 suggests that we may see sentences issued in 2023 for defendants who have pleaded or are found guilty in these cases. It is important to note that the legal process can be complex and that the outcome of an investigation may not always be immediately known. By staying informed about the latest developments in crypto-related government investigations, we can gain a better understanding of the state of Web3 and the efforts being made to combat illicit activity in the space.

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An Upward Trend

The data compiled by CertiK shows a significant increase in the number of crypto investigations conducted and publicly disclosed by U.S. federal law enforcement and regulatory agencies from 2021 to 2022. Specifically, there was a 81% increase in the total number of investigations, with 53 publicly released cases in 2021 compared to 96 cases in 2022. This trend is important to note, as it suggests that efforts to combat illicit activity in the Web3 space are increasing. It is likely that this upward trend will continue in the coming years, given the ramp-up of law enforcement and regulatory efforts in this area.

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The increase in crypto investigations is significant for a number of reasons. One contributing factor is the increased efforts and funding by law enforcement agencies toward the formation and support of cryptocurrency task forces. For example, the FBI launched its crypto task force in February 2022, and the number of disclosed cases doubled from 20 in 2021 to 40 in 2022. Similarly, the USSS launched a cryptocurrency awareness hub in February 2022, and the number of disclosed cases also doubled from 9 in 2021 to 20 in 2022.

Features of U.S. Federal Law Enforcement And Regulatory Agency Investigations

To fully comprehend the scope of crypto-related cases in the United States, it is crucial to understand the roles and responsibilities of different federal law enforcement and regulatory agencies. These agencies have different jurisdictions and capabilities, and their investigations may be conducted in different ways. By gaining a deeper understanding of these factors, we can better comprehend the overall state of crypto investigations in the U.S.

Agency Typology and Jurisdiction

It is worth noting that, in addition to federal agencies, there are also state and local law enforcement agencies that are also be involved in crypto-related investigations.

In the U.S., there are five main federal agencies responsible for investigating crypto-related crimes: the Federal Bureau of Investigation (FBI), the Commodities Futures Trading Commission (CFTC), the Internal Revenue Service Criminal Investigation Unit (IRS-CI), the United States Secret Service (USSS), and the Securities and Exchange Commission (SEC). Each of these agencies has specific duties and responsibilities when it comes to crypto investigations, and the complex nature of government jurisdiction can make it difficult to fully understand the scope of these investigations.

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Law Enforcement Agencies Vs. Regulatory Agencies

The FBI, USSS, and IRS-CI have criminal law enforcement capabilities and work closely with Assistant United States Attorneys (AUSAs) from the DOJ to prosecute and manage legal proceedings, including the processing of warrants and indictments. These investigations can result in criminal offenses, such as prison time, seizures, and other judicial actions.

On the other hand, the CFTC and SEC have regulatory and oversight responsibilities, rather than criminal law enforcement powers. They are responsible for enforcing rules and regulations related to the commodities and securities markets, respectively, and can take civil enforcement actions against individuals or companies that violate these rules. It is important to understand the differences between these agencies to properly evaluate crypto-related investigations. The distinction between department agencies with criminal law enforcement powers and regulatory agencies with oversight responsibilities can lead to significantly different legal proceedings and management. By understanding these differences, we can better understand the scope and nature of crypto-related investigations in the U.S.

Length of Investigations

Law enforcement and regulatory investigations can be lengthy and may take years before any charges are made. This means that it is possible for investigations that come to light in one year to relate to events that took place in previous years. As a result, announcements of crypto-related charges can be made for cases in 2022 well into 2023, and beyond.

This feature of law enforcement investigations is exemplified in many crypto-related cases that were announced in 2022. For example, on December 7, 2022, the Department of Justice U.S. Attorney's Office for the Southern District of New York announced the unsealing of an indictment charging Rikesh Thapa with operating a scheme to defraud a start-up technology company of over $1 million worth of U.S. currency, cryptocurrency, and utility tokens. According to the charges, Thapa allegedly carried out the scheme while serving as the CTO of the company between December 2017 and September 2019.

Similarly, the conviction of Randall Crater, founder of My Big Coin Pay Inc., for defrauding investors through the marketing and sale of fraudulent virtual currency between 2014 and 2017 is another example of a case that was announced in 2022 but related to events from several years prior.

It is worth noting that these examples are not exhaustive and that there may be other cases that have not been publicly disclosed. As we move into 2023, it is important to expect that we may see announcements of cases from 2022 and earlier, as the length of time that has passed since an event occurred is not necessarily an indicator of whether or not an investigation or potential charges will take place.

Legal Proceedings

It is important to note that not all cases pursued by the federal government that result in a formal complaint, indictment, sentence, or seizure are released to the public. Indictments can be sealed by courts or not formally announced through press releases, and investigators or prosecutors may choose not to publicly disclose certain cases for various reasons. This means that it can be challenging to fully understand the scope of crypto investigations in 2022, as we can only analyze the cases that have been made publicly available.

However, despite these limitations, there were many notable cases disclosed by U.S. law enforcement and regulatory agencies in 2022 that are worth examining and reflecting on as we move forward into 2023. These cases provide valuable insights into the state of crypto investigations in the U.S. and can help inform future developments in this area

Looking Ahead

Based on this analysis, it is clear that there has been an upward trend in the number of crypto investigations conducted and publicly disclosed by U.S. federal law enforcement and regulatory agencies. As we move into 2023 and beyond, it is important to stay informed about the changes within the government related to the Web3 space, as these changes will have significant impacts on the ecosystem and understanding of the scope of cryptocurrency. Based on current trends, it is likely that investigations will continue to increase in the coming years.

At CertiK, our goal is to secure the Web3 world through ongoing efforts to provide the highest level of security and due diligence in the space. Understanding these trends helps us better understand the need for more security in Web3. To stay up to date on relevant crypto investigations in the United States, be sure to follow @CertiKAlert on Twitter for real-time alerts on a wide range of hacks, scams, and law enforcement announcements.

Note: The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any subject matter.