Arizona Man And Israeli Woman Charged In Connection With Providing Shadow Banking Services To Crypto

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https://www.justice.gov/usao-sdny/pr/arizona-man-and-israeli-woman-charged-connection-providing-shadow-banking-services

Department of Justice
U.S. Attorney’s Office
Southern District of New York

FOR IMMEDIATE RELEASE
Tuesday, April 30, 2019

Arizona Man And Israeli Woman Charged In Connection With Providing Shadow Banking Services To Cryptocurrency Exchanges

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Jonathan D. Larsen, Acting Special Agent in Charge of the New York Office of the Internal Revenue Service, Criminal Investigation Division (“IRS-CI”), announced the arrest today of REGINALD FOWLER on charges of bank fraud and operating an unlicensed money transmitting business. Bank fraud charges were also unsealed against co-conspirator RAVID YOSEF, who remains at large. FOWLER and YOSEF, who worked for several related companies that provided fiat-currency banking services to various cryptocurrency exchanges (the “Crypto Companies”), allegedly participated in a conspiracy in which FOWLER made numerous false and misleading statements to banks to open bank accounts that were used to receive deposits from individuals purchasing cryptocurrency, and in which FOWLER and YOSEF falsified electronic wire payment instructions to conceal the true nature of a voluminous cryptocurrency exchange business. Hundreds of millions of dollars flowed through the Crypto Companies’ accounts from banks located across the globe. FOWLER will be presented today in federal court in Phoenix, Arizona. The case is assigned to U.S. District Judge Andrew L. Carter Jr.
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In or about 2018, REGINALD FOWLER, RAVID YOSEF, and others operated the Crypto Companies, and FOWLER opened and maintained bank accounts at various banks around the world on behalf of the Crypto Companies. One of the Crypto Companies markets itself as a company that allows clients to deposit and withdraw government-backed, or “fiat,” currency to numerous crypto exchanges, which are platforms where people can buy and sell cryptocurrency or “virtual currency.” Users of one particular crypto exchange (“Exchange-1”) deposited government-backed currency into a bank account of the Crypto Companies (“Account-1”) that was opened and maintained by FOWLER at a specific international bank (“Bank-1”). Although Exchange-1 advertised itself as providing required “know your customer” and anti-money laundering verification services in connection with Exchange-1’s platform, this was false with respect to the shadow banking services provided by FOWLER and YOSEF.

As described in the Indictment, FOWLER and YOSEF conspired to, and did, misrepresent the nature of the Crypto Companies’ business and falsely stated to Bank-1 that Account-1 would be used to process real estate investments. These misrepresentations also appeared on wire transfer instructions sent out from bank accounts opened and maintained by FOWLER and YOSEF, among others, on behalf of the Crypto Companies. Records from Bank-1 reveal that dozens of individuals from various countries wired millions of dollars into Account-1, and, at the same time, Account-1 also wired millions of dollars to other individuals and companies. Even though FOWLER was receiving and directing these monetary transactions, neither he nor any of the Crypto Companies were ever licensed as a money transmitting business, as required by federal law.
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[nitpicker]

1. From a background article

https://www.coindesk.com/two-charged-with-running-shadow-banking-service-for-crypto-exchanges

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Two of the bank accounts named in the court document are allegedly held under the name Global Trading Solutions LLC, one apiece from HSBC Bank USA and HSBC Securities USA/Pershing LLC.

That firm was previously identified in October as having done business with crypto exchange Bitfinex, which is being investigated along with stablecoin issuer Tether by the New York Attorney General’s Office in a development that last week spilled into public view. Past reporting suggests that the corporate entity said to be involved is tied to Crypto Capital, a payment processing firm that has provided services to crypto exchange Bitfinex and others.
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While the court documents themselves don’t directly state it, supplementary reporting suggests that Global Trading Solutions LLC is tied to licensed financial institution Global Trade Solutions AG. Global Trade Solutions is the parent company of Crypto Capital, a payment processor named in in the NY AG’s investigation of Bitfinex and Tether, the company behind the USDT stablecoin. The firm is cited as parent company on Crypto Capital’s website.

In addition to doing business with Bitfinex, Crypto Capital’s website names among its customers the now-defunct QuadrigaCX and Coinapult, among others. According to the Wayback Machine, past customers include exchanges Kraken, BTCC and Bitt.
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