The crypto industry is growing at an explosive pace, and the criminal activities gain traction along with it. Hackers and scammers continue to plague investors, and billions in funds are lost to illicit activities every year. While the transactions are untraceable, the criminals liquidate these illicit funds via crypto exchanges.
According to the 2020 state of crypto crime report by research firm Chainalysis, over 300,000 individual accounts at Binance and Huobi received Bitcoin from criminal sources in 2019. Throughout 2019, a total of $2.8 billion in Bitcoin were sent from criminal entities to exchanges.
In a similar incident, the FBI has made a criminal complaint that two Nigerian jetsetters, who were popular on Instagram for flaunting their wealth, converted millions of dollars of illicit funds via the popular crypto exchange Gemini.
The accused Olalekan Jacob Ponle, also known as “Mr. Woodbery,” and “Mark Kain,” and Ramon Olorunwa Abbas, who used the aliases “Ray Hushpuppi” and “Hush”, were engaged in a scheme known as business email compromise or BEC.
In BEC, a criminal gains access to email accounts of legitimate businesses and then trick company employees to transfer funds to the criminal’s bank account. The FBI’s complaint notes that the accused supposedly duped multiple American companies of tens of millions of dollars while converting $6.5 million into 1,500 BTC:
“Preliminary blockchain analysis indicates that PONLE received at least 1,494.71506296 bitcoin related to these BEC schemes, valued at approximately $6,599,499.98 at the time he received the proceeds.”
The complaint added that Ponle wasn’t concerned about covering his digital tracks on the bitcoin network, and had been using the same bitcoin address since 2014. The complaint, however, was focused around his illicit activity throughout 2019.
Gemini and Ponle
Gemini was Ponle’s favorite exchange, even though it is considered one of the most compliant exchanged in the industry. The choice is justified by the fact that the accused needed a U.S.-based exchange that caters to businesses.
The FBI also uncovered conversations between Ponle and his accomplices. One of his associates’ confirmed a $2,149,000 deposit to Gemini, which was then converted to BTC. These transactions traced on the blockchain amounted to 340 and 261 BTC each, 601 BTC in total. At the time, Bitcoin was priced at around $3,500.
The complaint further notes that the accused used LocalBitcoins and Huobi for cashing out. Gemini was just a means to convert dirty money into bitcoin. 557 BTC were cashed out via LocalBitcoins and 539 BTC was liquidated via Huobi. Both of these platforms have been criticized for their poor KYC procedures.
Both Ponle and his associate Abbas were flashy on Instagram and loved to flaunt their wealth.
The accused is now awaiting judgment by the court. There have been no additional comments from Gemini, as well as the FBI.