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Brazilian gov’t gets help from US Justice Department to seize $24M in crypto

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According to a Wednesday filing, the U.S. Justice Department seized $24 million in virtual currency pursuant to an official request from the Brazilian government.

The Department of Justice, or DoJ, said that the government of Brazil requested its assistance in connection to a crypto fraud scheme called “Operation Egypto.” Authorities in the South American nation reported that more than 10,000 Brazilians may have been defrauded from the scheme, in losses estimated at roughly $200 million.

The department seized funds connected to Brazilian national Marcos Antonio Fagundes, one of the individuals allegedly involved in the case. According to information that Brazilian authorities provided to the DoJ, Fagundes is charged with the operation of a financial institution without legal authorization, fraudulent management of a financial institution, misappropriation of funds, money laundering, and securities law violations. He and his conspirators allegedly operated an unregistered financial institution to hold crypto assets he obtained from victims by making “false and inconsistent promises” about the way the funds were invested and exaggerated the rates of return.

The funds were purportedly held on a U.S.-based crypto exchange. The DoJ said that a cryptocurrency firm holding the accounts complied with the seizure order, implying it was a company within its jurisdiction.

According to the Treaty on Mutual Legal Assistance in Criminal Matters between the United States and Brazil that has been in effect since 2001, either government can make a request regarding “proceeds or instrumentalities of offenses” subject to seizure located in the other’s territory. A Brazilian court issued an order calling for the seizure of any virtual currency Fagundes controlled or owned in the United States, which preceded the government filing an application to enforce the order in U.S. District Court for the District of Columbia.

The DoJ currently has the authority to confiscate cryptocurrency in connection with legal cases in the United States and later auction off the funds. In February, the government body announced that it would be selling roughly 4,040 Bitcoin (BTC), when the price was $9,200. Assuming the anonymous buyers purchased the funds at roughly market price, they could be looking at a 63% return with BTC’s rise to $15,000 today.



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Regulation

New York authorizes first Yen stablecoin operator in the US

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New York has given the first authorization to a stablecoin backed by the Japanese Yen to operate in the U.S.

Per a Dec. 29 announcement, the New York Department of Financial Services has granted Japanese firm GMO-Z.com a charter to handle U.S.D. and Yen-backed stablecoins in New York. 

Given New York’s status as a global center, the NYDFS is the most prominent state financial regulator in the U.S. It is also one of the most aggressive. A pass to operate in New York often opens up the rest of the country. 

GMO’s charter is as a limited liability trust company rather than a full bank, the principle difference being in authorization to handle deposits. While a stablecoin operator typically needs the ability to hold reserves of the pegged asset, GMO’s charter limits its rights to hold other kinds of deposits not central to its ability “to issue, administer, and redeem” its stablecoins. 

The right to issue such non-depository charters has been a bone of contention between state regulators like the NYDFS and national banking regulators in the U.S. 

GMO president and CEO Ken Nakamura said: “We’re breaking ground with our move to issue the first regulated JPY-pegged stablecoin, which many see as a safe haven asset.” 

The NYDFS recently made changes to its famous BitLicense, including a conditional format that buddies up newly licensed firms with existing licensees. The first conditional BitLicense went to PayPal, facilitating the launch of its new crypto services earlier this fall with the help of longstanding licensee Paxos.