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Newsletter: Trump continues to dismantle crypto enforcement while expanding his personal crypto empire.

Most recently, Trump has called the DOJ off cryptocurrency enforcement and dismantled the agency's crypto enforcement team.

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#crypto #cryptocurrency #USpol #USpolitics


Issue 81 – Crypto crime is legal

Molly White (Citation Needed)
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Molly White
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Molly White
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A Monday night memo from Deputy Attorney General Todd Blanche, citing Trump’s crypto executive orders, has dismantled the Department of Justice’s National Cryptocurrency Enforcement Team (NCET) and directed the agency’s Market Integrity and Major Frauds Unit to “cease cryptocurrency enforcement”.

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A Monday night memo from Deputy Attorney General Todd Blanche, citing Trump’s crypto executive orders, has dismantled the Department of Justice’s National Cryptocurrency Enforcement Team (NCET) and directed the agency’s Market Integrity and Major Frauds Unit to “cease cryptocurrency enforcement”.1 The memo also directs prosecutors to “not charge regulatory violations in cases involving digital assets including but not limited to unlicensed money transmitting..., violations of the Bank Secrecy Act, unregistered securities offering violations, unregistered broker-dealer violations, and other violations of registration requirements under the Commodity Exchange Act” unless they have specific knowledge that the defendant knowingly and willfully violated a specific requirement — erecting a major barrier to prosecuting such cases. The National Cryptocurrency Enforcement Team, established in October 2021 and merged with the computer crimes section in July 2023, helped investigate and prosecute cases including the historic Binance case [I44] — which was based on charges that the DOJ is now explicitly discouraged from prosecuting. NCET was also heavily involved in prosecuting Bitzlato for its role in laundering ransomware proceeds and illicit assets tied to the Russian Hydra darkweb marketplace [I46], and in prosecuting Avi Eisenberg, who I will return to in a moment.23
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Molly White
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Molly White
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As we watch Trump dismantling cryptocurrency industry regulations and enforcement, it’s worth revisiting the extent to which he and his family personally profit from their cryptocurrency business interests, which they have been rapidly expanding.

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Trump business interests As we watch Trump dismantling cryptocurrency industry regulations and enforcement, it’s worth revisiting the extent to which he and his family personally profit from their cryptocurrency business interests, which they have been rapidly expanding. Eric Trump has recently announced American Bitcoin, a company he has co-founded with the CEO of bitcoin mining firm Hut8. American Bitcoin will essentially subsume Hut8’s entire bitcoin mining business under suspiciously friendly terms for the Trumps. As VanEck’s Matthew Sigel noted, “I don’t fully understand the rationale of selling 61,000 miners in exchange for an 80% stake in a subsidiary that they previously owned 100% of. No cash changes hands.”13 Hut8 seems to have decided that favor with the Trump family is worth more than cash. I’ve gotten some flak in the past for describing World Liberty Financial as the Trumps’ crypto platform, as some liked to reiterate the platform’s claims that they had an arms-length relationship with the Trumps (despite the fact that 75% of protocol revenues go to Trump, and the platform prominently listed the three Trump sons as “ambassadors” [I68]). Now that the election is over, all pretense has been dropped, and the Trump family has taken majority control of the company. The company has raised $550 million in token sales, putting Trump’s cut at almost $400 million. The project still has yet to launch anything, but as I noted last issue, their plans now include lau
Then there’s Trump Media, the firm behind the Truth Social platform, which has recently filed documents disclosing plans to explore something called Truth.Fi, which will include a crypto component [I80]. Trump’s stake in Trump Media is estimated at around $2 billion, and the company recently submitted filings that would allow the trust holding his shares in the company (controlled by Donald Trump Jr.) to sell them.14 Then there are the memecoins [I75]. Trump has already extracted around $350 million from crypto buyers via his $TRUMP token.15 On April 18, he’ll be allowed to sell off another 40 million of the tokens in the first token unlock of several scheduled over a three-year period. There’s also his wife’s $MELANIA token, which has been comparatively less lucrative, although the team responsible for it (also responsible for the disastrous $LIBRA token) has been quietly dumping tokens for at least $30 million in recent days.16 Of course we can’t forget the NFTs (multiple projects apiece launched by both Donald and Melania Trump), the bitcoin sneakers, and the other associated crypto-related grifts. And then there’s the political benefit via crypto industry donations — over $10 million contributed directly to supporting Trump, and over $200 million and counting raised to influence Congressional races.
This is the environment we’re living in as we watch Trump call off the SEC from investigating or enforcing cryptocurrency-related cases targeting his crypto benefactors and companies much like the ones he’s running. As Trump establishes a “strategic bitcoin reserve” while directly admitted its purpose is to “elevate this critical industry”. As the SEC and CFTC invites crypto executives to write their own rules. As the SEC declares that memecoins like $TRUMP and $MELANIA don’t fall under their authority, and neither do stablecoins like the one Trump’s World Liberty Financial is planning to launch.17 As the CFTC withdraws guidelines that had established oversight requirements on their portions of the crypto industry.18 As banking regulators nix guidance supervising crypto-related activities. And as the Department of Justice has been unilaterally called off anything crypto-related.
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Molly White
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Molly White
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The Acting Director of the SEC is looking to rescind or modify even more previous crypto guidance based on “recommendations from DOGE”.

And the agency has dropped even more investigations and lawsuits, including against Trump business partner Crypto​.com.

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The Acting Chair of the SEC has also announced that, as a result of both executive orders and “recommendations from DOGE”, he has directed staff to “review” past guidance on digital assets, including frameworks for designating digital assets for securities, requirements for disclosures of cryptocurrency-related risk and exposure, and guidance around banks and crypto custody. Under this administration, “review” seems to be largely synonymous with “rescind”.19
The SEC investigation into Crypto.com has been terminated, and the agency will not pursue any enforcement action.20 This is hardly surprising given the flood of dropped SEC lawsuits and closed investigations targeting the industry, but it’s especially unsurprising given that, three days earlier, Trump Media picked Crypto.com as a partner to launch various exchange-traded funds [I80]. I noted in February that, despite the Winklevoss twins’ victory screeches, it wasn’t clear that the ongoing lawsuit regarding the Gemini Earn product had actually been dropped [I78]. The lawsuit was filed against Gemini and Genesis Global Capital in January 2023 after Gemini customers lost access to almost $1 billion in funds as the two companies halted withdrawals [I16], and Genesis settled their portion of the case for $21 million in March 2024 [I50]. The portion against Gemini had been ongoing until an April 1 joint request for a 60-day stay to “allow the parties to explore a potential resolution”.21 This is the same language that’s been used to halt the SEC cases against companies like Coinbase and Tron, and it’s widely understood that these mark the end of SEC scrutiny for these companies. Even “Hawk Tuah girl” is out of the woods, recently telling TMZ that the SEC had closed its investigation into the memecoin flop [W3IGG] that became emblematic of the memecoin world and — particularly lately — crypto as a whole.22
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Molly White
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Molly White
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mention of CSAM prosecution

Sensitive content

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Molly White
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Molly White
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He’s attempting a rather novel argument for leniency in his sentencing: there’s just so much crime in crypto that he forgot it wasn’t allowed.

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In his sentencing memorandum, Eisenberg continues to argue that he believed his crypto theft was permissible because, essentially, code is law. According to his lawyers, Eisenberg “reviewed several similar crypto trades in the months before, including one rather similar trade on Mango Markets, noting that no litigation or legal action had been pursued against the traders who profited, and concluded that his conduct was entirely permissible under the MNGO smart contract.” His lawyers also claimed that hacking is just so commonplace in the crypto world that it contributed to his belief that what he was doing was acceptable: A related important circumstance of the offense is the overarching atmosphere of normalcy, if not acceptance, in the cryptocurrency community towards the identification and exploitation of weakness or “bugs” in protocols and smart contracts, as well as what Mango Market’s own terms of service stated. Avi operated in this environment of exploration and pushing the envelope to identify smart contract weaknesses. He does not contend that community attitude toward identifying bugs alone justifies his actions, but he points out that his actions were taken in a place where social norms often accepted such behavior, and the line between acceptable and prohibited conduct could be difficult to delineate. Further, the Mango Markets user interface, which deliberately did not include any terms of use, informed users that the protocol
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Molly White
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Molly White
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Elsewhere in the last remaining crypto crime cases we may see for a while, it seems Celsius CEO Alex Mashinsky might be trying to weasel out of responsibility for the crimes to which he’s pleaded guilty. His sentencing is scheduled for a month from now.

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Alex Mashinsky Prosecutors are seeking further action from the court regarding factual disputes pertaining to the conduct of Alex Mashinsky, the former CEO of Celsius who pleaded guilty to fraud and market manipulation in December [I71]. It’s not entirely clear what the disputes entail, as the government’s letter was filed under seal,9 but it seems that the government feels Mashinsky is trying to deny responsibility for actions stipulated in his plea agreement. An unsealed response letter10 from Mashinsky’s defense quotes a portion of the prosecutors’ letter, where they allege Mashinsky is “distancing himself from the stipulations in the plea agreement”. Mashinsky’s lawyers write that, “The parties certainly dispute the nature and circumstances of Mr. Mashinsky’s offense, and whether, for example, he knowingly misrepresented Celsius’s profitability to customers or engaged in a conspiracy with Roni Cohen Pavon (and others) to manipulate the price of CEL token,” but argue that it is not material to his sentencing. At least according to Mashinsky’s lawyers, prosecutors are looking for the judge to either resolve factual disputes regarding Mashinsky’s conduct in the government’s favor, or conduct a two-week hearing in which both parties can present evidence for evaluation in his sentencing. Mashinsky’s lawyers don’t want either of these things, and want his sentencing to proceed as scheduled on May 8.
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Molly White
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That and more in this week’s recap issue of Citation Needed, an independent publication entirely supported by readers like you. Consider signing up for a free or pay-what-you-want subscription — it really helps me to keep doing this work.

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Riley S. Faelan
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Riley S. Faelan
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Technically, there is long-standing precedent for recognising the common practice of a technical field, such as plumbing or garum manufacturing, as the legal norm.
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T2R
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T2R
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Corruption in this white house, say it ain't so! We didn't see this coming at all! *sarcasm*
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Kevin Russell
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Kevin Russell
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Its all imaginary money. You don't have to choose sides based on money, its fake, imaginary money.
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iveyline
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iveyline
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So why would anyone (except criminals) even think of using crypto?
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Chris​‌​‬ Hayes‌​​​
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Chris​‌​‬ Hayes‌​​​
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coffeezilla losing his mind over this news is the only thing keeping me sane.
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