Tax Investigators Identify Potential $1 Billion Crypto Ponzi Scheme, Reports Say

International tax authorities have identified more than 50 leads of potential crypto tax crimes that could lead to official investigations in the coming weeks, including one case that may be a billion-dollar Ponzi scheme.

US tax authorities said on Friday they were following separate leads in scams focused on things like non-fungible tokens and other decentralized parts of the industry.

Crypto’s ability to cross borders largely undetected has made it a tool for scammers looking to target vulnerable investor populations. It has also led to a slew of criminal actions, which regulators are trying to attack and control as crypto scammers aim for bigger and wealthier targets, TheStreet.com reported.

There was also a revival during Russia’s unprovoked invasion of Ukraine. Many people were sending money to and from Ukraine via crypto, once again proving how currencies could possibly be used.

The money involved appears to have affected investors around the world, including crypto buyers in the US, UK, Netherlands, Canada, and Australia.

Senior criminal tax and financial crimes officials from the UK, US, Canada, Australia and the Netherlands, a group known as J5, met in London this week to share intelligence and data to identify sources of cross-border illegal cryptographic activity, Bloomberg reported. . Officials specifically focused on emerging trends with decentralized finance and non-fungible tokens, or NFTs.

“Some of these leads I’m talking about involve people with large NFT transactions related to potential tax or financial crimes in our jurisdictions,” Jim Lee, chief of criminal investigations for the Internal Revenue Service, told reporters on Friday. One lead “appears to be a billion dollar Ponzi scheme. It’s a billion with a B and this lead also affects all the J5 countries.

The initiative highlights growing scrutiny of risk, fraud, and malfeasance in the booming crypto industry. US Treasury Secretary Janet Yellen told lawmakers on Thursday that the collapse of stablecoin TerraUSD has highlighted the need for new regulation.

J5 tax officials have also identified leads involving decentralized exchanges and fintech companies, Lee said. There could be announcements of “significant goals” as early as this month, he added. Officials declined to give further details on the leads, which have not yet become active investigations or imply any official charges.

The identification of potential crimes marks more bad news in what has been a tumultuous week for crypto markets. Large price swings have rattled the crypto markets and lowered total crypto asset valuations by around $270 billion, according to some estimates.

See also: How a Bitcoin Market “In Extreme Fear” Compares to the Past and What to Expect Next

The ease with which crypto transactions can easily cross international borders has necessitated closer collaboration between countries that have struggled to keep pace with rapid changes in technology in recent years. The IRS has pivoted to make crypto one of the agency’s top enforcement priorities, both domestically and internationally.

“NFTs are one of the new modern digital means of trade-based money laundering,” Niels Obbink, from the Dutch Tax Information and Investigation Service, told reporters. “And since there is – in comparison with more well-known conventional sectors – less control and less supervision and limited regulation which makes it vulnerable to fraud, it needs our attention.”

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Tax Investigators Identify Potential $1 Billion Crypto Ponzi Scheme, Reports Say


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