DOJ Charges Canadian Man in $65M Cryptocurrency Hacking Schemes

Canadian Man Charged in $65M Cryptocurrency Hacking Schemes

A five-count criminal indictment was unsealed today in federal court in New York charging a Canadian man with exploiting vulnerabilities in two decentralized finance protocols to fraudulently obtain about $65 million from the protocols’ investors.

According to court documents, from 2021 to 2023, Andean Medjedovic, 22, allegedly exploited vulnerabilities in the automated smart contracts used by the KyberSwap and Indexed Finance decentralized finance protocols. Medjedovic borrowed hundreds of millions of dollars in digital tokens, which he used to engage in deceptive trading that he knew would cause the protocols’ smart contracts to falsely calculate key variables. Through his deceptive trades, Medjedovic was able to, and ultimately did, withdraw millions of dollars of investor funds from the protocols at artificial prices, rendering the victims’ investments essentially worthless.

Medjedovic also allegedly laundered the proceeds of his fraudulent schemes through a series of transactions designed to conceal the source and ownership of the funds, including through swap transactions, “bridging transactions,” and the use of a digital assets “mixer.” […]

Bitcoin College Savings Plan: Parents Ditch 529 Funds for Crypto

Some parents are turning to crypto to supercharge their college savings. Returns on traditional stocks just won’t cut it, the thinking goes, when the price tag for a single year at a top private university is approaching $100,000.

Travis Headley, a 43-year-old physician in Louisiana, first got into Bitcoin about four years ago and now converts his entire paycheck into the cryptocurrency. He decided to go all-in with his kids’ college funds as well. After about ten years of saving via tax-advantaged 529 plans, he pulled the money out, took the tax penalty and put it all into Bitcoin.

“I came to the conclusion that if I’m doing it for my personal savings, why am I not doing it for my kids?” he said. “They have even longer to save money, so if this all does blow up, they’ll have time to recover.”

10 Commandments for Federal Securities Laws

Now, under President Trump’s leadership, we stand on the brink of a historic shift. His “largest deregulation campaign in history” and “revolution of common sense,” offers us a rare chance to remove artificial boundaries, retire antiquated philosophies, and rethink our approach to regulating financial markets and digital asset ecosystems. Instead of creating and being bound by reactive regulations designed for past crises and technologies, we can design flexible, forward-looking frameworks that promote innovation.

As I envision these frameworks, I’m reminded of wisdom shared by Securities and Exchange Commission Chairman Harvey Pitt (2001-2003), a lion of the securities bar, who proposed a simple yet profound solution to improve U.S. equity markets: develop guiding principles for our markets to embody. Chairman Pitt likened these to God’s Ten Commandments — clear principles to govern conduct with the industry tasked to meet them.[…]

Based on Chairman Pitt’s vision, I distilled the core values for market participants into the following ten commandments for a trustworthy market.

Trump Coin ETFs Are the Crypto Products the SEC Should Prevent

That was then, this is now. Three days before the inauguration, President Donald Trump unveiled his and hers memecoins — crypto with no underlying economics — $Trump and $Melania. Ten days later an application was filed with the SEC to issue leveraged exchange-traded funds on the coins. This is precisely what sensible regulation should prevent, letting insubstantial projects into the regulated financial system to extract money from bubble-chasing speculators. People who want to gamble should do it without the false flag of SEC protection; people with real economic projects should raise capital from informed investors with full disclosure.

We can hope that productive crypto regulation will move forward ignoring the ignoble opportunism of the president, but I fear there will be pressure to carve out exemptions to keep $Trump and $Melania legal and embedded in traditional financial markets….

2024 Year-End FCPA Update

As our longtime readers know, we endeavor in these pages not only to describe the year’s individual FCPA and related enforcement actions, but also to discern patterns, themes, and trends in this enforcement activity. With respect to 2024, we have identified seven developments of note:

1. DOJ reaches subsidiary-only resolutions with parent compliance guarantees;

2. DOJ further defines the poles in Corporate Enforcement Policy credit;

3. DOJ FCPA “declinations with disgorgement” continue as a trickle;

4. Rounding out the SEC FCPA enforcement docket;

5. Individual FCPA enforcement actions come in bunches;

6. Not quite “FCPA-related,” but still worthy of mention; and

7. DOJ’s FCPA Unit runs the table, going four-for-four at trial.