The news broke at 10. 30. 10. 48. I saw i said hey we got to talk about this in 12 minutes on the show, and so the us treasury has announced brand new sanctions against a crypto exchange for its alleged role in laundering. Ransoms for cyber attacks now lauren feiner, i think, is how you pronounce it from cnbc. Amazing amazing, amazing reporter. Basically, what this is doing is its marking the first time that an action like this has been taken against a virtual currency exchange, and it comes after a string of a bunch of cyber attacks. Uh across industries and the treasury has said that the ransomware payments totaled more than 400 million dollars in 2020 alone, more than four times that of 2019.. So obviously anytime, that you put ransomware cyber attack, a big number on it: 400 million dollars in a single year. People start to say: oh, we got to do something understood the ransomware. According to this, article is a type of cyber attack where actors often shut down access to key programs and demand payment, usually in a cryptocurrency like bitcoin to unlock them now part of what is so interesting about. This is theres a fascination in the mainstream press, with the idea of bitcoin being used as part of the ransomware. The cyber attacks, but, as we know, bitcoin has a public ledger. It is fully transparent and you can see all the transactions on it. So its not exactly the best thing to do is if i call up john and i say, hey john ive hacked your computer, you should send me bitcoin.

Well, if john sends me, the bitcoin whats gon na happen is that there is going to be recorded forever in an immutable database publicly available and auditable by anybody in the world, a transaction where john pays me bitcoin in exchange for that now, when that transaction is There people may not know exactly why that transactions there. They may not know who owns the wallet sending or who owns the wallet that is receiving, but it is recorded in history forever in an immutable way that anyone can audit so down the road. If all of a sudden, we figure out that john kept sent ransomware to a wallet, and so did somebody else install it to somebody else, and then we could start to identify wait. This wall is somebody whos doing nefarious activity and then all of a sudden i go to withdraw the bitcoin lets, say the fiat or i try to move it into a different exchange and i happen to have done kycaml on that exchange or theres. Some other connectivity point, then it can be identified, hey that was a bad actor heres who they are, and then the law enforcement, the regulators etc. They can step in, they can uh actually act. We even saw during one of the ransomware attacks. If you remember a couple weeks ago, where people requested bitcoin that bitcoin was given to them, the regulators and the law enforcement were able to actually see on the blockchain where the money was being traced.

They continued to trace it and at some point the bitcoin was sent to a centralized exchange account and when it was sent there immediately, they were hit with a order to freeze the bitcoin. Do not allow that bitcoin to leave your centralized exchange and the law enforcement is able to step in and kind of the whole thing unwound from there. So my point in that is, yes, it has happened, but people are very quickly waking up to the fact that you probably dont want to get paid in a digital currency that has a transparent ledger because it actually makes it in some cases easier to track. You down, if youre a bad person than if you were to use something else, so the treasury departments office of foreign assets control will designate the cryptocurrency exchange called suex. I believe i i dont know this exchange so uh. This is new to me, suex for allegedly playing a role in facilitating financial transactions for ransomware actors, and the article goes on to say, while the treasury emphasized that most virtual currency activity is legal key point, while the treasury emphasized that most virtual currency activity is legal. Really important here bad actors exist in every single industry. I can show you a ton of people laundering money in the legacy system. Doesnt mean that everyone, the legacy systems bad same thing here, theres bad people doing bad things, doesnt mean that all of it is bad. As the treasury says, most virtual currency activity is legal.

The technologies facilitating those payments can be exploited by bad actors. True, cryptocurrency transactions are decentralized, can be harder to trace than those conducted through traditional financial institutions. Probably false. The department said that in suexs case, it helped facilitate illegal activity for their own illicit gains. End quote now. I do want to talk about this last piece here, which is, while the treasury emphasized that most virtual currency activity is legal technologies. Facilitating those payments can be exploited by bad actors. Of course, we know that to be true of everything, guess what criminals money, launders drug dealers murderers, they all use cell phones, nobodys, trying to ban cell phones, but the technology mostly used by people for legal purposes. Some bad people use cell phones same thing here same thing with the dollar same thing, with everything did you know criminals use cars? We probably should look at cars right. Did you know that criminals wear shoes? We should look at no, of course, not nobodys, claiming that right, so most of the activity is legal, but there are some people who use the active, uh use the technology for illegal purposes, of course, but this next cent is really important. Cryptocurrency transactions are decentralized and can be harder to trace than those conducted through traditional financial institutions. I personally dont necessarily agree with that. I actually think that, because they are decentralized and they use a public ledger, they are easier to trace the transactions than lets say in the legacy system right.

What i do believe that maybe this is getting at is the fact that it is harder to tie the recipient or the sender to an actual human identity, because all you see is the wallet addresses so theres a difference between being able to see the actual transaction And trace where the money flows through a system versus the ability to go to a bank and say who owns this account and the bank immediately has already done kyc aml and can just tell you remember what we talked about with the open c situation. Is people random people on the internet were able to look at the flow of funds, identify a wallet and then quickly understand hey this person works at the company theyre buying these things before theyre public? Maybe we shouldnt allow that to happen, or maybe we should but lets flag that issue you wouldnt be able to do that in the legacy system, so i think theres more transparency here um and which, for the purposes of this, if you want to put yourself in The perspective of law enforcement trying to catch bad people doing bad things. It actually should make your job easier than lets say the legacy system. You can imagine if they were using physical cash. It would be nearly impossible to do this, but it also brings up the fact that theres privacy issues. So what happens if all of a sudden, john and i are both good actors – and we just want to send bitcoin back and forth to each other, how much surveillance should be allowed in the system or how much surveillance should there be in the system? Do we have a right to financial privacy right? Why should i have to give up my information if im not doing anything wrong? Should we actually have more surveillance on everybody to catch the small percentage of people who are doing bad things, or should we not impede on the financial, privacy and freedoms of every individual? Just because were pursuing a couple of people theres, some very, very big philosophical questions in here: theres a lot of legal complexity here, theres regulation, law enforcement, uh and tons and tons of lobbying going on, etc.

So this is a really complex issue, but to see the treasury come out and take action like this, i think most people again most people agree that if someone is doing something bad, that should not be encouraged. That should not be allowed. Of course, if youre doing illegal things, they are going to come after you, whether you like it or not, thats just how the rules work. If you break the law, theyre going to come after you, if, if you dont break the law, then youre – probably okay for the most part but john. What do you think about this yeah? This makes a lot of sense right if a bank was doing this, probably the same sanctions would be passed down, thats right. So if someone was doing an illegal activity and they knew about it and kind of let it go because they were getting a financial gain from that, they would obviously be sanctioned and um reprimanded. For that, so i dont see anything wrong with them doing it. Ive. Never heard of this exchange before um, so it seems relatively small, but in the grand scheme of things i think it just lets. People know that this this industry is being watched, um and its actually more helpful to law enforcement and to people trying to catch those bad actors and anything else. People want their money through big banks all the time i mean the big bit. How many times have the big banks gotten in trouble for laundering money for drug cartels, the mafia criminals? They probably do it more than in these exchanges? I dont want to go down that uh, that road, but theres a lot of banks who uh who know what theyre doing but uh the banks have a uh, a catch, all a safety net and most uh.

I wrote about this one time that actually what banks can do is banks can identify suspicious transactions, that kind of sort of look smell and act like money laundering, but the bank doesnt step in and say. Oh, please, dont do that anymore. Oh, we refuse your business. What the bank does is the bank simply flags it to this organization, africa, the name of the organization and says hey? This is a suspicious transaction and then what they do is they do that, for you know, hundreds thousands millions of transactions per month and then somebody has to go sift through all of these suspicious transactions, and so, if ever there is a situation would say: oh you Know x, person was laundering money in the uh bank. The bank statement says well, we flagged the transaction like we didnt know what it was. We did our best. We we flagged it, and so, if you just flag as much as possible one, it makes it harder to actually figure out which what is good and what is bad so that shutting down customers. But then two is, you basically just say: hey? Well, we flagged it. We flat, like you know we can just claim uh that you know its on you. You have to look at it yeah we did our job, we noticed something suspicious. We reported it versus the bank coming in and saying: hey you cant do this now. I will say: the banks are very good at finding out who runs crypto businesses and whos, trying to do things in crypto and shutting those accounts down they.

They are amazing at doing that. Let me tell you how many times ive gotten a call from a founder who literally says pomp. I need help, i go whats up and they say the bank just shut down our account right and then i got ta go scramble and help them try to figure out a bank that will actually bank them and so its not to say that they dont have The capabilities its not to say that they cant do this stuff. It just happens to be that sometimes it is selective when they try to do it, but its estimated uh that over two trillion dollars a year is laundered and used for illicit purposes. In the fiat system, which is about the size of the entire crypto market, so when we talk about it on an aggregate dollar basis, its much much higher in the uh in the legacy system and most people say oh thats, because the crypto market is so much Smaller there is a report out from the former, i think, hes the cia director. His name is uh mike morrell, if i remember correctly – and he estimates that about point four percent – less than half a percent um and i think theres another company that also came out. The report that i think says less than half a percent of all transactions in bitcoin are used for illicit purposes or nefarious purposes, so on a percentage basis, thats much smaller as well than lets, say the fiat system.

So i think again, when you have a transparent public ledger, it drastically reduces the uh excitement that people have of using these assets for illicit purpose, whats up guys, bang, bang thanks so much for watching the best business show today, if were gon na, be the best Business show we obviously need the best partner thats, why the exclusive sponsor the best business show is sofi theyre, an all in one platform that allows you to invest in all kinds of different assets, including stocks, etfs, crypto ipos, and they even have an automated investing function. If thats your thing so before we start getting after it again make sure that you go download sofi, you get an invest account and when you make your first crypto trade, regardless of what you buy theyll, give you 10 in bitcoin for free its that simple head On over to sofi.

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