Oz Yosef, principal of troubled, Panama-based payments processor Crypto Capital, has been indicted by the United States Attorney for the Southern District of New York on three criminal counts. Crypto Capital reportedly lost control of $850 million worth of crypto exchange Bitfinex’ funds last year; the payments processor was also used by QuadrigaCX before it went defunct.
According to CoinTelegraph, a court filing made on October 23rd confirmed Yosef’s indictment on the basis of conspiracy to commit bank fraud, bank fraud, and conspiracy to operate an unlicensed money transmitting business.
The filing specifically cited an instance in which Yosef sent a text message to an unnamed source “regarding the need to transfer $10,000,000 to a bank located in the Bahamas, knowing that the funds would be transferred from a bank account maintained with a bank located in Manhattan, New York.”
According to the filing, Yosef will be forced to forfeit listed assets “representing the number of proceeds traceable to the commission of said offenses.” Court documents specifically list a number of assets, including those held by Crypto Capital principal Reginal Fowler.
Earlier this year, Fowler was charged with running a shadow banking service and a number of other companies with fraudulent associations: Global Trade Solutions, LLC (the parent company of Crypto Capital), Eligibility Criterion, Eurocontrol, and Spiral Global Development are also listed.
Bitfinex claims that it was a victim of fraud
Yosef’s indictment appears to confirm Bitfinex’s narrative that it was a victim of Crypto Capital’s fraudulent behavior and its associated consequences–Crypto Capital’s funds were frozen by regulators in the Spring after investigations by multiple international bodies, including US authorities. $880 million of those frozen funds allegedly belonged to Bitfinex.
In April of this year, the New York Attorney General’s office accused Bitfinex of losing $850 million and then using a loan from stablecoin issuer Tether, its sister company, to cover the loss.
Bitfinex did not delay the allegations, but explained that it took the loan because of the losses incurred by Crypto Capital–the exchange alleged that the funds were spread across accounts in different countries by its former payment processor and that some of the accounts were frozen while under Crypto Capital’s control.
The statement explaining the circumstances was released by Bitfinex general counsel Stuart Hoegner upon the arrest of Ivan Manuel Molina Lee, the former president of Crypto Capital, which was made earlier this month. Court documents to verify Hoegner’s claims had not yet been released.
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Statement in response to arrest of Crypto Capital principal by Polish authorities https://t.co/dGef6vWEed
— Bitfinex (@bitfinex) October 25, 2019
Crypto Capital “regularly referred to its integrity, banking expertise, robust compliance programme and financial licences” in talks with Bitfinex
Indeed, Bitfinex alleges that Crypto Capital originally informed it that $500 million of its funds were being “held up” by regulators in Poland and Portugal also during April of 2018. The filing says that before that point, Bitfinex’s relationship with Crypto Capital–which had lasted for years–” generally operated well.”
Bitfinex also said that before April of last year, it operated under the assumption that Crypto Capital’s statements were true–statements that turned out to be misrepresentations: “among those misrepresentations, Crypto Capital regularly referred to its integrity, banking expertise, robust compliance programme and financial licences,” the filing explains.
“This was designed to assure us that Crypto Capital was capable of handling Bitfinex’s transactions.”
The saga continues…
Earlier this month, Bitfinex filed a discovery application with a US district court in order to subpoena a former banking executive who allegedly provided Crypto Capital with a statement confirming that roughly $300 million of Bitfinex’s funds were being held in an account at the bank.
The application for discovery came several days before Ivan Manuel Molina Lee, the president of Crypto Capital, was arrested by Polish authorities in connection with a massive money-laundering scheme. Allegations that Molina Lee may have used Bitfinex as part of the scheme have also been floating around.
However, Bitfinex has denied any willful involvement with Molina Lee’s money laundering scheme: “we cannot speak about Crypto Capital’s other clients, but any suggestion that Crypto Capital laundered drug proceeds or any other illicit funds at the behest of Bitfinex or its customers is categorically false,” the exchange said in a statement.
This article previously (incorrectly) stated that Oz Yosef was arrested. He was, in fact, indicted.