DoJ Indictment Reveals Two Exchanges Allegedly Used Shadow Banking Services

The U.S. Department of Justice indictment of two individuals on multiple counts, including operating an unlicensed money transmitting business and bank fraud, revealed a connection to two recent crypto exchange controversies.

In a statement, United States Attorney’s Office for the Southern District of New York alleged that Arizona resident Reginald Fowler and Ravid Yosef, a resident of Tel Aviv, Israel, took part in a scheme, which involved using bank accounts to move money into unnamed crypto exchanges. According to the announcement, Fowler was taken into custody on April 30, while his alleged accomplice remains at large.

The two allegedly worked for several interconnected firms that provided multiple cryptocurrency exchanges with fiat banking services. The indictment document purported that the money service business operated between February and October 2018, and during this time Fowler and Yosef “opened and used numerous bank accounts” by falsely representing to those banks that the accounts would be primarily used for real estate investment transactions. U.S. Attorney Geoffrey S. Berman said in the statement:

“Reginald Fowler and Ravid Yosef allegedly ran a shadow bank that processed hundreds of millions of dollars of unregulated transactions on behalf of numerous cryptocurrency exchanges. Their organization allegedly skirted the anti-money laundering safeguards required of licensed institutions that ensure the U.S. financial system is not used for criminal purposes, and did so through lies and deceit.”

Two of the bank accounts named in the document are allegedly held under the name Global Trading Solutions LLC, a firm which was identified in October to have done business with crypto exchange Bitfinex, which is now being investigated by the New York Attorney General’s Office for its alleged cover up of a loss of $850 million.

As reported by The Block Crypto, Global Trading Solutions LLC was presided over by Crypto Capital, the payment processor for Bitfinex. In addition to doing business with Bitfinex, Crypto Capital also names the now defunct exchange QuadrigaCX, which was involved in a controversy following the death of its owner, as one of its clients.