The trader who allegedly used Bitcoin to conceal fraudulent profits now faces criminal charges

Ian Waldie/Getty Images

A trader who allegedly hacked into brokerage accounts and profited from artificial share trades has been indicted by the US Department of Justice (DoJ).

It follows charges laid by the US Securities & Exchange Commission (SEC) — the US equivalent of Australia’s corporate regulator ASIC — earlier this month.

The indictment filed in the New York District Court alleges Joseph Willner attempted to cover his tracks by first converting his ill-gotten gains into Bitcoin before transferring them to a second individual involved in the scheme.

“As alleged in the indictment, between September 2014 and May 2017, Joseph Willner, 42, of Ambler, Pennsylvania, and others conspired to hack into victims’ online securities brokerage accounts and used them to place unauthorised trades, at times fraudulently liquidating existing positions in the victims’ accounts in order to fund the unauthorised trades.”

The strategy involved Willner making artificially high sell offers on publicly-traded stock, while his co-conspirators hacked into victim’s accounts and simultaneously made unauthorised buy orders at the inflated prices.

The scheme allegedly netted around $US700,000. The indictment then alleges that around April 2015, Willmer opened an account with the cryptocurrency exchange Coinbase.

It’s then alleged that “from approximately April 2015 to August 2016, the defendant sent bitcoin payments totaling approximately $US237,120 to bitcoin addresses provided by Co-Conspirator 1”.

The indictment alleges that Willner corresponded with his co-defendant via Twitter direct messages, and expressed concern about transferring funds.

The use of Bitcoin and other cryptocurrencies in criminal activity has been cited as a concern by multiple regulatory authorities including Australia’s RBA, with the bank’s Head of Payments, Tony Richards, discussing the issue in recent address to a parliamentary committee.

As Bitcoin becomes more firmly established in the global financial system, its immersion into traditional financial system and the regulation that comes with it will be interesting to monitor.

According to reports on Bloomberg, US Internal Revenue Service has requested to see the records of thousands of users on Coinbase, to ensure that gains from cryptocurrency trading are being reported correctly for tax purposes.

A short time ago Bitcoin prices were holding above $US7,000, following the cancellation this week of the proposed Segwit2x hard fork that was scheduled for mid-November.

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