A trader charged with fraud allegedly used Bitcoin to conceal illegal profits

Jean-Philippe Ksiazek/ AFP / Getty Images

A day trader in Philadelphia has been charged with fraud and market manipulation, in a scheme which allegedly involved the transfer of proceeds into Bitcoin to conceal illegal payments.

US corporate regulator the Securities & Exchange Commission (SEC) announced it had filed a lawsuit against Joseph Willner, alleging he illegally accessed the brokerage accounts of over 100 unknowing victims to artificially move stock prices.

The SEC alleges Wilner based trades from his accounts on artificial moves generated by unauthorised trades from the victims’ accounts, netting more than $US700,000 in the process.

It’s alleged Willner then made payments to another individual with proceeds from the illegal trading activity, as part of a profit-sharing arrangement.

To cover his tracks, “Willner allegedly transferred proceeds of profitable trades to a digital currency company that converts US dollars to Bitcoin and then transmitted the Bitcoins as payment,” the SEC said.

The explosion in popularity of Bitcoin and other cryptocurrencies has seen an increased level of focus by regulators, from corporate watchdogs to financial market operators.

The SEC’s lawsuit reinforces comments earlier this week by the Reserve Bank of Australia’s Head of Payments, Tony Richards, in a speech to a parliamentary committee.

“Cryptocurrencies can serve as a means of payment in the illicit economy. Accordingly, their use may have some implications for tax authorities and they raise more significant issues for authorities tasked with crime prevention and detection,” Richards said.

“The distributed and cross-border nature of digital currencies like bitcoin means that regulation of the core protocols of these systems is unlikely to be effective. Authorities have therefore tended to focus on the ‘on-ramps’ and ‘off-ramps’ – that is the links to the traditional payments system.”

In other regulatory developments, the CME Group — one of the world’s largest clearing houses for options and futures contracts — said overnight that it would include Bitcoin futures trading on its platform later this year.

The CME Group’s decision helped drive another surge in Bitcoin prices, which a short time ago were trading at a new record high above $US6,400.

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