Cryptocurrencies and nonfungible tokens are ripe for fraud, including money laundering, market manipulation, and tax evasion, according to IRS criminal investigators, and even celebrities could be caught up in the agency’s investigations.
As digital assets have become more mainstream, government agencies have become increasingly concerned, with regulators grappling with how to police the tokens and conduct enforcement activities to deter investors from engaging in criminal activity.
“We’re just seeing mountains and mountains of fraud in this area,” said Ryan Korner, special agent in charge of the Los Angeles field office at the IRS’s criminal investigation division. The division is tasked with probing tax crimes and related financial crimes.
Late Tuesday, at a virtual event hosted by the USC Gould School of Law, Korner said celebrities aren’t immune to the IRS’s criminal investigations. “We’re not looking for celebrities, but when they make a blatant or open comment that says, ‘Hey, IRS, you should probably come to look at me,’ that’s exactly what we do.”
During the fiscal year 2021, IRS investigators seized $3.5 billion in cryptocurrencies linked to financial crimes, accounting for 93 per cent of all assets seized by the division during that period. According to Korner, IRS CI ended the year with 80 cases in its inventory that it was still actively working on, with crypto’s primary violation.
A variety of criminal activities are causing concern among law enforcement agencies. According to Korner, they are concerned when they see people paying millions of dollars for assets such as NFTs that do not appear to have that kind of inherent value. He claims that bad actors can take advantage of this to launder money from criminal enterprises such as drug trafficking.
According to Korner, NFTs and crypto, in general, are ripe for market manipulation, with high-profile investors able to sway asset prices with a single Tweet.
In the past, federal agencies have pursued crypto companies that used celebrities to promote their products and engage in illegal activities.
Because “this space is the future,” Korner said, IRS CI is attempting to train all of its agents on crypto and NFT issues.
According to him, the agency wants to increase collaboration and information sharing with other federal agencies, including the Justice Department, to ensure that everyone is on the same page and stays ahead of the criminals.