Ben Strack

Anchorage Digital Bank has added and promoted a slew of C-suite executives focused on security and compliance, citing the crypto industry’s “flight to quality” following events such as the crash of FTX.



Mark duBose, now chief compliance and risk officer, held similar roles at open source technology project Centre and, prior to that, Circle. He was also a chief operational risk officer at Santander Bank and held various leadership roles at Bank of America.



Rachel Anderika, who was formerly the bank’s chief risk officer, is set to become chief operating officer as a result of the hire.



These moves are pending “supervisory non-objection” from the Office of the Comptroller of the Currency (OCC), Anderika told Blockworks. Anchorage Digital received its OCC charter in January 2021.&nbsp;



Meanwhile Frieder Weichelt, former chief risk officer at institutional crypto platform BitGo, has been named chief information security officer. 



Founded in 2017, the San Francisco-based federally chartered bank raised $350 million at a roughly $3 billion valuation in December 2021. Investors include Andreessen Horowitz, Goldman Sachs, KKR, Visa and Singapore sovereign wealth fund GIC.&nbsp;&nbsp;



The hires come several months after the company <a href="https://blockworks.co/news/anchorage-digitals-new-engineering-head-focused-on-scaling-team-security">hired a new head of engineering</a> focused on scaling the team, as it sought to target <a href="https://blockworks.co/anchorage-co-founder-institutions-becoming-more-sophisticated-about-crypto">“more sophisticated”</a> institutions looking for secure crypto infrastructure.



<h2 class="wp-block-heading">Anchorage Digital&#8217;s new Bank Secrecy Act officer is a US agency vet</h2>



Dustin Palmer, a former senior advisor to general counsel at the US Department of Treasury also joins as interim Bank Secrecy Act (BSA) Officer. 



Though not a new role, it is unclear who Palmer is replacing. A spokesperson declined to comment.&nbsp;



Prior to his time at the Department of the Treasury from 2008 to 2011, Palmer was an attorney at the US Department of Homeland Security, according to his LinkedIn page. More recently, he spent nearly 10 years as head of Promontory Financial Group’s financial crimes compliance practice, as well as a managing director at Berkeley Research Group — a role in which he will remain.&nbsp;



Scott Schwartz, Anchorage Digital’s Office of Foreign Assets Control (OFAC) officer, will now also work as deputy BSA officer.&nbsp;



The <a href="https://www.occ.treas.gov/topics/supervision-and-examination/bsa/index-bsa.html" target="_blank" rel="noreferrer noopener">Bank Secrecy Act</a> (BSA), passed in 1970, established program, recordkeeping and reporting requirements for national banks, federal savings associations, federal branches and agencies of foreign banks, particularly around combating money laundering.&nbsp;



Crypto exchanges fall under the scope of the BSA, too. Reuters <a href="https://www.reuters.com/technology/exclusive-us-sought-records-binance-ceo-crypto-money-laundering-probe-2022-09-01/?rpc=401&amp;" target="_blank" rel="noreferrer noopener">reported</a> in September that US authorities were investigating whether Binance violated the act.



​​”As has been well documented, regulators across the globe are reaching out to every major crypto exchange to better understand our industry,” a Binance spokesperson told Blockworks at the time. “We work with agencies regularly to address any outstanding questions.”



Arthur Hayes and Ben Delo, co-founders of crypto derivatives exchange BitMEX, <a href="https://blockworks.co/bitmex-founders-hayes-delo-plead-guilty-to-violating-us-bank-secrecy-act">pleaded guilty</a> to violating the Bank Secrecy Act last February. They were ordered to pay $10 million each for their involvement in “willfully failing” to implement and maintain anti-money laundering measures at the company.



“Recent market events have reaffirmed what we have long believed — that security and regulation are key to increasing trust in the crypto economy,” Anchorage Digital CEO Nathan McCauley said in a Tuesday statement.  



<h2 class="wp-block-heading">Other recruits well-versed in legacy finance</h2>



The company has added others with deep traditional finance backgrounds amid its compliance push.  



Mo Abdoolraman, now interim head of know your customer (KYC), has held vice president roles in compliance at Goldman Sachs and Citi. He was also formerly a senior manager of financial crime and identity at fintech company Chime. 



Daniel Sankey is set to lead the company&#8217;s financial intelligence unit. The team completes transaction monitoring and escalates any necessary investigations to the bank’s BSA officer.



Sankey was previously head of financial crimes compliance at financial services firm Brex. He has also worked in BSA compliance, reporting and crimes investigations roles at Coinbase, Square and Wells Fargo.&nbsp;



As part of the crypto bank leadership reshuffling, Jessica Perkins, who oversees third-party risk management, will now hold the title of enterprise risk management lead.



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Anchorage Digital

Bank Secrecy Act Officer Amid Anchorage Digital’s Latest Hires

Sebastian Sinclair

<div id="highlights-block_632d6c4e78003" class="highlights">
 <ul>
 <li>bZeroX’s protocol facilitated unlawful margined and leveraged retail commodity transactions on its platform between 2019 and 2021, the CFTC said Thursday</li>
 <li>Its DAO was operating without having first registered as a futures commission merchant, the regulator said</li>
 </ul>
 
</div>



The Commodity and Futures Trading Commission (CFTC) has filed and settled charges against a decentralized autonomous and its founders for facilitating margined and leveraged retail commodity transactions, which they say operated outside the law for years.



The bZeroX DAO deployed, marketed and made solicitations to customers under a protocol of the same name to undertake transactions considered unlawful because those transactions did not occur on a designated market contract, the CFTC said in a <a href="https://www.cftc.gov/PressRoom/PressReleases/8590-22" target="_blank" rel="noreferrer noopener">statement</a> Thursday.



According to the regulator, bZeroX, as well as founders Tom Bean and Kyle Kistner, have been ordered to pay $250,000 for their involvement.



The bZeroX platform was subjected to a <a href="https://bzx.network/blog/prelminary-post-mortem" target="_blank" rel="noreferrer noopener">phishing attack</a>, in November 2021, which extracted stablecoins and DeFi tokens and <a href="https://cms.blockworks.co/hacked-dao-faces-lawsuit-as-users-try-to-recoup-stolen-funds/" target="_blank" rel="noreferrer noopener">prompted a class action lawsuit</a>, though the CFTC is not considering that as part of its filing.



Acting as a pseudo trading marketplace from July 2019 to August 2021, the CFTC said the DAO’s protocol allowed users to take leveraged positions but that bZeroX was operating without having first registered as a futures commission merchant.&nbsp;



The DAO and its founder also failed to adopt know-your-customer procedures under the Bank Secrecy Act, the CFTC said. It&#8217;s believed to be the first such case the regulator has brought against a DAO.



Ooki DAO — a successor to bZeroX — also faces similar charges, the CFTC said. Ooki is said to be operating the same software as bZeroX. As such, the CFTC is seeking restitution, disgorgement, civil monetary penalties, trading and registration bans as well as injunctions against further violations.



While the case is unique based on the involvement of what is perceived as a decentralized organization, the regulator’s move aligns with sentiments laid out last week by CFTC Chair <a href="https://cms.blockworks.co/cftc-preparing-to-oversee-crypto-behnam-tells-senators/" target="_blank" rel="noreferrer noopener">Rostin Behnam</a>.



Behnam told the Senate Agriculture Committee his agency has already begun preparations to take the reins as the primary regulator for the crypto industry.&nbsp;



While the regulator attempts to position itself as the main authority over the new asset class, the SEC has been vying for similar oversight.



Earlier this month, SEC chair Gary Gensler said the CFTC can have authority over bitcoin and other unspecified “non-security tokens,” the securities regulator in turn, it would take charge over all other cryptos. 



The decision ultimately <a href="https://cms.blockworks.co/bitcoin-ether-to-be-regulated-as-commodities-by-cftc-per-new-senate-bill/" target="_blank" rel="noreferrer noopener">rests with</a> Congress, which will have to decide whether either regulator is deemed fit enough to police the industry or whether the creation of an entirely new oversight body is preferred.



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bank secrecy act

CFTC Pursues First Case Against a DAO

<div id="highlights-block_6310eb2e34efd" class="highlights">
 <ul>
 <li>The Bank Secrecy Act is mostly concerned with anti-money laundering controls</li>
 <li>“We work with agencies regularly to address any outstanding questions,” Binance spokesperson said</li>
 </ul>
 
</div>



US authorities have an ongoing investigation into whether Binance violated the Bank Secrecy Act, Reuters <a href="https://www.reuters.com/technology/exclusive-us-sought-records-binance-ceo-crypto-money-laundering-probe-2022-09-01/?rpc=401&amp;" target="_blank" rel="noreferrer noopener">reported</a> Thursday, after federal prosecutors began probing the company and its CEO in December 2020.



The Justice Department’s money laundering unit asked the world’s largest crypto exchange nearly two years ago to hand over messages from CEO Changpeng Zhao and other executives on matters including its detection of illegal transactions and US customer recruitment, according to the report.&nbsp;



The 2020 letter reportedly made nearly 30 requests for documents that included details of Binance’s policies to combat illegal finance, or reports of suspicious financial activity it had filed to authorities, among other matters.



The <a href="https://www.occ.treas.gov/topics/supervision-and-examination/bsa/index-bsa.html" target="_blank" rel="noreferrer noopener">Bank Secrecy Act</a>, passed in 1970, established program, recordkeeping and reporting requirements for national banks, federal savings associations, federal branches and agencies of foreign banks, particularly around combating money laundering.&nbsp;



Crypto exchanges fall under the scope of the Bank Secrecy Act too. Though Binance.US registered with the US Treasury Department in 2019, Binance’s flagship platform did not, according to Reuters.



A Binance spokesperson told Blockworks in an email that the company has a global security and compliance team with more than 500 people, including former regulators and law enforcement agents.



​​&#8221;As has been well documented, regulators across the globe are reaching out to every major crypto exchange to better understand our industry,” the representative added. “We work with agencies regularly to address any outstanding questions.”



The spokesperson did not comment on whether it is being investigated for violating the Bank Secrecy Act.



<h3 class="wp-block-heading">Crypto exchange execs already stung by Bank Secrecy Act</h3>



While Binance is reportedly deals with its own Bank Secrecy Act investigation, prominent executives at crypto derivatives exchange <a href="https://cms.blockworks.co/bitmex-founders-hayes-delo-plead-guilty-to-violating-us-bank-secrecy-act/" target="_blank" rel="noreferrer noopener">BitMEX</a> have already been sentenced for violations.



BitMEX co-founders Arthur Hayes and Ben Delo <a href="https://cms.blockworks.co/bitmex-founders-hayes-delo-plead-guilty-to-violating-us-bank-secrecy-act/" target="_blank" rel="noreferrer noopener">pleaded guilty</a> in February. As part of the plea agreement, the pair was ordered to pay $10 million each for their involvement in “willfully failing” to implement and maintain anti-money laundering measures at BitMEX. 



Another co-founder, Samuel Reed, <a href="https://www.justice.gov/usao-sdny/pr/third-founder-cryptocurrency-exchange-pleads-guilty-bank-secrecy-act-violations" target="_blank" rel="noreferrer noopener">pleaded guilty</a> to the same count the following month and also agreed to pay $10 million. Earlier this month, BitMEX&#8217;s head of business development Gregory Dwyer <a href="https://cms.blockworks.co/first-bitmex-employee-pleads-guilty-instead-as-co-founders-avoid-prison/" target="_blank" rel="noreferrer noopener">pleaded guilty</a> to violating the Bank Secrecy Act in a similar manner. He agreed to pay a $150,000 fine and faces up to five years in prison.&nbsp;



Hayes was sentenced to six months of house arrest followed by two years of probation; Delo received 30 months probation; and Reed was sentenced to 18 months probation. &nbsp;



<a href="https://cms.blockworks.co/crypto-industry-eyes-secs-regulation-by-enforcement-ramp-up/" target="_blank" rel="noreferrer noopener">Regulation by enforcement will continue</a> in the absence of concrete crypto legal frameworks, industry executives and lawyers have told Blockworks.



The Reuters report came two days after US Rep. Raja Krishnamoorthi, D-Ill., <a href="https://oversight.house.gov/news/press-releases/chairman-krishnamoorthi-requests-information-from-federal-agencies-and-crypto" target="_blank" rel="noreferrer noopener">sent letters</a> to four federal agencies and five crypto exchanges — including Binance — <a href="https://cms.blockworks.co/lawmakers-probe-coinbase-binance-ftx-over-crypto-fraud/" target="_blank" rel="noreferrer noopener">requesting information</a> on their mechanisms to tackle fraud and scams.



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