The April 30 indictment of two individuals on multiple counts — including bank fraud and operating an unlicensed money transmitting business — reveals an apparent connection to the shadow banking services that were used in two recent high-profile crypto exchange controversies.
The indictment — charging Arizona resident Reginald Fowler and Ravid Yosef, a resident of Tel Aviv, Israel — was announced in a news release from the United States Attorney’s Office for the Southern District of New York (SDNY) on April 30.
According to the SDNY announcement — published alongside an unsealed indictment document from the Department of Justice — Fowler was arrested on April 30 on charges of bank fraud and operating an unlicensed money transmitting business, whereas his alleged co-conspirator Yosef remains at large.
Fowler and Yosef are alleged to have worked for several interconnected firms that provided fiat currency banking services to multiple crypto exchanges. They are charged with having participated in a conspiracy in which Fowler made several misrepresentations to banks in order to open the accounts that would be used to hold deposits from individuals purchasing crypto.
As The Block Crypto today reports, Global Trading Solutions LLC — one of the defendants’ firms, with a bank account held at HSBC USA — is reportedly presided over by Crypto Capital, the payment processor used to process fiat deposits for crypto exchange Bitfinex.
The Block further claims that an unnamed, but ostensibly implicated firm in the indictment — Swiss-based Global Trade Solutions AG — runs Crypto Capital’s operations, and that it similarly held an HSBC account that was used by Crypto Capital to process fiat deposits for Bitfinex.
Fowler and Yosef are further accused in the indictment of having falsified electronic wire payment instructions in a bid to conceal the true magnitude of their allegedly voluminous crypto exchange business, which provided services that reportedly enabled hundreds of millions of dollars to flow via their firms’ accounts from banks located worldwide.
According to its website, Crypto Capital also provided services to the now-defunct Canadian crypto exchangeQuadrigaCX, which has this year become embroiled in a controversy following the death of its owner, who was ostensibly the sole person with access to the exchange’s wallet keys.
An earlier, archived version of the site — as of February 1, 2018 — had notably listed Bitfinex as one of Crypto Capital’s clients, although all references have since apparently been removed.
As previously reported, the New York Attorney General’s office has this month alleged that Bitfinex lost $850 million in funds allegedly held at Crypto Capital, and subsequently used funds from affiliated USD stablecoin operator tether — which is apparently only backed 74% with cash — to secretly cover the shortfall.
In an official statement, Tether rebuffed the allegations, stating that the “New York Attorney General’s court filings were written in bad faith and are riddled with false assertions, including as to a purported $850 million ‘loss’ at Crypto Capital.”