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‘Hundreds’ of Crypto Cases Coming, IRS Criminal Chief Says

Nov. 3, 2022, 8:52 PM

The IRS’s Criminal Investigation division is building “hundreds” of crypto cases, and many of them will soon be public, division chief Jim Lee said Thursday.

The cases involve areas like “off-ramping” transactions, in which digital assets are exchanged for fiat currency, as well as people being paid in crypto and not reporting, Lee said during a press call.

“In the last three years I’ve really seen a shift” in digital asset investigations, Lee said. Previously, most were related to money-laundering, he said, but tax cases now make up about half the mix.

  • The agency created the Office of Cyber and Forensic Services last year to group its digital asset investigation, cybercrime investigation, digital forensics, and physical forensics support efforts. Lee said the office was capable of tracing essentially any crypto transaction.
  • The Criminal Investigation division’s annual report, released Thursday, highlights a number of its crypto successes, including the March 2022 sentencing for tax evasion of Bitqyck founders Bruce Bise and Samuel Mendez. It also vaunted the arrest of Ilya Lichtenstein and his wife, Heather Morgan (aka “Razzlekhan”), for alleged conspiracy to launder crypto stolen in the 2016 Bitfinex hack, in what was at the time the largest financial seizure of that type in US government history.
  • On Tuesday, Lee said Criminal Investigation has seized about $7 billion in cryptocurrency in fiscal 2022, double the previous year’s total.

To contact the reporter on this story: David Jolly in Washington D.C. at djolly@bloombergindustry.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergindustry.com; Alex Clearfield at aclearfield@bloombergindustry.com