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The Marshall Islands – A cybercrime paradise promotes crypto to legal tender

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Crypto becomes legal tender

On February 26, 2018, the sovereign Republic of the Marshall Islands (RMI), a tiny Pacific atoll nation with a population of just 55,000, passed the Sovereign Currency Act of 2018 introducing the blockchain-based currency Sovereign (‘SOV’) as its legal tender for all debts, public charges, taxes, and dues. Being legal tender of the Marshall Islands, SOV is legally defined as money, worldwide. The Marshall Islands became a sovereign nation in 1986 and has been a United Nations member since 1991.

According to the SOV website, the SOV is the first digital money which is independently governed and libertarian by design with a predictable supply.  With SOV, cash can be transferred instantly around the world and the emerging crypto-rails can tap into the massive infrastructure and resources, they claim.

The SOV Development Fund, a non-profit organization established with the mandate to support the Marshallese government in the establishment, maintenance, and implementation of the SOV is the central authority of the new legal tender says a press release published Tuesday. David Paul, the RMI Minister In Assistance to the President said: “We are designing SOV in a way that will not place any burden on the government’s finances. The currency funds itself.

The plan is heavily criticized by the International Monetary Fund (IMF), the U.S. Treasury Department and bank officials in the RMI. U.S. authorities have concerns about anonymous digital currencies which are often used for illicit purposes by people who want to conceal their identity. However, all SOV blockchain participants will be properly KYC-checked the RMI officials said.

The scammers paradise

The Marshall Islands are the preferred home of many new generation broker and gambling scams. In recent years, many scam operators have established their offshore entities there, especially scams in the crypto sector. The Marshall Islands stand in one line with other offshore havens like the British Virgin Islands or St. Vincent and the Grenadines. When it comes to cybercrime and scam operations the RMI even stands out between those offshore centers.

As a matter of fact, the Marshall Islands have been around in the fraudulent binary options, Forex, and crypto scene for some years now. 6 out of 10 scam brokers use offshore entities in the Marshall Islands. Actually, all of them are registered on the only address available on the distant island country.

Marshall Islands Ajeltake road, Ajeltake island, Majuro, Marshall islands MH96960.

The scam brokers preferred offshore address

This single address probably holds the sad world record of most warnings from financial regulators around the world. Google’s search for warnings from the UK Financial Conduct Authority (FCA) against this address, for example, produces more than 5,200 results. There are, of course, many redundant listings of websites that report on respective FCA warnings.

As a matter of fact, hundreds of scams are operated by companies registered at this address. The problem is exacerbated by the fact that the Marshall Islands companies register does not offer any transparency. On OpenCorporates you search in vain for the companies registered on the islands. A paradise for scammers, money launderers and online fraudsters.

The Israel Connection

The Israel connection may be a coincidence. In any case, it is remarkable that the introduction of the cryptocurrency as legal tender of the Marshall Islands was carried out with the support of Israeli companies and lawyers. As reported by FinTelegram, the Sovereign (SOV), was created through a partnership with Neema, an Israeli financial technology startup. Neema’s Israeli law firm Yigal Arnon & Co. helped the RMI government with the drafting of the needed legislative runtime environment.

As a matter of fact, 8 out of 10 binary options and broker scams were organized and/or supported by Israeli perpetrators and their technology, marketing services, and boiler rooms. Simona Weinglass of the Times of Israel has reported extensively on the Wolves of Tel Aviv and that the fact that Israel was the global hub of investment fraud with binary options. The FBI has estimated that investors have lost up to $10 billion annually.

From our own research and many whistleblower reports FinTelegram can confirm that Israelis are behind the big broker scams. For example behind GreyMountain Management (GMM), the E&G Bulgaria scheme around the Israeli Gal Barak or the new Zoo Scam Broker Network.

Not only the attackers behind the broker scams come from Israel, but also the many payment service providers such as Payobin, NetPay International or Moneta International UAB.

Recently, the scammers have massively bet on cryptocurrencies and will be pleased about the introduction of SOV accordingly.

Money laundering with crypto

It is an indisputable fact that cryptocurrencies are used for money laundering on a large global scale. In recent years, tens of billions of dollars of black money have flowed into Bitcoin and other cryptocurrencies. It is exactly this currently still difficult tracking of cryptos that prompts scammers to rely on them for their illicit businesses. It remains to be seen what measures the SOV Development Fund will take to prevent money laundering. So far, those responsible have not even managed to prevent their small republic from becoming a global scam hub.

How exactly do those responsible for SOV want to prevent money from being laundered via SOV through local lawyers, tax consultants, and trustees? What are the reporting obligations to other authorities? How transparent is the SOV blockchain really?

Until these questions are answered, we remain sceptical and recommend that investors do not do online business on the Marshall Islands.

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