The superseded indictment against U.S. citizen Reginald Fowler and his Israeli partner Ravid Yosef was unsealed in early 2019. They are charged with operating an unlicensed money transmitting business, bank fraud, and wire fraud. All this is said to have been done on the basis of cryptocurrencies and hundreds of millions of dollars are said to have been moved around the globe. This case is closely connected to the Bitfinex Case around a lawsuit filed by the New York General Attorney.
The Shadow Bankers
According to the U.S. prosecutors, Fowler and Yosef, along with other co-conspirators, allegedly operated a cryptocurrency-based shadow banking system through the Crypto Capital Corp scheme (see graphics above) with companies in offshore destinations for several crypto exchanges but also for drug dealers. Through the Crypto Capital Corp scheme, they allegedly provided shadow banking services to Bitfinex, Binance, Cex.io, Coinapult, QuadrigaCX, and other exchanges between 2017 and 2018.
The Bitfinex Case
The Crypto Capital Corp scheme remains a centerpiece to the ongoing investigation by the NY Attorney General (“NYAG”) into the Bitfinex Case. Allegedly the exchange failed to disclose the loss of $880 million in customer funds.
In April 2019 New York Attorney General Letitia James filed a lawsuit accusing Bitfinex of using the reserves of its affiliated Tether venture to cover up a loss of $850 million. Because Bitfinex had been unable to obtain a normal banking relationship it deposited over $1 billion with Crypto Capital Corp without any contract signed. James alleged that in 2018 Bitfinex knew or suspected that Crypto Capital Corp had absconded with the money, but that their investors were never informed of the loss.
In a case addressing important issues about the scope of the NYAG’s investigative authority over crypto businesses, a New York appellate court on July 9, 2020, rejected Bitfinex’s challenges and authorized the NYAG investigation to proceed.
The Crypto Capital Corp Case
The U.S. prosecutors believe that Crypto Capital Corp scheme has have failed to return about $850 million to an unnamed client. In the course of the indictment, the U.S. prosecutors are alleged to have frozen a total of $371 million in various accounts held by Fowler and Yosef companies. In October 2020, Reginald Fowler‘s attorneys requested that part of the frozen funds be released to pay the costs of the defense, Matthew Russel Lee of Inner City Press reported.
The trial against Reginald Fowler will start Monday, January 11, 2021. His co-conspirator Ravid Yosef remains at large.