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The Morning Risk Report: Crypto Guru Pleads Guilty to Advising North Korea on Blockchain Technology
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The trial had been scheduled to begin Monday at a federal courthouse in Manhattan.
PHOTO: MARK KAUZLARICH/BLOOMBERG NEWS
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Good morning. As his criminal trial was set to start, a cryptocurrency expert pleaded guilty to conspiring to violating U.S. law by traveling to North Korea to give a presentation on how to use blockchain technology to launder money and evade sanctions.
Virgil Griffith entered the plea in federal court in Manhattan on Monday, before jury selection was to begin in his trial. The former senior researcher for the Ethereum Foundation was arrested in November 2019 after attending a conference in Pyongyang earlier in the year. A federal grand jury convened by the U.S. attorney’s office for the Southern District of New York indicted Mr. Griffith on one count of allegedly conspiring to violate the International Emergency Economic Powers Act, which prohibits U.S. citizens from exporting goods, services or technology to North Korea.
[Continued below…]
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While prosecutors say Mr. Griffith provided valuable information at the conference, his lawyers previously said in filings that he didn’t violate the law because he didn’t provide any service to North Korea. Mr. Griffith, who has a doctorate from the California Institute of Technology in computational and neural systems and has frequently spoken on panels about blockchain technology, gave a talk to about 100 people at the Pyongyang conference, providing basic information that could be found on the internet by anyone, his lawyers previously said. As such, his talk was protected by the First Amendment, the lawyers said.
Prosecutors said Mr. Griffith conspired to violate the sanctions law by planning with others to give the presentation at the conference without receiving approval from the U.S. The presentation amounted to services to North Korea, prosecutors said, because it provided valuable information tailored to a North Korean audience. It emphasized that U.S. or U.N. sanctions couldn’t stop the use of blockchain technology, according to prosecutors.
Mr. Griffith faces up to 20 years in prison. Brian Klein, a lawyer for Mr. Griffith, said on Monday that his client “is sincerely remorseful.”
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From Risk & Compliance Journal
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WSJ Risk & Compliance Forum
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Join us on Oct. 12 for the WSJ Risk & Compliance Forum. The virtual program includes sessions on anti-money laundering laws, emerging risks, compliance and cryptocurrencies, lessons from Wirecard and workshops on ESG reporting and responding to ransomware. Register here.
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U.S. Subsidiary of Schlumberger to Settle Sanctions Probe
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A subsidiary of Dutch oilfield services company Schlumberger Ltd. agreed to pay about $1.4 million to settle allegations the unit violated U.S. sanctions related to the situation in Ukraine, the U.S. Treasury Department said on Monday.
The Treasury Department alleged senior managers at Cameron International Corp., a Houston-based goods and services supplier for the oil-and-gas industry, approved contracts between 2015 and 2016 for its Romanian subsidiary to supply goods to Gazprom-Neft Shelf, a Russian energy firm that faces U.S. sanctions, according to the Treasury’s Office of Foreign Assets Control, which enforces U.S. sanctions. OFAC said the written requests to approve the contracts referenced the provision of the goods to the Russian company’s offshore project and their destination to the Russian Arctic.
Representatives for Schlumberger, which acquired Cameron in 2016, and Cameron International didn’t immediately respond to requests for comment.
Separately, Schlumberger Rod Lift Inc., a Frisco, Texas-based entity formerly linked to Schlumberger and now doing business as Lufkin Rod Lift, agreed to pay about $160,000 to settle allegations it facilitated a shipment of goods that violated U.S. sanctions on Sudan. The U.S. in 2017 revoked longstanding economic sanctions against Sudan.
—Mengqi Sun
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Financial Regulators Prep for New Anti-Money-Laundering Regulations
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Federal financial regulators are preparing to update rules and add new priorities to their compliance examinations in light of anti-money-laundering reforms passed by Congress earlier this year.
Although the U.S. Treasury Department’s Financial Crimes Enforcement Network is the sole government entity required to update its rules in connection with the legislation passed by Congress in January, financial regulators on Monday said they would follow suit in an effort to remain aligned with the agency.
“The federal banking agencies intend to make sure that our rules conform with changes that FinCEN is making,” Lisa Arquette, associate director of anti-money-laundering for the Federal Deposit Insurance Corp., said at a conference of the Association of Certified Anti-Money Laundering Specialists.
A FinCEN official said the agency was working as quickly as possible to implement the sweeping anti-money-laundering legislation, and regulators said they hoped to contribute to the effort.
“We're fully engaged as partners,” Ms. Arquette said. “It's not additional funding, but it is human resources that we contribute.”
—Dylan Tokar
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A jury found that MD Helicopters defrauded the U.S. military.
PHOTO: SHAH MARAI/AGENCE FRANCE-PRESSE/GETTY IMAGES
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A federal jury found that an Arizona helicopter maker backed by financier Lynn Tilton defrauded the U.S. military, awarding $36 million in damages to the government and whistleblowers, an amount that could be tripled under a federal law.
A jury in the U.S. District Court in Huntsville, Ala., determined that MD Helicopters Inc. broke federal rules for government contractors through its relationship with Col. Norbert Vergez, an Army procurement officer involved in awarding contracts to the company in 2011 and 2012. After retiring from the Army, Col. Vergez went to work in 2013 for Ms. Tilton’s management firm Patriarch Partners LLC and later for MD Helicopters directly, court records show. In 2015, Col. Vergez pleaded guilty to a criminal conflict of interest stemming from his connection to MD Helicopters and to making other, unrelated false statements.
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The outcome of Elizabeth Holmes’s trial partly hinges on how jurors answer the question of whether investors in Theranos Inc. were savvy speculators who made an unwise but informed bet, or were hoodwinked by a lying founder.
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Prosecutors will attempt to show Ms. Holmes didn’t just face the setbacks and course-corrections common in startups, but that she knowingly lied to investors who in turn based their investment on false information. Ms. Holmes’s lawyers have pointed to the wealth and success of Theranos’s investors to argue that they were well-equipped to understand the risk of a speculative bet on nascent technology.
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An advisory group for the Securities and Exchange Commission voted Monday to recommend making it easier for less-wealthy people to invest in private funds, a change long sought by asset managers. The SEC’s Asset Management Advisory Committee unanimously approved a report recommending that the regulator increase ordinary investors’ access to private-equity, private-debt and real-estate vehicles.
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One of the world’s largest cryptocurrency exchanges said it would close all user accounts in mainland China by the end of the year, days after the country’s central bank declared all crypto-related transactions illegal. Huobi Global, which was founded in 2013 and currently operates from offices in Singapore, South Korea, the U.S. and other countries, over the weekend said it stopped allowing new customers in mainland China to register accounts. The exchange will also gradually retire existing accounts in China by the end of this year to ensure the safety of its customers’ assets, it added.
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Adam Mosseri, head of Instagram, said the company wants to talk to parents, researchers and safety experts about how to move forward.
PHOTO: GETTY IMAGES
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Facebook Inc. said it would suspend plans for a version of its Instagram app tailored to children, a concession after lawmakers and others voiced concerns about the photo-sharing platform’s effects on young people’s mental health. Instagram head Adam Mosseri said on Monday that the social-media service is pausing its work so that it can listen to concerns and do more to demonstrate the value of the kids version, which was to be ad-free and allow parents to monitor children’s activity.
Separately on Monday, Florida Republican Gov. Ron DeSantis directed his secretary of state to investigate Facebook in relation to an article in the The Wall Street Journal’s Facebook Files series. The article exposed a company system known as “cross check” that has exempted high-profile users from some or all of Facebook’s rules for behavior on its platforms. Mr. DeSantis said the probe would examine whether the exemptions violate Florida election laws.
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Gov. Jim Justice’s heavily indebted family businesses were thrown into turmoil by Greensill’s collapse. PHOTO: CHRIS JACKSON/ASSOCIATED PRESS
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West Virginia Gov. Jim Justice has offered a $300 million payment and half the value of his family coal businesses to settle loans from the now-defunct Greensill Capital, according to people familiar with the deliberations. The proposal is part of talks between the governor’s family business, Bluestone Resources Inc., and Credit Suisse Group AG, which manages investment funds that were Greensill’s main source of cash for its lending business.
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Ford Motor Co. is recalling certain Mustang Mach-E electric sport-utility vehicles over concerns that the front windshield and panoramic roof could become detached, a setback for one of the car company’s highest-profile, new-model launches this year.
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Evergrande Worries Help Fuel Selloff at Chinese Developer Sunac
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A coal-fired power station in China’s Jiangsu province, where factories are curbing operations amid government-mandated cuts to energy use.
PHOTO: FANG DONGXU/FEATURECHINA/ZUMA PRESS
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Government efforts to curb energy consumption and reduce carbon emissions, along with surging coal prices, are leading to power outages across many of China’s manufacturing hubs, threatening to further disrupt strained global supply chains for semiconductors and other vital goods.
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The British government is searching for drivers to deliver fuel to gas stations across the country after panic buying over the weekend left long lines of customers waiting to fill their tanks. The Covid-19 pandemic and the U.K.’s departure from the European Union have resulted in a shortage of tanker drivers to ferry fuel across the country.
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U.S. Durable-Goods Orders Rise Sharply Despite Supply Constraints
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