The Australian Transaction Reports and Analysis Centre (AUSTRAC) announced that it had suspended the licenses of two cryptocurrency exchanges in the country. The regulatory authority decided to suspend the exchanges after investigations by the Australian Federal Police (AFP) linked them to a dark web drug trafficking group. The AFP started the investigations against the organised crime group in February 2017 after receiving some intercepted international mail packages carrying drugs from the Australian Border Force (ABF).
In the first phase of the investigations, dubbed Operation Crozet, that ended in October 2017, the AFP and ABF agents intercepted and seized from the international mail a total of 33 kilograms of illicit drugs including 15.8 kilograms of MDMA, 2.6 kilograms of cocaine, and just over 1 kilogram of ketamine. The AFP then executed three search warrants in Mernda and Kew, Melbourne that resulted in the seizure of 1 kilogram of crystal meth, 700 grams of cocaine, 1 kilogram of ketamine, 10 kilograms of MDMA, and testosterone in 10 vials. Apart from the drugs, police also seized an undisclosed amount of cash and Lamborghini cars. The searches also resulted in the arrests of two men – a 27-year-old from Mernda and a 26-year-old from Kew. The two men were, as a result, charged with importation, possession, and trafficking of border-controlled drugs. They were also charged with dealing with proceeds of crime.
On March 8, the AFP and AUSTRAC announced in a joint press release that as a result of the second phase of Operation Crozet, the AFP arrested 27-year-old Sam Karragiozis from Bulleen believed to be the leader of the organised crime ring. AUSTRAC responded to the arrest by suspending two crypto exchanges associated with Karragiozis. On March 7, the AFP carried out raids at three residences in the suburbs of Melbourne and seized steroids, cryptocurrency and an undisclosed amount of cash. After the search, the police arrested Karragiozis, who they believe headed the ring and used unnamed dark web marketplaces, bitcoin, and international mail to acquire and distribute drugs. The AFP then successfully obtained a restraining order on assets believed to be proceeds of crime. The order was issued by the County Court of Victoria and froze bank accounts, a motorbike, real estate properties, vehicles, and an undisclosed amount of cryptocurrencies and cash. Superintendent Detective Paul Hopkins said freezing assets of suspected drug traffickers coupled with the threat of long prison sentences proves that drug trafficking is not worth all the trouble in the long run.
Karragiozis was presented before the Melbourne Magistrate Court where he was charged with over a dozen counts related to importation, trafficking, and possession of MDMA, cocaine, ketamine, and heroin. AUSTRAC then suspended the licences of AusCoin that was founded by Karragiozis and SK BTC, both believed to have facilitated the movement of the ring’s funds. The two exchanges were suspended even though the ring’s operation ended before the enactment of regulation of crypto exchanges in Australia. The AUSTRAC National Manager of Regulatory Operations, Dr. Nathan Newman, said the suspension of the two exchanges helps fulfil the regulator’s role of disrupting criminal use of Australia’s financial system.
The suspension of AusCoin and SK BTC is the first suspension by AUSTRAC since April 2018 when the regulatory body was mandated with monitoring cryptocurrency exchanges to ensure they are not used in money laundering and other criminal activities. The legislation that placed crypto exchanges under AUSTRAC demanded that any exchange intending to operate in Australia must:
- Register and enrol with AUSTRAC.
- Create and maintain a program to counter money laundering and terrorism financing.
- Report suspicious activities and transactions that exceed the set limit to AUSTRAC.
- Keep records of their clients’ identities, transactions, and of the anti-money laundering and terrorism financing program.
In a joint press release by the NSW Police and AUSTRAC meant to remind crypto exchanges of their reporting obligations, Dr. Newman said that AUSTRAC had worked closely with the exchanges to help them adopt the set regulations. Dr. Newman also said that the suspension of AusCoin and SK BTC was as a result of their failure to comply with AUSTRAC’s laws. Detective Superintendent Matt Craft said that the suspension of the exchanges served as a timely reminder to other exchanges to comply with the set regulations. He also added that the growing popularity and use of dark web marketplaces indicates that more criminals are turning to cryptocurrencies to fund their illicit activities, and as a result, the monitoring of the exchanges will be enhanced.