The recent news that the U.S. Department of Justice (DOJ) is disbanding its crypto unit and shifting focus from prosecuting platforms to targeting individuals who harm crypto investors or use digital assets for illegal activities may be seen as a sign of a significant sea change in the Government’s “regulation by prosecution” approach to financial crimes. Very often, criminal prosecution in the securities, health care, and cryptocurrency arenas is focused on violations of complex and often opaque regulations, which is why such prosecutions very often emerge alongside parallel civil investigations. Criminal defendants and their attorneys have decried the Government’s blunt force approach to criminalizing what are essentially regulatory violations using the incredibly broad federal statutes for mail fraud (18 U.S.C. 1341); wire fraud,18 U.S.C. 1343); healthcare fraud (18 U.S.C. 1347); securities and commodities fraud (18 U.S.C. 1348), and the Computer Fraud and Abuse Act (18 U.S.C. 1040).

Likely, this move by the DOJ does not signal a looming retreat from such prosecutions, but instead represents a more targeted effort to promote innovation in the ever-developing digital currency platforms in alignment with President Trump’s Executive Order on digital assets. The end result is that the DOJ will no longer pursue actions that impose regulatory frameworks on digital platforms, leaving this instead to President Trump’s regulators. The DOJ will prioritize cases involving misappropriation of funds, scams, and hacks with the stated goal of protecting investors and building market confidence and will continue to target crypto use by criminal organizations.

Under this new policy, prosecutors are advised against charging regulatory violations unless there is evidence of willful misconduct (criminal intent), which really seems to be restating what should have been policy all along. Importantly, the DOJ will avoid litigating whether a digital asset is a security or commodity (a retreat from the Biden era’s position), preferring charges like wire fraud, but may consider bitcoin and ether as commodities. The U.S. Commodity Futures Trading Commission (CFTC) is adopting a similar approach, as directed by Acting Chair Caroline Pham deprioritizing registration violation actions unless there is evidence of willful non-compliance.

It is important if you are being investigated or charged with fraud to hire an attorney who has vast experience with white-collar federal criminal investigations and prosecutions. Often, early intervention in a case may prevent charges from ever being filed. Given the complexity of the federal regulations applicable to many industries, from health care to securities to banking, and the incredibly broad federal statutes that can be used to transform an investigation into a criminal case, you need to make sure that the attorney you hire has a practice that is primarily federal, with an in-depth understanding of the criminal statutes, the sentencing guidelines (driven by loss amounts and enhancements that can result in draconian sentences); federal forfeiture statutes, and restitution.

At Stahl Gasiorowski, partners Laura K. Gasiorowski and Robert Stahl have over 65 combined years of experience representing federal criminal defendants in the District of New Jersey, the Southern and Eastern Districts of New York, and in other federal courts across the United States. We have represented individuals and start-up platforms involving unregulated money transfer businesses, rug pulls, NFTs, material misrepresentations, and the use of paid celebrities and sport figures in marketing.

Stahl Gasiorowski Criminal Defense Attorneys have represented hundreds of individuals and companies subpoenaed by federal and state authorities. We have the experience and skills to effectively navigate our clients through these complex issues and investigations to achieve the best possible outcome. If you are looking for a crypto fraud lawyer,wire fraud lawyer, securities fraud lawyer or healthcare fraud lawyer, contact Mr. Stahl or Ms. Gasiorowski, call 908.301.9001 for the NJ office or 212.755.3300 for the NYC office, or email Mr. Stahl at rgs@sgdefenselaw.com or Ms. Gasiowski at lkg@sgdefenselaw.com.

Federal agents and AUSAs serve subpoenas that demand the production of huge amounts of documents and data. They seek search warrants that authorize the seizure of every electronic device at the location to be searched – computers, servers, external hard drives and cell phones. They seize tens of thousands of emails, texts and other forms of communication from businesses and individuals. This common investigative tactic results in an exponential growth in seized data to be reviewed and turned over in discovery to the defense.

A few years ago, after several high profile cases exposed the Department of Justice’s failures in processing and timely disclosing seized data to the defense, the DOJ told U.S. Attorney’s Offices around the country to collect less evidence. In late 2022, a training program was implemented to teach more than 6000 federal prosecutors to be more selective in the evidence sought and seized. This was the so called “smart collection” approach.

This approach was developed because DOJ struggled to fund and find the software and personnel needed to store and analyze the volume of electronic evidence seized. In fiscal year 2023, DOJ requested $27 million for U.S. Attorneys’ offices “e-Litigation modernization”, including 52 new positions and technology upgrades. This was in addition to DOJ’s $1.5 billion e-discovery vendor services contract awarded in 2020 and set to expire in 2027.

Putting aside the government’s issues and budget, seizures of terabytes of data require an enormous expenditure of time and resources for the defense. Effective review of the data requires hosting a search platform that can search millions of pages for key words, names and dates in an expedient fashion. Outside vendor platforms can cost thousands of dollars a month just for the platform. Add to that the time spent by paralegals and associates conducting the actual searches and initial review of the documents, and then the further review by the attorney handling the case. One can quickly see that only well-funded clients, or ones with some type of insurance or corporate backing, can afford zealous representation.

The costs for the review of massive amounts of documents and other data, coupled with potentially much lengthier prison sentences post-trial rather than a negotiated plea, account for the 95-97% rate of pleas in the federal system. Few individuals can afford the costs of a trial – legal and discovery fees, expert witness fees and the so-called “trial penalty” (harsher sentences after a loss at trial).

DOJ must do better at seizing and turning over data that falls within the confines of the items authorized to be seized in the warrant, and limiting the scope of the documents sought in grand jury subpoenas. Courts must enforce discovery obligations on the government and compel the government to produce the discovery in a timely and organized fashion that permits defendants to be properly and zealously represented, including those defendants that cannot afford costly search platforms.

Stahl Gasiorowski Criminal Defense Lawyers have successfully represented hundreds of individuals under complex federal and state investigations with terabytes of discovery. To contact the firm’s NJ office, call 908.301.9001 and to contact the firm’s NYC office, call 212.755.3300, or email Mr. Stahl at rgs@stahlegasiorowski.com Ms. Gasiorowski at lkg@stahlegasiorowski.com.

Federal regulatory and law enforcement agencies have been redirecting and expanding their resources to investigate and combat frauds involving crypto and other digital platforms. The SEC recently requested $200M from Congress to hire additional 170 new employees, many to focus on crypto-related cases. These new hires will include lawyers in the Division of Enforcement’s Crypto and Cyber Unit (CACU) that focuses on violations of federal securities laws. This request is in addition to the 20 positions added in 2022.

With the recent collapse of FTX, and fraudulent conduct or hacked accounts involving Ethereum, Celsius, Nomad, Wormhole and BlockFi, to name a few, there is good reason for increased budgets, new hires and advanced technology to investigate, uncover and prosecute crypto-related frauds.

Until recently, crypto platforms, initial offerings and digital start-ups were less regulated than traditional financial offerings and investments. With the advent of so many major collapses and frauds, however, law enforcement and Congress have focused their attentions on regulating these platforms to help prevent pump and dump schemes, unregistered money transfers, know your customer requirements, and money laundering.

A major example of this increased scrutiny is the SEC’s recent Wells Notice to Coinbase, a well-established company that was publicly listed in 2021 and has repeatedly attempted to register its spot platform. The Notice listed potential claims Coinbase could face including operating as an unregistered exchange, listing unregistered securities in the form of digital assets, and offering services such as staking and wallet activity that could violate securities law. Coinbase is pushing back hard on these potential claims arguing that the SEC has not specified which digital assets potentially qualify as securities, which aspects of its stalking service are of concern and whether Coinbase’s recent updates corrected any of these potential issues. Moreover, Coinbase has argued that the SEC has dramatically changed its position from May 2021, when SEC Chair Gary Gensler told Congress that there was no framework for crypto at the SEC or at the U.S. Commodity Futures Trading Commission, and that he looked forward to working with Congress to develop one. By the end of 2022, however, Gensler said that he believed the SEC had enough authority to regulate the space. It is Coinbase’s position that these two statements are “diametrically opposed.”

The increase in regulatory and enforcement actions here in the United States, and more recently in countries traditionally sought for their lax monetary regulations, has caught many “crypto entrepreneurs” unaware. Many in this burgeoning field are young who get their “advice” from chat groups, Instagram and other platforms where influencers flaunt their apparent wealth and possessions all allegedly obtained through their skills at buying, trading and investing in crypto and NFTs. Many are completely unaware, while other intentionally ignore, the many statutes, regulations and rules that regulate digital assets and platforms.

Stahl Gasiorowski Criminal Defense Attorneys has represented a number of individuals investigated and charged with crypto-related frauds and failures to register. To contact Mr. Stahl, call 908.301.9001 for the NJ office and 212.755.3300 for the NYC office, or email Mr. Stahl at rgs@sgdefenselaw.com.

A recent high profile case highlights the federal government’s ability to seize a convicted defendant’s accounts to satisfy an Order of Restitution after a conviction at trial or a guilty plea. The Second Circuit recently held that the retirement funds of Evan Greebel, the former convicted attorney and Martin Shkreli’s codefendant, could be seized in partial satisfaction of the restitution amount owed. Greebel was convicted in a separate 2017 trial for assisting his client Shkreli’s fraudulent taking of funds from Retrophin to pay Shkreli’s hedge fund debts, and for manipulating the stock price of Shkreli’s drug company. After conviction, Greebel was sentenced to 18 months in prison and ordered to pay $10.4 million in restitution.

In its opinion, the Second Circuit upheld the trial court’s decision that Greebel’s 401(k) accounts at his former law firm were subject to garnishment in an effort to collect the restitution amount. The Second Circuit held that the Mandatory Victims Restitution Act (MVRA) gives the government full access to retirement funds, and that ERISA’s prohibition on disbursing retirement funds to third parties is trumped by the MVRA.

It is well-established that under 18 U.S.C. § 3664(m)(1)(A), the Government may enforce a restitution order in the manner provided by subchapter B of Chapter 229, or 18 U.S.C. § 3613. An order of restitution may be executed in accordance with the practices and procedures for the enforcement of a civil judgment under federal law or state law or by all other available and reasonable means. 18 U.S.C. § 3613 (a) and (f).

The MVRA broadly permits the United States to enforce a restitution order “against all property or rights to property of the person fined.” Pursuant to §3613(c), once restitution is ordered, all the defendant’s property becomes subject to a lien in favor of the United States, and for purposes of debt collection, such lien is treated like a tax lien. §3613(c). Thus, any property the IRS can reach to satisfy a tax lien, a sentencing court can also reach in a restitution order – bank accounts, retirement funds, stock accounts and even Social Security benefits. Additionally, while periodic payments (usually monthly payments through the Probation Department) in satisfaction of a restitution order are limited to 25% of the defendant’s disposable income, one time lump sums payments, such as the garnishment of a retirement or bank account, are not limited.

The only issue left unanswered by the Second Circuit in Greebel was whether the government could seize all the funds, or whether it had to leave the defendant sufficient funds to pay the 10% tax penalty for early withdrawal of retirement funds. In many instances, the amount left to a defendant to pay tax penalties and taxes on garnishment of retirement accounts can be negotiated with the government.

Stahl Gasiorowski Criminal Defense Attorneys have represented scores of clients facing restitution and forfeiture orders and garnishments. We actively and aggressively protect clients’ rights. To contact Mr. Stahl, call 908.301.9001 for the NJ office and 212.755.3300 for the NYC office, or email Mr. Stahl at rstahl@stahlesq.com.

It’s 6 a.m. or 8 p.m., your doorbell rings and two people are standing outside holding up their badges and credentials. They say they are Special Agents with the FBI or IRS and would like to talk with you for just a few minutes about something important. They ask if they could come in to speak with you privately. Caught off-guard, and not wanting them to think that you have anything to hide, you invite them in (and, of course, you don’t want your neighbors to see them talking to you on your front steps). The agents are “friendly” and just have a few questions to get your input, your side of things, or to serve you with a grand jury subpoena. You decide to talk to them, only for a few minutes, in the comfort of your own home or office. At the end, they thank you for your time and hand you either a grand jury subpoena or a “target letter.”

After they leave, you start to wonder – what did I say? How much did I tell them? Am I in trouble, did I implicate myself or others? You start to look for an attorney. You can’t ask your family or friends who they hired last time the FBI or IRS visited them because you don’t know anyone who ever faced such a situation. So, you scour the internet to find an experienced criminal defense attorney, one with a lot of federal experience because it’s a federal investigation.

The next day you’re in the attorney’s office. After talking to the attorney you realize that what you thought was an innocuous 15 -30 minute chat with the FBI was actually an hour and a half where you told them some things, but not others. You discover that it is a federal crime to lie to the agents. You learn that it doesn’t matter that they didn’t read you your rights, like in the movies, because you weren’t “in custody.” When you tell the lawyer that you only spoke to them because you didn’t want the agents to think you were involved or guilty, the lawyer tells you that the agents already think that you’re involved, that’s why they were at your house to interview you in the first place. You then learn that there were two agents so that the interview was witnessed by two of them for credibility later on if you dispute what you said. You learn that a “target letter” is issued by an Assistant U.S. Attorney because she believes that you are involved in criminal activity and wants you to come in with your attorney to negotiate a plea of guilty. You realize that it was a mistake to say anything to the agents without first talking with an experienced white-collar criminal defense attorney.

So, what should you do in such a situation? The safest course would be to politely tell the agents that while you would like to talk with them, you need to contact your attorney and that he will get back to them. Ask them for their business cards so that you can give the information to your attorney. If they don’t have cards, write down their names, agency and contact information. Do not under any circumstances talk with them about the subject matter of their investigation. After they leave, contact an experienced criminal defense attorney to discuss your rights, potential exposure and your options.

If you did talk with the agents, experienced criminal defense counsel can help you get through the situation and protect your rights going forward. The task will be to mitigate any statements made and develop an overall strategy to succeed.

Stahl Gasiorowski Criminal Defense Lawyers have successfully represented hundreds of individuals under federal and state investigations. To contact the firm’s NJ office, call 908.301.9001 and to contact the firm’s NYC office, call 212.755.3300, or email Mr. Stahl at rstahl@stahlesq.com.