The Colonial Pipeline ransom was paid in Monero, an “untraceable” cryptocurrency designed for full privacy of transactions. Most of it, we got back, according to the Department of Justice. Then JBS, the world’s largest meat packer, was held hostage. As that story unfolds, Russians are often considered the boogey men behind it all. No one knows for sure whether the hackers are government-directed or not.
But one curious trend is happening in the world of high-tech thievery: cryptocurrency is the Miami penthouse of offshore money launderers, the receptacle of the ill-gained cash. And concern that governments will crack down on crypto because of ransomware hacks, and traditional tax evasion, has a lot to do with the recent sell off in Bitcoin, down around 40% in the last two weeks.
Moreover, if it’s new tech related; foreign money wants it. But some of that money wasn’t exactly earned the old fashion way, as that classic 1979 Smith Barney investment firm commercial once taught us.
New Tech, New Secret Stash
Cryptocurrency, blockchain projects soliciting investor capital, and even some traditional tech start-up investing are becoming ways in which the wealthy are trying to take money out of places like Russia and China.
Because of this, China’s government warned in May that it intended to curb Bitcoin trading and mining. Some government officials believe that Bitcoin, or some other mainline cryptocurrency, will just replace government backed fiat. Then there is the perennial issue of China not wanting its locals to take money out of the country. As it is, it is dealing with a strong yuan and trying to keep it from going to low into the 6s and maybe even sub-6.
China’s Vice-Premier Liu He said they needed to” crack down on Bitcoin mining and trading” to “resolutely prevent the transmission of individual risks.” Yeah, who believes that’s the reason?
The latest tech bull run is often compared to the dotcom boom of the early 90s. Crypto is twice that. After being a dud market for about two years, Bitcoin went from around $9,500 in May 2020 to over $60,000 this year. It has since crashed to around $40,600.
Still, if one considers crypto part of this past year’s tech bull market, consider all the money that has been pumped into it from wealthy investors just to get money out of the country where transparency is low, and corruption levels are high.
One Russian source who did not want to be quoted on the record said some investors buy into a crypto project knowing it is going to launch a token. They buy into these private placements which, in some cases, are used to boost the start-ups value. Thanks to the pretty anonymous world of crypto currency wallets, cash from ill-gotten gains (black market sales, corrupted official’s money, or basic tax evasion) can be easily invested in these projects and later withdrawn as perfectly legitimate proceeds from a cool new tech venture. Sort of dirty money in, clean money out.
“It’s not new,” he says. “Chinese, Saudi and Russian money has long been involved but the recent compliance initiatives — like ‘unexplained wealth orders’ in the UK and more scrutiny when it comes to real estate – means the tech sector has gained traction as an alternative.”
The rise of foreign money has turned Silicon Valley into a geopolitical minefield for venture…