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Why law enforcement struggles to throttle crypto scams

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Heather Morgan, an amateur rapper nicknamed 'Razzlekhan' was charged with money laundering in February
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Under the headline “Scammers in Paris”, an online sleuth known as ZachXBT published a blog in August detailing how a pair of youngsters stole cryptoassets worth millions.

Much to his surprise, the French police announced last week that they had acted on his tipoff and charged five people.

It was the first time his sleuthing had led to police action, ZachXBT told AFP, despite having investigated $250 million worth of crypto scams and thefts and chronicling them for his 300,000 Twitter followers.

One explanation for the lack of action is that low-level scams are not a priority.

The authorities in the European Union and the United States — the leaders on crypto control — have relentlessly focused on aspects of crypto crime related to terrorist financing, money laundering and sanctions busting.

Arrests have been rare at federal level in the US — the Department of Justice’s specialised unit charged only eight suspects in the first half of this year.

US federal agencies have often concentrated on headline-grabbing suspects like Heather Morgan, an amateur rapper nicknamed “Razzlekhan” who was charged with money laundering in February, and more recently reality TV star Kim Kardashian, who was fined this month for illegally promoting a cryptocurrency.

Yet the specialist crypto firm Chainalysis said more than $3.5 billion had been lost to scams and hacks between January and July. 

AFP contacted police departments and crime agencies in Europe and the United States but none could give figures for clear-up rates or charges for crypto-related crime.

– ‘Fear of crypto’ –

The sheer scale of the criminality proves difficult for law enforcement agencies already lacking resources for financial crime.

Chainalysis is one of several firms rushing to fill the gap in expertise, selling its tools and services to agencies including the New York police.

Former New York police chief Terry Monahan told a recent Chainalysis event that before he stepped down last year officers would face three cryptocurrency cases every day.

But they had no way of investigating, so the cases would be closed.

“The victim was left with nowhere else to go,” he said, pointing out that federal agencies were only interested in cases worth millions.

Another part of the problem is the direction from the top.

The focus on terrorism and sanctions busting comes as regulators struggle to decide if cryptoassets are securities or commodities.

If they plump for securities, crypto companies would face so much regulation and fines that the sector could be decimated.

Omid Malekan, a professor at Columbia University, said the manoeuvring by US agencies could be seen as “their fear of what a crypto-centric future might mean for US power at home and abroad”.

If decentralised crypto networks revolutionise finance, US politicians would no longer be able to project power in the way they do now with the dollar and the banks.

– ‘Very little’ enforcement –

With Washington and Brussels focused on high-value targets, victims of low-level fraud are often left high and dry.

Some end up asking ZachXBT for help, and he has recovered funds for them.

“I would say there is very little law enforcement in the crypto space,” he said, adding that China was particularly unresponsive to his investigations.

But he said US authorities at least were taking more notice of lower-level scams.

Scams have become harder to ignore since crypto lender Celsius went bust owing $4.7 billion to investors.

Many of those who lost out were ordinary folk sold on the idea of quick and easy profit.

Their testimony to regulators — pensioners robbed of their life savings, small investors left contemplating suicide, farm owners who lost their livelihoods — reset the image of a typical crypto-scam victim.

– ‘Treasure trove’ –

Monahan and Malekan both reckon law enforcement is slowly getting a grip.

Monahan hailed the tracking technology supplied by the likes of Chainalysis for allowing some funds to be returned.

“At least we got something back for (the victims), we didn’t just take that case and toss it into the trash,” he said.

And Malekan says increasingly sophisticated tools are helping to unmask scammers despite the much-vaunted anonymity of the blockchain — the digital ledgers where all transactions are stored.

“Once a single participant is unmasked,” said Malekan, “their on-chain history becomes a treasure trove of data for chasing down their entire network”.

However, the damage of years of lax enforcement will be difficult to unpick.

“I do think lack of enforcement encourages and emboldens the scammers,” said Molly White, whose project “Web3 is going just great” chronicles some of the most outrageous scams and thefts in the crypto world.

“I think it has contributed to a perception that crypto hacks are basically risk-free and high reward, which many of them have been.”

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Big Tech earnings expected as Meta share price skyrockets

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Meta CEO and founder Mark Zuckerberg said he was upbeat about the future of his company, despite a one percent fall in sales in 2022
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Tech giants Google, Apple and Amazon will report their latest results on Thursday as shares in Meta skyrocketed after the Facebook owner posted a smaller-than-expected slump in sales for 2022.

The results of the world’s biggest tech companies follow several weeks of unprecedented layoff rounds in the usually unassailable sector amid pessimism about the economic outlook.

The souring mood followed a long spell of outsized growth during the peak Covid-19 period when consumers went online for work, shopping and entertainment.

Meta as expected on Wednesday said sales fell last year, the first time that occurred on an annual basis since the company went public in 2012.

The social media giant said sales dropped one percent to $116.6 billion, while it also announced that the number of daily users on Facebook hit two billion for the first time.

But CEO and founder Mark Zuckerberg said he was upbeat about the future, pointing to the success of short videos and better delivery of ads after Apple made targeting users harder on the iPhone.

He also assured investors that Meta would take bolder decisions and run a much nimbler operation, hinting at more layoffs. 

Shares in Meta jumped as much as 25 percent on Thursday, setting the bar high for the earnings announcements by the other tech giants after markets closed later in the day.

Following in Meta’s wake, Google’s parent company is expected to also announce a slump in ad sales, which would be only the second quarterly fall in since the search engine giant went public in 2004.

Google, which has long seen itself as an innovation leader, was caught off guard by the sudden rise of user-friendly AI apps such as ChatGPT, which is seen as a potential rival to Google’s all-powerful search engine.

CEO Sundar Pichai last month announced a plan to lay off 12,000 people in order to reverse pandemic over-hiring and focus on new areas, especially artificial intelligence.

Apple is the only tech giant that has yet to announce major layoffs in recent weeks and investors will be taking a hard look at how its sales have been affected by China’s zero-Covid policy that was only recently lifted.

China remains the key manufacturing hub for iPhones and the drastic restrictions adversely affected Apple’s ability to export the iPhone 14 during the key holiday season.

Apple, the world’s biggest company in terms of market value, will also be burdened by a drop in smartphone sales worldwide, its key driver for profits.

According to the International Data Corporation, worldwide smartphone shipments declined 18.3 percent year-on-year to 300.3 million units in the fourth quarter of 2022.

Amazon is also expected to report a hit to sales after the company announced a round of layoffs to correct for a hiring binge during the pandemic when business growth ramped up.

Last month, the company said it would let go more than 18,000 employees after the workforce swelled by 800,000 employees during the peak years of the pandemic period. 

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Asian markets drift as weak tech earnings dent recovery optimism

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Investors will be keeping a close watch on the release of US jobs figures
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Asian equities were mixed Friday as the optimism over a possible pause in Federal Reserve interest rate hikes again gave way to worries about the global economy as more than a year of monetary tightening kicks in.

Disappointing earnings from Wall Street titans Apple, Amazon and Alphabet — who together are worth almost $5 trillion — indicated higher borrowing costs and elevated inflation were weighing on consumer demand.

The readings came in towards the end of a week when the stocks rally that defined most of January hit the barriers as traders worried that the buying had been overdone and that there were plenty more bumps in the road for the economy.

Those concerns also overshadowed optimism about China’s reopening and recovery from nearly three years of zero-Covid policies that hammered business activity.

They also offset the positive mood created by an acknowledgement from the Fed that it was making progress in bringing inflation down from multi-decade highs, fuelling hopes it was nearing the end of its rate hike cycle.

Eyes are now turning to the release of US jobs data later on Friday, which will provide a clearer idea about the state of the world’s biggest economy.

“A softer payrolls data, so long as it does not fall off a cliff triggering a recessionary (backlash), could re-engage all the favourite trades of the year,” said SPI Asset Management’s Stephen Innes.

“Not least, it would provide the most critical evidence to date to suggest that the market’s rates pricing is more in line with reality than the Fed’s own more subtly hawkish higher for longer signalling.”

Wall Street’s three main indexes ended broadly higher, with the Nasdaq piling on more than three percent thanks to forecast-beating results from Facebook owner Meta.

However, the after-hours reports from Apple, Amazon and Google’s parent firm Alphabet brought investors back down to earth.

Apple said sales dropped more than expected in October-December, Amazon’s revenue was hit by weak consumer demand and Alphabet results fell short of estimates.

“The war in Ukraine, inflationary pressures, economic uncertainty and macroeconomic headwinds kept the consumer sentiment weak in 2022 while smartphone users reduced the frequency of their purchases,” Harmeet Singh Walia, of Counterpoint Research, said in a report on Apple.

Hong Kong led losses in Asian trade, losing close to two percent, and Shanghai was off more than one percent. Taipei was also down, while Singapore, Seoul and Wellington were flat.

Still, Tokyo, Sydney, Manila and Jakarta rose.

Futures in the Nasdaq and S&P 500 were both deep in the red.

On currency markets, the euro and pound lost further ground after weakening Thursday despite the European Central Bank and the Bank of England hiking interest rates more than the Fed.

Crude prices ticked slightly higher a day after suffering more selling pressure on concerns about the economic outlook and demand, with US stockpiles rising last week more than expected.

“Oil’s in a bit of a limbo as the market awaits tangible signs of China’s oil demand recovery,” Vandana Hari, of Vanda Insights, said.

– Key figures around 0230 GMT –

Tokyo – Nikkei 225: UP 0.4 percent at 27,518.75 (break)

Hong Kong – Hang Seng Index: DOWN 1.9 percent at 21,547.50

Shanghai – Composite: DOWN 1.2 percent at 3,245.90

Dollar/yen: UP at 128.67 yen from 128.62 yen on Thursday

Euro/dollar: DOWN at $1.0898 from $1.0918

Pound/dollar: DOWN at $1.2218 from $1.2225

Euro/pound: DOWN at 89.18 pence from 89.21 pence

West Texas Intermediate: UP 0.1 percent at $75.97 per barrel

Brent North Sea crude: UP 0.2 percent at $82.29 per barrel

New York – Dow: DOWN 0.1 percent at 34,053.94 (close)

London – FTSE 100: UP 0.8 percent at 7,820.16 (close)

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Mexico invites foreign investment in clean energy transition

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Aerial view of the largest solar energy project in all of Latin America, in Puerto Penasco, Sonora state, Mexico
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Mexico welcomes investment by all countries in its clean energy projects, its foreign minister said on Thursday, launching a diplomatic charm offensive amid international concerns over controversial power reforms.

Several dozen ambassadors were taken on a visit to a giant solar park being built in Puerto Penasco in the desert in northern Mexico using photovoltaic panels made in China.

“We want to invite all the countries of the world, all the companies of the world” to “participate, invest, be part of the future of Mexico,” Foreign Minister Marcelo Ebrard said.

The first phase of the solar plant is due to be inaugurated in April by President Andres Manuel Lopez Obrador, according to officials.

Once completed, the park will be able to supply 1.6 million electricity users, thanks to an estimated investment totaling $1.6 billion, according to state power provider CFE.

Mexico pledged at the COP27 climate talks in Egypt in November to strengthen its emissions-cutting efforts as part of a $48 billion renewable energy investment scheme with the United States.

The Latin American nation previously committed to cutting greenhouse gas emissions by 22 percent from the business-as-usual levels by 2030, but will increase that to 35 percent, Ebrard said at the time.

The Mexican-US collaboration in renewable power comes despite tensions between the neighbors over Lopez Obrador’s efforts to boost the state’s role in the energy sector.

Mexico faces a formal trade complaint from Washington and Ottawa, which say the reforms hurt foreign investors and favor polluting fossil fuels over clean energy.

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