It has become difficult to ignore the double standards of regulators and lawmakers when considering the perceived wrongdoings of individuals operating in the worlds of traditional and decentralized finance (DeFi).
While only one top Wall Street executive went to jail in the United States for their role in causing the 2008 financial crisis, a raft of charges have been filed against crypto executives in recent years.
Why, one wonders, did those pulling the strings at Lehman Brothers, AIG, Citigroup, Merrill Lynch and others get off scot-free when Web3 entrepreneurs and power brokers frequently find themselves in the government’s cross-hairs?
DeFi double standards
There are more recent examples that can be cited to illustrate this point. Payment apps like Venmo, Zelle, and PayPal process thousands of illicit transactions every day – including those related to drugs, gambling, and prostitution – yet their founders never seem to be in danger of prosecution.
Meanwhile, Web3 entrepreneurs like Roman Storm, founder of crypto mixing service Tornado Cash, and Bitzlato exchange co-founder Anatoly Legkodymov face the full force of the law.
Even comments from Manhattan District Attorney Alvin Bragg linking payment apps to illegal behaviour failed to provoke a change in this two-tier approach. Indeed, the only outcome appears to be promises by the platforms in question to enhance security measures to protect consumers.
Some believe the disparity relates to Operation Chokepoint 2.0, considered a form of mission creep from the Obama administration’s original initiative to restrict access to banking services for crypto businesses, as well as others perceived to be at a high risk of fraud or money laundering.
Such claims would undoubtedly be dismissed by the current administration, with President Trump at pains to paint himself as a pro-crypto Commander and Chief. Indeed, Trump famously pardoned jailed Binance boss Changpeng Zhao, although he later alleged to “not know who he is.” According to the President, the pardon was based on advice he had received which claimed Zhao was the victim of a witch hunt directed by the Biden administration.
Trump admittedly has form for rolling back legal actions against crypto entrepreneurs: he previously ended a fraud case against TRON founder Justin Sun and pardoned both the founders of BitMEX and Silk Road entrepreneur Ross Ulbricht.
Nevertheless, it is telling that while the aforementioned Wall Street banker Kareem Serageldin received a 30-month stretch for approving the concealment of hundreds of millions in losses in Credit Suisse’s mortgage-backed securities portfolio, Terra Labs founder Do Kwon faces 12 years, while Sam Bankman-Fried got a quarter-century-long sentence.
The case of Anatoly Legkodymov
In the case of Anatoly Legkodymov, who attempted to implement KYC measures on the Hong Kong-registered Bitzlato exchange, charges of operating an unlicensed money transmission business earned him an 18-month spell inside a notorious Brooklyn detention center (plus a $23 million forfeiture). Yet there is a very real risk of a further 20-year stretch if French prosecutors get their way.
A cursory review of the evidence suggests Legkodymov is being punished for users’ actions rather than his own; in other words, there is no claim that he knowingly facilitated specific crimes. Thus, a logical question comes to mind: How does this differ from platforms like Venmo and others? Should all services used by criminals as well as law-abiding citizens simply be disbanded and their founders thrown in jail?
The hope, for Legkodymov and others, is that the current administration accords them the same respect as TradFi payment execs, who never seem to be answerable for the activities of their users. If that fails to happen, fears about Operation Chokepoint 2.0 may prove well-founded.
Featured image via Shuttertsock.
