Joseph Kim, a 24-year-old Chicago-based trader, is facing criminal charges for alleged wire fraud and bitcoin theft.
First of a Kind Crypto Fraud in Chicago
On February 15, 2018, US Federal Prosecutors charged Kim with stealing over $2 million worth of bitcoin and litecoin from his employer, Consolidated Trading LLC. Prior to his arrest, Kim held the position of an assistant trader at the firm and was responsible for handling cryptocurrency trades on behalf of the firm’s clients.
Commenting on the case, John Lausch of the office of the US Attorney said that Kim is the first person to be taken to court in Chicago on account of trading in cryptocurrency.
According to the details of the case, the prosecutors are charging the assistant trader with one count of wire fraud. It all began when Kim was transferred from the company’s bond trading department to the cryptocurrency trading unit which had just been newly established in September 2017.
Upon his reassignment, Kim was asked if he had any private cryptocurrency accounts and he answered in the affirmative. His superiors then instructed Kim to stop all personal cryptocurrency trading activities so as not to cause any potential conflict of interest. Although Kim initially agreed, he continued trading his virtual assets.
Within weeks of his transfer to the new cryptocurrency trading unit, Kim transferred 980 Litecoin ($217,952 at time of press) from one of the company’s accounts to his personal wallet.
According to the US Prosecutor, when his supervisor confronted Kim about the transfer, he explained that he had made the transfer for security reasons, to keep the coins safe in a wallet owned by the company.
The trader cited issues with transacting with Bitfinex, the Hong Kong-based cryptocurrency trading platform, and had thus moved the coins to a Consolidated Trading LLC wallet to serve as an intermediary holding space.
Even under the microscope his superiors’ interrogation, Kim is alleged to have stuck with his story of moving the coins to a Consolidated wallet. However, FBI investigators were unable to find the transfer of Litecoin to any wallet owned by Consolidated. In November 2017, Kim made another transfer, this time of 55 bitcoin ($598,924 at time of press) from the company’s account. When confronted about this transfer, Kim is reported to have said that the transmission was blocked and that he was trying to reverse the transfer.
Kim would later in that same month return 27 bitcoins of the allegedly stolen bitcoin back to the coffers of the company. This partial transfer left a deficit of 28 bitcoin which the company had to declare as a loss.
He would later confess to stealing bitcoin from his employers to cover his private losses. While admitting to the theft, Kim called himself a degenerate gambler who had tried to fix his own mistakes and that he had not meant to steal from his employers.
According to US Prosecutors, Joseph Kim made his first appearance in court February 16, 2017. If found guilty, Kim faces up to 20 years imprisonment.
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