Brazil: Crypto Exchanges Dragged Into Major Anti-Corruption Case

Four individuals allegedly involved in hacking the cell phones of Brazil’s Justice Minister Sergio Moro regularly used Bitcoin (BTC) and other cryptocurrencies, Cointelegraph Brazil reported on July 25.

On July 23, the Federal Police of Brazil arrested four individuals who allegedly hacked Moro’s cell phones while he was acting as a judge in the Operation Car Wash case involving former President Luiz Inácio Lula da Silva.  

Operation Car Wash is a major criminal money laundering investigation initiated by Moro, which further expanded to allegations of corruption at major Brailizan petroleum firm Petrobras. 

Political parties subsequently found themselves implicated into the corruption scandal and were accused of funneling some of the funds to pay off politicians, including former President Lula. Lula lost his appeal against corruption charges in January 2018 and was sentenced to prison time. 

Judge requests data from major crypto exchanges

One of the arrested individuals, Gustavo Santos, told the Federal Police that another suspect, Walter Delgatti, said he intended to sell the obtained message information to the Workers’ Party. After discovering that Santos had been using Bitcoin, Judge Vallisney de Souza from the tenth Federal District criminal court requested related data from major crypto exchanges in the country.

Vallisney ordered that three Brazilian crypto exchanges — Foxbit, Braziliex and Mercado Bitcoin — disclose any Bitcoin holdings data related to the suspects starting in January 2018. Santos’ lawyer stated that the origins of his client's financial resources come from his work as a DJ and Bitcoin trader.

Vallisney also ordered the Central Bank to be officiated for reporting and requested the "Survey on the National Financial System Customer Registry to communicate exclusively to the financial institutions with whom the investigated persons have or had relationships during the period of bank secrecy, thus accelerating the collection of data from such entities."

Earlier this year, the Department of Federal Revenue of Brazil released new rules requiring cryptocurrency exchanges to report users' transactions in order to identify tax fraud.