The story behind Seychelles becoming the world's number one crypto-friendly offshore location
and the go-to hiding spot for shady crypto companies is two stories.
The first is the story of Seychelles, more generally. For example, its history and development of
relationships with those seeking offshore sanctuaries for dirty money. Small havens like
Seychelles are essential in a more extensive network of offshore systems. Systems whose secrecy
supports catering to drug traffickers, arms dealers, money launderers, and high-net-worth tax
dodgers fueling onshore corruption and poverty. Systems that hide, by rough estimate, as much
as $32 trillion in private financial wealth.
Michael Hudson and Matthew Shaer stated in an article for International Business Times in
2014, “Thanks to its offshore industry, Seychelles, an island nation with a population smaller
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than Davenport, Iowa, maintains a Zelig-like presence in the annals of international corruption
and money laundering. Where there’s an odor of financial scandal, there’s often a good chance
Seychelles is involved.”
The same article credits Mario Ricci, an Italian man with a shady reputation and history of
criminal fraud and possible Italian mafia ties, as the creator of the Seychelles offshore industry.
Ricci collaborated with the Seychellois government to create the Seychelles Trust Company in
1978. Ricci later became the sole owner of the company in 1981. He had exclusive rights to
incorporate offshore companies in the islands. Through some sleight of hand maneuvering, Ricci
was issued a diplomatic passport by the Seychelles government and used a diplomatic pouch.
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He established business interests in nearly two dozen countries around the globe. The pouch
allowed Ricci to move documents from business to business undetected.
Examples of Seychelles' shady practices:
One of Ricci's business partners was a South African Intelligence officer who helped lead
South Africa's efforts to get around apartheid-era economic sanctions. Ricci likely used the
Seychelles offshore industry to help.
In the 1980s, the U.S. ambassador to Seychelles, David Fischer, documented evidence of
widespread illicit activities. Activities like N.Y. mafia's Gambino family laundering their
money through the Seychelles and drug traffickers smuggling heroin into the U.S. using
Seychelles to launder their profits.
In 2010, a man named Mukhtar Ablyazov, a now convicted embezzler, money launderer,
and former Kazakh businessman, embezzled billions of dollars from Kazakhstan's BTA
Bank using Seychellois-created shell companies.!
https://www.ibtimes.com/how-island-seychelles-became-haven-dirty-money-1595993
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https://fam.state.gov/FAM/14FAM/14FAM0720.html
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In 2011, a subsidiary of the Reserve Bank of Australia got caught knowingly funneling
millions of dollars through a Seychellois shell company. The money, linked to a convicted
white-collar criminal, was meant to bribe Nigerian officials.3
In 2012, two Israeli-based entrepreneurs operating an illegal Internet pharmacy that
laundered its profits through Seychelles pleaded guilty in a U.S. court.!
According to the International Consortium of Investigative Journalists (ICIJ's) database,
"Offshore Leaks," the president of Seychelles from 2004 until 2016, James Alix Michel,
who was also the former vice-president of Seychelles from 1996 until 2004, is the sole
shareholder in Soleil Overseas Holding Ltd. Soleil is domiciled in the British Virgin
Islands, their address was Michel's presidential residence. "Soleil was controlled by a
Mauritius entity called Pines Limited that, in turn, oversaw eight more offshore companies.
Documents indicate that three of them are owned in whole or part by Marie Anne Claudine
Lilette Savy, the wife of Glenny Savy, a member of [former] President Michel's inner circle
and the chief of the Islands Development Company, which oversees tourism and
construction efforts on Seychelles' so-called Outer Islands. Opposition media and
politicians see the documentation of Michel's offshore holdings as evidence of backroom
intrigues that benefit the powers that be." In 2012, Michel’s party controlled 31 of 32 seats
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in the Seychelles legislature. Michel refused to answer questions regarding his offshore
holdings, which his critics interpreted as proof of the evasion of their own tax authorities.
In 2012, undercover journalists working for an Al Jazeera television program, made a
documentary revealing all kinds of unethical conduct by the Seychellois offshore business
system and government.
https://www.ibtimes.com/how-island-seychelles-became-haven-dirty-money-1595993
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https://www.ibtimes.com/how-island-seychelles-became-haven-dirty-money-1595993
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Over time, Seychelles has become an increasingly popular place to harbor anonymous shell
companies. Global efforts to rein in the fraud, money laundering, and arms smuggling drawn to
these offshore havens have been thwarted by those who enable and profit from the activity.
Seychelles, happy to help offshore clients embrace the flexibility of the international tax system,
has made it easy for those with money to hide to do so here. Not surprising considering the
historical and current actions of the Seychelles government.
The second is the more recent story of how Seychelles' renown as an offshore sanctuary led to its
current reputation as the capital of crypto. A reputation earned as more and more International
Banking Companies involved in crypto have sought out the unregulated, unlicensed Seychelles
crypto exchanges.
One can see the natural progression of Seychelles' practices to include cryptocurrencies
eventually. With the advent of blockchain technology began the wild west of unregulated online
currency exchanges. The potential for financial innovation created by the new technology is as
vast and exciting as the advent of the internet. It is also equally as fraught with potential for use
by criminals of every size and shape.
As the world goes through the growing pains of somehow containing the malfeasance unleashed
by cryptocurrency exchanges while simultaneously promoting the beneficial potential,
Seychelles has taken advantage of its familiar position as a safe harbor for all.
According to those in the know, there are specific steps one needs to take to launder money using
cryptocurrency. The first step is placement, as in placing your money into crypto. Crypto can be
purchased with cash (fiat) or other cryptos (altcoin) via online trading markets or exchanges. To
date, online exchanges have varying levels of compliance and regulations. Because blockchain is
part online ledger, protecting your privacy and hiding your coins is a must.
In order to hide crypto, you need to use an anonymizing service that hides the source of your
funds, thus confusing blockchain analysts and destroying traceability on regular crypto
exchanges. You can also use application tools that help you hide transactions by creating
temporary addresses to send coins to or that blend coins of the same value between different
owners. “Tumblers” are application tools that split coins up from a clearnet wallet and send
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them to various addresses on the dark web . After the coins are sent to various adresses they are
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recombined and can be transferred back to a single wallet on the clearnet.You can also participate
https://medium.com/applicature/transaction-mixer-how-to-hide-dirty-bitcoins-6fad5aaa8d8d
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https://www.elliptic.co/blog/bitcoin-money-laundering
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https://en.wikipedia.org/wiki/Clearnet_(networking)
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https://en.wikipedia.org/wiki/Dark_web
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in an Initial Coin Offering (ICO) using one type of coin to pay for another type making it harder
to determine a digitual currency’s origin.
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After placing and hiding, you need to integrate. Integration is the final phase of crypto
laundering processes. The point of integration is the point at which the currency cannot be traced
back, easily anyway, to criminal activity. You need a simple way to explain the legitimate way
your currency was earned. By profitable investment venture or the appreciation of another
currency, for example. You can create your own online company that launders crypto like
Seychelles launders fiat. Or you could go to Seychelles and let them handle the whole effort.
Unregulated exchanges, like Seychelles, provide an ideal avenue for crypto money laundering.
Without regulation, cryptocurrencies can be traded over and over across markets, deposited into
other unregulated exchanges, and traded for altcoins without strict and thorough identity checks.
The offshore world has also provided a rich environment for frauds and fakes to operate in and
around the crypto market. Some examples of offshore crypto activities:
The Seychelles Cryptocurrency License is a relatively recent example of the opportunistic
"crypto adjacent" fraud market that has been created. The license doesn't actually exist.
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However, dishonest marketers are offering standard Seychelles offshore company
formation to crypto start-ups at a highly elevated price by framing it as the Seychelles
Cryptocurrency License.
In 2016, “Cryptoqueen” Ruja Ignotova acquired 230,000 Bitcoins in exchange for a
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dubious Seychelles Power of Attorney from His Excellency Sheikh Saoud bin Faisal Al
Quassimi. The Power of Attorney granted Al Quassimi and a real estate agent Mimoun
Madani control of OneCoin’s portfolio of frozen bank accounts, companies, and real estate
purchased from Emirati property developers Emaar, Nakheel, Union, Deyaar, and
Properties Investment, LLC. OneCoin is a fraudulent cyptocurrency scheme Ignatova
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founded that was used to defraud investors of billions. The OneCoin sheme is one of the
biggest scams in history and Ignotova is currently one the FBI’s most wanted. The 230,000
in Bitcoins were worth more than $10 billion in 2021.
In 2022, the Commodity Futures Trading Commission (CFTC) won multiple $10 million
settlements against various individuals operating BitMEX crypto trading platforms in
Seychelles. Other entities have brought a variety of "crypto fraud" related suits against
individuals and companies associated with BitMEX, a Seychelles-domiciled crypto
exchange.!
https://www.elliptic.co/blog/bitcoin-money-laundering
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https://therovingentrepreneur.com/the-seychelles-cryptocurrency-license-real-or-fake/
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https://en.wikipedia.org/wiki/Ruja_Ignatova
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https://thebitcoinnews.com/over-10-billion-in-onecoin-transactions-traced-to-seychelles-police-investigation-requested/
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FTX Trading Ltd. a crypto exchange, crypto hedge fund, and now-infamous crypto fraud
founded in 2019 by Sam Bankman-Fried and Zixiao “Gary” Wang, had entities domiciled
in the Seychelles and multiple other offshore havens. Its main corporate headquarters were
in the Bahamas. The fraud had to do with FTX’s relationship with Alameda Research, a
trading firm founded by Bankman-Fried. The crypto markets lack of regulatory oversight
applicable in traditional markets allowed for the dubious relationship. FTX lent $10 billion
of its assets to Alameda. Alameda then used those funds, in part, to pay back loans they had
taken out to make investments. FTX used software to conceal the misuse of customer funds
and gave Alameda a “secret exemption” from FTX’s auto liquidation protocol. Alameda
ammassed cryto tokens ahead of FTX announcing the decision to list them for trading. In
November of 2022, information was leaked to the public about the bulk of Alameda’s
assets being held in FTT, the exchange token issued by FTX. On November 6, 2022, a few
days after the leak, Binance CEO, Changpeng Zhao, who had been paid in FTT when FTX
bought back Binance’s early equity stake in FTX, announced on Twitter that Binance
intended to sell all its holdings of FTT. This set off a mass sell-off of FTT and other
cryptocurrencies to the tune of an estimated $6 billion putting FTX into crisis. On
November 8, 2022, Binance announced it would acquire FTX leading FTT to drop in price
by 80 percent, erasing $2 billion in value in one day. Binance did not acquire FTX and the
SEC and the CFTC were investigating FTX for reported mishandling of customer funds.
November 9, 2022 FTX’s website stopped processing withdrawals. Two days later, all 134
FTX affiliates filed for bankruptcy. Later the same day $473 million was siphoned from
FTX in “unauthorized transactions.” The $473 million were mostly stablecoins such as
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Tether, and were quickly exchanged for Ether, a method of hiding “dirty” or stolen crypto
mentioned here earlier.
The law has not yet caught up with the reality of the crypto exchanges in Seychelles or
elsewhere. New lawsuits and novel points of law are developing every day regarding entities in
Seychelles and "crypto theft" and "crypto fraud." Time will tell how the law will be able and
willing to interpret jurisdictional boundaries when it comes to persons' unidentified and unknown
whereabouts, as is often the case in crypto theft. It will also be telling how Seychelles will
respond to the attention of all of the high-profile fraud and money-laundering cases in terms of
crypto regulation.
https://www.investopedia.com/terms/s/stablecoin.asp
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