U.S. Seeks $84.2 Million in Capstone Forfeiture Case Tied to Crypto
The U.S. Department of Justice seeks to forfeit $84.2 million from accounts linked to payment processor Capstone, threatening digital bank EQIBank with potential liquidation as frozen funds impact its asset reserves.
The U.S. Department of Justice is seeking to forfeit approximately $84.2 million seized from accounts linked to Capstone, an American payment processor that handled fund transfers for EQIBank, a digital bank registered in Dominica. The civil forfeiture lawsuit was filed on July 15 in a federal court in California, with authorities alleging that Capstone misrepresented itself to banks as an IT services provider while actually conducting unlicensed money transmissions.
According to court documents, over $700 million flowed through one of Capstone's accounts within several months. Approximately $337 million was transferred to hundreds of individuals and companies, with a significant portion tied to services provided to clients linked to the Bitfinex cryptocurrency exchange and Tether, the issuer of the USDT stablecoin. Of the frozen funds, about $79.11 million was located in an account at Wells Fargo Securities, roughly $2.06 million at JPMorgan Chase, and over $1.1 million in USDT across two crypto wallets.
Connections to Crypto Giants and Fraud Schemes
The case also branches into a separate fraud investigation. Authorities claim that individuals posing as FBI agents routed fraudulently obtained funds through Capstone's system, converting some into USDT. However, these are allegations within an ongoing civil forfeiture proceeding and do not constitute a judicial determination of wrongdoing by Capstone, Tether, Bitfinex, or EQIBank. Capstone denies the allegations, while Tether and Bitfinex stated they were unaware of the alleged misrepresentations.
For EQIBank, the implications are severe. The bank claims that U.S. authorities froze about $89 million of its funds, an amount it says constitutes roughly 80% of its financial assets. EQIBank petitioned for the return of the funds, maintaining it is an "innocent owner" unaware of Capstone's alleged conduct, and warned that failure to recover the money could lead to liquidation.
Industry Implications and Ongoing Litigation
Tether acknowledged exposure to EQIBank, but noted it represents less than 0.034% of the group's assets, reiterating that it had no knowledge of the conduct attributed to Capstone. The court has yet to rule on the forfeiture proceedings and the rightful ownership of the funds, with discrepancies remaining between the $84.2 million sought by the government and the $89 million cited by EQIBank.
This case underscores the inherent risks for financial entities operating through intermediary companies to access the U.S. banking system. What was intended to facilitate international transfers for banking and crypto clients has instead triggered a major federal forfeiture action, leaving the future of involved institutions hanging in the balance.
