Brazilian Authorities Launch Operation Niflheim to Tackle Crypto-Related Financial Crimes

On October 10, Brazilian authorities, including the Federal Revenue and the Federal Police, launched Operation Niflheim to investigate a complex network of money laundering, tax evasion, and other financial crimes involving cryptocurrency transactions. The operation aimed to dismantle schemes that used digital currencies for illegal activities such as asset shielding and laundering money from criminal sources, including drug trafficking and smuggling. Law enforcement executed 23 search warrants and eight arrest warrants across multiple cities, including Caxias do Sul, São Paulo, Fortaleza, and Brasília.

The investigation primarily targeted two companies based in Caxias do Sul, revealing an extensive network of financial transactions. The first company was found to have moved over R$ 19 billion (approximately USD 3.6 billion) from August 2019 to May 2024, while the second company moved over R$ 15 billion (around USD 2.8 billion) during the same period. Authorities discovered that over half of the deposits linked to the main suspects came from individuals with criminal backgrounds, pointing to widespread use of cryptocurrencies to facilitate illicit activities.

The scheme operated on four levels. At the first level were potential tax evaders who used cryptocurrencies to avoid taxes, make under-the-table payments for undervalued imports, and conceal their revenue. The second level involved shell companies that received funds from these tax evaders. The third level focused on processing and filtering these transactions, while the fourth level consisted of companies authorized to conduct foreign exchange operations and cryptocurrency trading. After laundering the funds, the criminals transferred them abroad to countries like the U.S., the United Arab Emirates, Hong Kong, and China.

Operation Niflheim also shed light on the significant use of cryptocurrencies in the Rio Grande do Sul region. Between 2020 and 2024, more than 16,000 companies in this area executed crypto transactions exceeding R$ 127.6 billion, while 75,000 individuals engaged in transactions totaling R$ 20.38 billion. The investigation emphasized the Brazilian government's growing focus on regulating digital assets and combating financial crimes in the cryptocurrency space. The Federal Revenue underscored the importance of legally compliant cryptocurrency transactions, requiring all crypto activities, including buying, selling, and transferring to exchanges, to be declared to the authorities.

As a result of the operation, the Brazilian Federal Court blocked $1.58 billion in funds stored in bank accounts and cryptocurrency exchanges, and authorities seized several vehicles and properties. The Federal Police reported that the three organizations collectively laundered over $9.7 billion since the investigation began in 2021. These criminal groups used shell companies and other methods to obscure their operations and the origin of the funds, which were then sent abroad.

The Federal Police stated that the crimes under investigation include money laundering, concealment of assets, crimes against the national financial system, ideological falsehood, criminal association, and offenses against the tax system. Although these groups operated individually, they demonstrated a high degree of cooperation, leading authorities to consider the possibility that they might actually function as a single, coordinated organization. The leaders of this network are believed to reside in Caxias do Sul and Orlando.

Operation Niflheim represents a significant step by Brazilian authorities to crack down on the misuse of cryptocurrencies in financial crimes, highlighting the ongoing global challenge of regulating digital assets to prevent illegal activities.

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