Home > News > Asset Management Culture > Exclusive: Kentucky Retirement’s Executive Director Says Proposed Board Split Will Increase Taxpayer Burden
Asset Management Culture

Exclusive: Kentucky Retirement’s Executive Director Says Proposed Board Split Will Increase Taxpayer Burden

David Eager shares his thoughts on proposed legislation that would split the current board into three entities.
By Steffan Navedo-Perez

Legislation that would see the Kentucky Retirement Systems’ (KRS) board split into three separate entities has elicited comment on its potential consequences for taxpayers and operational inefficiencies from the pension’s executive director, David Eager.

The bill was originated from concerns regarding the board’s supposed lack of representation for the County Employees’ Retirement System (CERS), the leaders of which expressed dissatisfaction with the current state of affairs and are pushing for a bill (HB 484) that would establish a separate board for the system. The legislation on Monday passed through the state’s House Local Government Committee and will now be sent to the full House.

The two respective KRS and CERS boards would report to an entity that would be formed as a result of the bill, the Kentucky Public Pension Authority, which would provide administrative and personnel needs necessitated by the two boards.

Eager testified to the potential complexity and cost the legislation could bring about if passed.

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“As the executive director of the Kentucky Retirement Systems, I cannot speak to policy issues of a bill, but I am required to address the cost and administrative impact of proposed bills,” Eager told CIO.

“At KRS we try to follow the principle of Occam’s Razor which is, ‘the best solution is usually the simplest one,’” Eager said. “HB 484 increases the complexity of managing the five main retirement and health care plans. Currently, KRS’s cost of operation is only slightly above its peer public fund universe in spite of the fact that we are much more complex than the average system and cover five separate plans and health care plans, and not just retirement plans.

“Under HB 484, KRS will now be required to serve three boards, not one. That could include preparing for over 70 board and committee meetings versus about 30 today. The new two systems may result in two different benefit structures and retiree health care providers, among others.  There will be additional staff required.”

“Our costs will no doubt increase, which will ultimately have to be borne by taxpayers,” he added.

Eager declined to provide a delegated position of support or opposition to the bill.

Advocates for the bill, including members of the organization Kentucky League of Cities (KLC), said that passage of the bill is in the best interest of CERS.

“This bill would create a new CERS Board of Trustees that is free of political influence regardless of future administrations while also protecting the state’s pension systems and limiting duplication of services,” KLC’s Bryanna Carroll said to a KRS subcommittee in February.

Carroll stated that CERS has 76% of the assets and makes up 64% of the KRS membership, however it only has 35% of the seats on the KRS board, 14% on the actuarial subcommittee, and 11% on the investment committee.

KERS is approximately 13% funded and is regarded as one of the lowest-funded state pension plans in the United States. Spectrum News 1 reported last October that CERS claims to be approximately 60% funded.

Legislators in the state pushed a bill that would see their benefits switch to the KRS in order to “align their interests” with that of their constituents under the ailing pension system.

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Home > News > Regulation > Chinese Nationals Charged with Laundering More Than $100 Million in Cryptocurrency
Regulation

Chinese Nationals Charged with Laundering More Than $100 Million in Cryptocurrency

North Korean co-conspirators allegedly hacked virtual exchange, stole $230 million in virtual currency.

By Michael Katz

Two Chinese nationals were charged by the US Justice Department with laundering more than $100 million worth of cryptocurrency that was part of more than $230 million hacked from a virtual currency exchange by North Korean co-conspirators.

According to an indictment unsealed in the US District Court for the District of Columbia, Tian Yinyin and Li Jiadong were charged with money laundering conspiracy and operating an unlicensed money transmitting business.

“The hacking of virtual currency exchanges and related money laundering for the benefit of North Korean actors poses a grave threat to the security and integrity of the global financial system,” US Attorney Timothy Shea said in a statement.

Nearly $101 million was laundered through hundreds of automated cryptocurrency transactions in order to prevent law enforcement from tracing the funds.

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According to the legal complaint against Yinyin and Jiadong, in 2018, an employee of the exchange communicated with a “potential client” via email. While communicating with the potential client, the employee unwittingly downloaded malware that attacked the exchange. The malware provided remote access to the exchange and unauthorized access to private keys controlling wallets to seven virtual currencies.

Yinyin and Jiadong engaged in nearly $101 million in virtual currency transactions, which primarily consisted of their exchange of virtual currency traceable to the hack of the exchange, the complaint said. The two allegedly converted the virtual currency into fiat currency and transferred it to customers for a fee. The funds were laundered through hundreds of automated cryptocurrency transactions aimed at preventing law enforcement from tracing the funds. 

The North Korean co-conspirators circumvented multiple virtual currency exchanges’ controls by submitting doctored photographs and falsified identification documentation, according to the complaint. A portion of the laundered funds was used to pay for infrastructure used in North Korean hacking campaigns against the financial industry.

“North Korea continues to attack the growing worldwide ecosystem of virtual currency as a means to bypass the sanctions imposed on it by the United States and the United Nations Security Council,” IRS-Criminal Investigation (IRS-CI) Chief Don Fort said.

The complaint also alleges that the North Korean co-conspirators are tied to the theft of approximately $48.5 million worth of virtual currency from a South Korea-based virtual currency exchange in November. As with the prior theft, they allegedly laundered the stolen funds through hundreds of automated transactions and submitted doctored photographs and falsified identification documentation.

The civil forfeiture complaint specifically names 113 virtual currency accounts and addresses that were used by the two defendants and unnamed co-conspirators to launder the funds. The forfeiture complaint seeks to recover the funds, a portion of which has already been seized.  

The US Department of the Treasury’s Office of Foreign Assets Control also imposed sanctions on Yinyin and Jiadong for “having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, a malicious cyber-enabled activity.”

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