JA_2019-116_Ciphertrace_Software_Support.pdf

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Office of Acquisitions

JUSTIFICATION AND APPROVAL

FOR OTHER THAN FULL AND OPEN COMPETITION

J&A No.: 2019-116

Upon the basis of the following justification, I hereby approve the issuance of the contractual action discussed below using other than full and open competition, pursuant to the authority cited herein.

1. Agency and contracting activity:

U.S. Securities and Exchange Commission Office of Acquisitions 100 F Street, NE Washington, DC 20549

2. Nature and description of action being approved:

The U.S. Securities & Exchange Commission (SEC or Commission) proposes to negotiate and execute a sole source firm fixed price (FFP) contract under FAR Part 15 with CipherTrace Inc. The contract will provide specialized analytical support to SEC staff for investigations that involve tracing cryptocurrency transactions, to continue activities associated with the Cryptocurrency Tracing Project. The Cryptocurrency Tracing Project (via an MOU with the Department of Homeland Security’s Advanced Research Projects Agency (HSARPA)) provides expert assistance to SEC staff tracing transactions via the Ciphertrace tool. The SEC requires support for using the Ciphertrace tool for which the SEC already has access through the HSARPA MOU and the associated Cryptocurrency Tracing Project. SEC staff gains immediate access to critical cryptocurrency transaction information that is otherwise unavailable.

3. Description of the supplies or services required to meet the agency needs:

The mission of the SEC is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. In pursuit of its mission, SEC staff requires assistance for tracing cryptocurrencies and performing related analyses. In order for the Division of Enforcement (ENF) to be successful in fulfilling its mission, personnel and stakeholders must possess the ability to trace cryptocurrency transactions and enhance the pace of the investigations and tracing analysis. Use of the CipherTrace tool was acquired to fulfill this need.

The Cryptocurrency Tracing Project has leveraged an existing contract with CipherTrace Inc., to use the CipherTrace tool, via an MOU with HSARPA. As part of that contract and MOU it has been determined that additional support is necessary.

The Contractor shall provide the SEC with support services to trace and analyze cryptocurrency transactions.

The Contractor shall meet the following support services objectives specifically related to the support required for use of the Ciphertrace tool:

• Trace individual addresses, wallets, and contracts provided by SEC staff.

• Provide support services not available to SEC staff under the MOU for the use of the proprietary

CipherTrace software tool to assist the SEC with performing cryptocurrency tracing and analysis.

J&A # 2019-116

• Provide SEC staff with on-demand access to tracing capabilities at the request of the SEC.

The contractor will perform requested work in a timely manner and provide useful work products. Minimal management of the contractor will be required beyond the direct interaction they will have with staff on a per case basis.

This contract will be awarded on a firm fixed price (FFP) basis using fiscal year 2019 funds in the total amount of $35,400.60 for the base period. The period of performance will be for one year with four (4) one-year optional periods. The total award amount for the base period and four optional periods is $177,003.00.

4. Statutory authority permitting other than full and open competition:

The statutory authority permitting other than full and open competition is 41 U.S.C. 3304(a)(1) and FAR 6.302-1 (a)(2) - Only one responsible source.

5. Demonstration of a contractor's unique qualifications:

CipherTrace Inc. is uniquely qualified to provide the support services required by the SEC for the Cryptocurrency Tracing Project, due to its status as the creator of the CipherTrace tool that is in use and its experience providing related support under the Project.

The SEC has access to the use of the CipherTrace tool under the Cryptocurrency Tracing Project, via an MOU with HSARPA. The needed CipherTrace software support services required for the Cryptocurrency Tracing Project are only available from CipherTrace, and no other type of cryptocurrency investigative support services exist to support the SEC’s use of the CipherTrace tool in accordance with the MOU. The CipherTrace software support services demonstrate a unique and innovative cryptocurrency investigative concept. CipherTrace demonstrates an ability to provide the particular cryptocurrency investigative support services required, which are not otherwise available to the SEC and do not resemble the substance of a pending competitive acquisition.

Obtaining additional support services from CipherTrace to continue the Cryptocurrency Tracing Project ensures continuity of the project and increases the ability for success.

6. FedBizOpps announcement/potential sources:

As outlined above, CipherTrace is the appropriate source to provide software support and related services, as its CipherTrace tool is in use under the Cryptocurrency Tracing Project and associated HSARPA MOU. However, all responsible inquiries/comments resulting from the J&A FedBizOpps announcement will be carefully considered.

7. A determination by the Contracting Officer that the anticipated cost to the Government will be fair and reasonable:

The Contracting Officer determines that the anticipated cost to the Government will be fair and reasonable based on historical hourly pricing for the same services.

8. Market research results:

The Cryptocurrency Tracing Project’s stakeholders have conducted market research by:

a. Querying other Government Agencies that may have similar cryptocurrency tracing applications;

b. Contacting industry personnel regarding market capabilities; and

c. Participating in a pilot/evaluation program to ensure the product (CipherTrace) meets/exceeds the SEC’s requirements.

J&A # 2019-116

The results of the market research indicated that CipherTrace is suitable to meet the SEC’s support requirements and CipherTrace Inc. is capable of meeting the SEC’s requirements at this time. The market research did not indicate that other providers would be able to provide the needed support of the CiperTrace tool that is in use.

9. Additional support:

No other additional support is needed.

10. Other interested sources:

Per FAR Part 5.202 (a)(13)(i), this procurement is exempt from notice as required by 5.201 because it is for an amount not expected to exceed the simplified acquisition threshold. However as stated in paragraph 6, all responsible inquiries/comments resulting from the FedBizOpps announcement will be carefully considered.

11. Future competitive plans:

Taking advantage of the interest generated through the FBO J&A announcement, the Government will develop a list of contractors that will be beneficial in identifying current and future market capability for providing the services required to support the SEC.