The United States Attorney of the Southern District of New York has brought charges against Bitcoin exchangers, including the CEO of a Bitcoin exchange company called BitInstant. The other defendant was using bit coin through a website called Silk Road, which is alleged to be used for selling illicit drugs.
This is the first charge of its kind, which alleges that the company used over a million dollars in “Bitcoins” to traffic drugs through Silk Road.The Government alleges that the Bitcoin Exchangers engaged in a scheme to sell the online currency to enable users to buy and sell illegal drugs anonymously and beyond the reach of law enforcement.
Each defendant is charged with one count of conspiring to commit money laundering, and one count of operating an unlicensed money transmitting business. The combine maximum for these offenses is 25 years in prison.
A news release from the Department of Justice's website states the following of one of the Defendants:
“From about December 2011 to October 2013, [Defendant] ran an underground Bitcoin exchange on the Silk Road website, a website that served as a sprawling and anonymous black market bazaar where illegal drugs of virtually every variety were bought and sold regularly by the site's users. Operating under the username “BTCKing,” [Defendant] sold Bitcoins – the only form of payment accepted on Silk Road – to users seeking to buy illegal drugs on the site. Upon receiving orders for Bitcoins from Silk Road users, he filled the orders through a company based in New York, New York (the “Company”). The Company was designed to enable customers to exchange cash for Bitcoins anonymously, that is, without providing any personal identifying information, and it charged a fee for its service. [Defendant] obtained Bitcoins with the Company's assistance, and then sold the Bitcoins to Silk Road users at a markup.”
The News release also states: “Truly innovative business models don't need to resort to old-fashioned law-breaking, and when Bitcoins, like any traditional currency, are laundered and used to fuel criminal activity, law enforcement has no choice but to act…We will aggressively pursue those who would coopt new forms of currency for illicit purposes.”
There have been charges filed in multiple areas in the country. The breaking up of the website is leading to more information that the government is using to charge new defendants. There will likely be several new charges filed in the near future.
The money laundering charges bring about interesting questions about how this new technology intersects with the criminal law. Schrem, the founder of BitInstant, was charged not just for allowing the service of bitcoins for the Silk Road website, but also for giving discounts on mass purchases of Bitcoins and for failing to file suspicious activity about the website.
If you face federal criminal charges, contact Attorney Eric J. Olson for vigorous defense and unrivaled results.