It seems as if American authorities are competing for cryptocurrency related action as the US Attorney for the Western District of New York now boasts about its “first Bitcoin-related case.” On Friday a federal grand jury returned an indictment charging Richard Petix with operating an unlicensed money transmitting business and making materially false statements, and a separate indictment charging Zhe Wang and Kevin Szura with conspiracy to distribute controlled substances, money laundering, money laundering conspiracy, and conducting a monetary transaction in criminally derived property.
“This case demonstrates the ever-growing ways in which the virtual world is intersecting with, and being exploited by, real life crime and criminals,” said U.S. Attorney Hochul. “Those involved in such illicit activities should know that law enforcement is prepared to track them into the deep and dark portions of the web in order to bring criminals to justice.”
“Dismantling the fraudulent financial operations of transnational criminal organizations is critical because these groups can succeed only so long as they can funnel their illicit proceeds freely and without detection,” said J. Michael Kennedy, Acting Special Agent in Charge of Homeland Security Investigations. “HSI will continue to aggressively target illegally functioning new alternatives to traditional financial institutions that deliberately enable businesses and individuals to further their criminal schemes.”
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According to the indictment of Wang and Szura, they purchased approximately $74,000 in bitcoin between March 2015 and March 2016. Wang and Szura used proceeds of drug sales to buy the bitcoin, and then used the bitcoin to buy bulk quantities of drugs from the dark web for further distribution. Wang and Szura mainly dealt with Xanax that they imported from Canada, but also conspired to distribute mollies (MDMA).
According to the complaint, Wang was previously arrested on controlled substance charges in October 2015 during a search where officers seized approximately 2,500 bars of Xanax. When Wang and Szura were arrested on March 7, 2016 by federal agents, they were attempting to purchase approximately $8,000 in bitcoin to buy more Xanax. They had a total of over $30,000 in their possession. Szura had also brought some Xanax pills for an undercover agent to sample. Petix faces five years in prison on each of his charges. Wang and Szura face up to 20 years in prison.
Bitcoin is not inherently illegal
The American prosecutors said on Firday that “bitcoin is not inherently illegal.” However, “its anonymity has popularized it as a payment form of choice in black markets for illegal goods and services. Virtual currencies such as Bitcoin have created a shadow banking system for criminals who use Internet-based black markets. Bitcoin has been a preferred method of payment for leading dark web markets such as Silk Road. In the same way that the Internet revolutionized consumer commerce (for lawful purposes), an anonymized global payment system on an anonymized global black market has paved the way for people to access with ease a world’s array of contraband with the click of a button, rather than having to find and go to a drug dealer on a street corner.”
Just a week before, the US Attorney for the Southern District of New York, along with the Federal Bureau of Investigation FBI and the U.S Secret Service, charged a Federal Credit Union Chairman who allegedly received over $150,000 in bribes from the operators of the bitcoin exchange, Coin.mx.