Recently, the United States District Court of the District of Columbia refused to dismiss money laundering charges against a defendant who was allegedly engaged in a darknet cryptocurrency scheme. See U.S. v. Harmon, Case Number 1:19-cr-00395-BAH (D.D.C. July 24, 2020) .
Essentially, the defendant tried to claim that, when he transferred more than 350,000 bitcoins, he was not transferring “money,” and, therefore, not subject to operating an unlicensed money transmitting business, in violation of 18 U.S.C. § 1960(a); and engaging, without a license, in the business of money transmission, D.C. Code § 26-1001(10), in violation of the District of Columbia’s Money Transmitters Act, D.C. Code § 26-1023(c). The government had alleged that, over a 3 year period, the defendant exchanged over 350,000 bitcoins worth over $300 million. Further, the government claimed that this was all part of a conspiracy to enrich the defendant as well as allowing the defendant’s customers to facilitate other illicit activities. The bitcoins allowed these nefarious actions to be hidden.
The federal court rejected that argument indicating that, although the statute did not provide a definition for money, courts provide the statutory term with its ordinary meaning. As such, the federal court held that the ordinary definition of money as a “medium of exchange, method of payment, or store of value” covered bitcoins, and determined that the defendant was transmitting money from one location to another to hide the bitcoin’s original source. Thus, the federal court found that these activities qualified as a money transmission, and, as a result, it was an unlicensed money transmitting business.
Accordingly, it is critical that, before engaging in these types of bitcoin transactions, parties should consult with counsel to avoid being the subject of a criminal investigation and potential indictment.