You'd think with all of the recent arrests and indictments, those selling bitcoin in a "flying under the radar" capacity might have taken notice and made some adjustments to their business models.
Apparently not the case, two more men have been indicted, and one arrested, for selling bitcoin. Specifically, Thomas Mario Costanzo and Peter Nathan Steinmetz have both been charged with:
- Conspiracy to Operate and Unlicensed Money Transmitting Business
- Operating Unlicensed Money Transmitting Business; and,
- Money Laundering
Among other counts.
The last of the transactions that led to the arrest were as recent as April 2017. During February and March, the Coin.MX trial was ongoing leading to a guilty verdict in March for the exact same thing these two are charged with.
In all fairness it was predominantly May that brought the bulk of the P2P trading arrest disclosures (to the public, and note there were several in 2016 as well) and these guys started this back in 2013 so it's 3.5 years in the making.
Pretty much the same story we've heard, however the new twist on this one is that there were transactions as recent as a couple months ago.
Overall, the indictment states that the two men operated between 2013 to 2017 taking in over $160,000 from undercover agents in exchange for bitcoin.
Count 1: Conspiracy to Operate and Unlicensed Money Transmitting Business
Count 2: Operating a Money Transmitting Business
Count 2 also included (C) the allegation that the men knew the funds in which they exchanged were proceeds from illegal activity.
Count 3: Money Laundering/Structuring
Count 3 states that the men intentionally avoided BSA reporting. Any business conducting cash transactions that exceed $10,000 are supposed to file FinCEN form 8300, any attempt to avoid or flat out avoiding the report is viewed as money laundering. I guess nobody told them that if they wanted less reporting, they should register with FinCEN?
Registered entities such an Money Services Businesses file a smaller more streamlined report 104 and deal with aggregates of only 24 hours. (regular businesses or individuals can be required to aggregate for up to 12 months).
This count was in the amount of $3000
Count 4: Operating a Money Transmitting Business/Money Laundering - $13,000
Count 5: Operating/Laundering - $13,000
Count 6: Operating/Laundering - $30,000
Count 7: Operating/Laundering - $107,000
Count 8: Unrelated Ammunition and Marijuana charge against Costanzo only.
$166,000 in trades setup by the government. Where do these guys get that kind of jack to just be tossing around? Oh yeah, civil forfeiture and tax payers.
So in a nutshell, these guys paid to have themselves setup and provided funds for the next victims of HSI to setup.
One thing to note however, it was "virtual currencies" used to explain the allegations in the indictment and not bitcoin specifically.
Let the Games Begin
This one is just getting started as these men were just indicted Friday and it appears as if only Steinmetz has been arrested, however, we can eventually expect to likely see a couple more plea bargains rather than trials.
One thing to be cognizant of is the apparent bag of nails the federal government has waiting for Costanzo and Steinmetz once they are near the wall. Unlike other recent cases such as Jason Klein where the single charge was backed up with an aggregated sum supporting the charges. This indictment has then itemized as different counts. This is a big deal because the law allows a equal penalty for each count in that they can be fined up to $5000 per day of operation that they can prove which means they could face up to $25,000 in fines in addition to 5 years in prison.
The two men traded on the localbitcoins.com platform under the username "Morpheus Titania" (aka: Costanzo). Steinmetz went by the user "Amedio" but it's not apparent if he had a localbitcoins account.
Dropping like ... flies.