Arizona Bitcoin Trader Convicted of Money Laundering

As we reported in 2017, a Localbitcoins trader was arrested on charges of operating an unlicensed money services business and money laundering. Mario Costanzo, aka. MorpheusTitania, was convicted of money laundering.

Costanzo hasn't logged in to the Locabitcoins platform in over 11 months according to his profile and for apparent reasons of the legal fight which has resulted in a loss and conviction for the bitcoin trader. 

He and associate Peter Steinmetz were arrest in April of 2017 and indicted on 7 counts of unlicensed operation and money laundering with an Costanzo indicted on an 8th count related to marijuana  and felony ammunition possession.

It would appear that the possession charges had something to do with the arrest in the first place, however the details of the case indicate this was yet another case of "legal entrapment" where federal agencies setup a trader and persuaded the individual(s) to break the law so that they could then arrest the men.

This is a scenario we've seen played out time and time again over the past couple years where many cases are supported by only the federal agencies actions of putting an individual in a situation where a law is violated. 

In one case in 2017, it was only the HSI's transactions that combined to exceed a threshold high enough to charge Kevin Klein with a crime that would result in a penalty that would have otherwise been unlikely to even register as a blip on FinCEN's radar.

In other words, Klein's excessive transactions predominately, if not entirely, consisted of transactions conducted with the United States federal government. 

For that, he's on probation for the next 3 years among other penalties and it can be argued that this is unfair to citizens of the United States where it's federal agencies are targeting otherwise harmless individuals who never intended to break any laws.

Meanwhile, those who are committing crimes of this nature are nowhere to be seen, much less apprehended.

Costanzo Broke the Law

According to court documents and the DOJ (Dept. of Justice), specifically the U.S. Attorney’s Office, District of Arizona, Costanzo's case is not one of the Klein flavor, rather he intentionally broke the law and laundered money using bitcoin. He purchases illegal narcotics using bitcoin and knowingly washed cashed by exchanging drug money for bitcoin.

When undercover HSI agents first approached Costanzo, they flat out told him that they were drug dealers to which he responded that bitcoin was a great way to limit their exposure to law enforcement.

Obviously Costanzo's current situation is not without it's irony and that statement is one that'll likely haunt him for many years to come. 

Entrapment or Not Entrapment

As we've reported before, this is unfortunately not considered entrapment even though it would appear otherwise.

Entrapment requires law enforcement officers to persuade an individual into doing something he or she would otherwise not do. For example, had the convinced him to steal a car and deliver it to an address for which he'd receive $40,000 in compensation. That would be a case of entrapment if Costanzo had no history of car theft or theft of any kind. It's rather possible that had authorities never talked him into stealing the car, he'd have never done it.

United States Vs. John Delorean is a textbook example of entrapment whereas federal agencies offered a cocaine related deal to Delorean, who was in serious financial trouble at the time, of which he accepted. Delorean was acquitted of the drug trafficking charges due to "police entrapment" whereas authorities randomly targeted a financially vulnerable Delorean who had no criminal history and would have likely never partaken in the activity had it not been suggested to him by authorities and a neighbor, James Timothy Hoffman.

This is not the case with Costanzo who was selling bitcoin, well known for it's money laundering potential, was caught with narcotics, and was on probation for a felony narcotics charge. In Costanzo's case, it can be realistically perceived that he would have engaged in activity of this kind with anyone and according to court document, the evidence presented in the case indicated that he did, ultimately concluding with a conviction on 5 counts.

Each count of money laundering carries a penalty of up to $250,00 in fines, 20 years in prison, or both.

Additionally, Costanzo will lose all of his bitcoin so the federal government can auction off more bitcoins for millions of more dollars of money that doesn't belong to them.

That's legal of course. They can steal Costanzo's property and legally get away with it. It's legal theft to go along with their legal entrapment. Although instead of "theft", they call it "civil forfeiture".

"Civil forfeiture" has a better ring to the federal mind since "forfeiture" sounds as if Costanzo just gave away coins rather than Costanzo's property being taken from him against his will. Which is theft in all actuality and would be called theft in any other circumstance anywhere else on earth. 

How is that legal again? 

It doesn't matter at this point. It wouldn't appear as if Costanzo will ever see the light of day again anyway, much less have time to play with his bitcoins. 

Notably Peter Steinetz's charges were dropped with prejudice. Given the outcome of the Costanzo case, Steinmetz's days in court my not be over after all.

You can read the DOJ's complete announcement on their website.

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