Skip to main content
SpringerLink
Log in

Criminal Prosecutions and Civil Litigation Concerning Virtual Currencies

  • Chapter
  • First Online:
Regulation of Cryptocurrencies and Blockchain Technologies

Part of the book series: Palgrave Studies in Financial Services Technology ((FST))

  • 3689 Accesses

Abstract

In this chapter, we review the major laws affecting virtual currencies and explore in substantial detail the many cases that have arisen that required governmental intervention. Among the most egregious cases are “The Silk Road” and “Darknet” cases whereby blockchain and virtual currencies formed the basis of numerous violations of the laws of both the United States and numerous other countries. Governments have the choice of proceeding criminally against violators or civilly which requires a much lower standard of proof and consequently is much easier to prosecute successfully.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 129.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 169.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    The table, in part, was taken from the U.S. Department of Justice press release concerning the prosecution of U.S. v. Vinnik , U.S. Dept. of Justice, Northern District Ca., Russian National and Bitcoin Exchange Charged in 21-Count Indictment for Operating Alleged International Money Laundering Scheme and Alleged Laundering From Hack of Mt. Gox, News Release, July 26, 2017, https://www.justice.gov/usao-ndca/pr/russian-national-and-bitcoin-exchange-charged-21-count-indictment-operating-alleged

  2. 2.

    18 U.S.C. §§470–477 which criminalize counterfeiting acts both domestically and internationally including uttering, dealing, possession of plates, stones, or analog, or electronic images for counterfeiting obligations securities, and §§485–489 concerning making or possession or making impressions of dies or tokens or paper used as money.

  3. 3.

    For an excellent review of federal and state statutes and regulations governing counterfeiting including that of virtual currencies, see Ralph E. McKinney, R. E., Shao, L. P., Shao, D. H., Rosenlieb Jr., The evolution of financial instruments and the legal protection against counterfeiting: a look at coin, paper, and virtual currencies, Journal of Law, Technology, & Policy, 2015(2), 273–313, http://mds.marshall.edu/cgi/viewcontent.cgi?article=1146&context=mgmt_faculty

  4. 4.

    15 U.S.C. §45(a)(1).

  5. 5.

    U.S. Federal Trade Commission, Operators of Bitcoin Mining Operation Butterfly Labs Agree to settle FTC Charges They Deceived Customers (Feb. 18, 2016), Press Release, https://www.ftc.gov/news-events/press-releases/2016/02/operators-bitcoin-mining-operation-butterfly-labs-agree-settle

  6. 6.

    Sealed Complaint, U.S. v. Murgio , No. 15-MAG-2508 (S.D.N.Y., July 17, 2015), https://www.justice.gov/usao-sdny/file/830616/download

  7. 7.

    Jonathan Stempel , UPDATE 1-Bitcoin exchange operator tied to hacks gets 5-1/2 years U.S. prison (July 27, 2017) Reuters, https://www.reuters.com/article/cyber-jpmorgan-murgio/update-1-bitcoin-exchange-operator-tied-to-hacks-gets-5-1-2-years-u-s-prison-idUSL1N1JO1BH. For a discussion of actions pertaining to electronic payments including Bitcoin, see Sarah Jane Hughes, Stephen T. Middlebrook, and Tom Kierner, Developments in the Law Affecting Electronic Payments and Financial Services (2107), at 259–261, Articles by Maurer Faculty, 2445, http://www.repository.law.indiana.edu/cgi/viewcontent.cgi?article=3445&context=facpub

  8. 8.

    U.S. v. BTC-e, No. CR 16-00227-SI (N.D. Ca., Jan. 17, 2017), sealed indictment, https://www.justice.gov/usao-ndca/press-release/file/984661/download

  9. 9.

    Nikhilesh De, Alleged BTC-e Operator Claims Innocence in New Interview, CoinDesk, Sept. 11, 2017, https://www.coindesk.com/alleged-btc-e-administrator-i-do-not-consider-myself-guilty/

  10. 10.

    U.S. Department of Justice, Manhattan U.S Attorney Announces Charges Against Liberty Reserve, One of the World’s Largest Digital Companies, and Seven of Its Principal Employees For Allegedly Running a $6 Billion Money Laundering Scheme (May 28, 2013), Press Release, https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-announces-charges-against-liberty-reserve-one-world-s-largest

  11. 11.

    Sealed indictment, United States v. Liberty Reserve, No. 13cr368 (DLC) (D.C. N.Y. Sept. 23, 2015), https://www.justice.gov/sites/default/files/usao-sdny/legacy/2015/03/25/Liberty%20Reserve%2C%20et%20al.%20Indictment%20-%20Redacted.pdf

  12. 12.

    U.S. Department of Justice, Liberty Reserve Founder Arthur Budovsky Sentenced In Manhattan Federal Court to 20 Years for Laundering Hundreds of Millions of Dollars Through His Global Digital Currency Business, Press Release, May 6, 2016, https://www.justice.gov/usao-sdny/pr/liberty-reserve-founder-arthur-budovsky-sentenced-manhattan-federal-court-20-years

  13. 13.

    U.S. v. Cazes , No. 1:17-at-00597 (N.D. Ca., July 17, 2017), https://www.justice.gov/opa/press-release/file/982821/download. See, also, commentary by the Department of Justice, AlphaBay, the Largest Online ‘Dark Market’ Shut Down, Justice News, July 20, 2017, https://www.justice.gov/opa/pr/alphabay-largest-online-dark-market-shut-down

  14. 14.

    The three offenses Hubbard pled guilty to were 21 U.S.C. §841(b)(1)(E), Conspiracy to Distribute Controlled Substances Resulting in Serious Bodily Injury and Death; 21 U.S.C. §841(b)(1)(E), Distribution of a Controlled Substance Resulting in Death, and 18 U.S.C. §1956, Money Laundering Conspiracy, https://www.ice.gov/sites/default/files/documents/Report/2017/CSReport-13-2.pdf

  15. 15.

    TOR, Tor Overview, https://www.torproject.org/about/overview.html.en

  16. 16.

    United States v. Ulbricht, 14-cr-68 (KBF) (S.D.N.Y., Sept. 27, 2013).

  17. 17.

    U.S. Bureau of Investigation, Manhattan U.S. Attorney Announces the Indictment of Ross Ulbricht, the Creator and Owner of the Silk Road Website, Press Release, Feb. 4, 2014, https://archives.fbi.gov/archives/newyork/press-releases/2014/manhattan-u.s.-attorney-announces-the-indictment-of-ross-ulbricht-the-creator-and-owner-of-the-silk-road-website

  18. 18.

    United States v. Ulbricht , 1-13 06919-JPO Civ. (D.C.N.Y. Jan. 27, 2014), https://www.usmarshals.gov/assets/2015/dpr-bitcoins/sale-order.pdf

  19. 19.

    U.S. v. Benthall , 14 MAG 2427 (S.D.N.Y. 2016), http://documents.latimes.com/united-states-america-vs-blake-benthall/

  20. 20.

    Nate Raymond , An alleged staff member of Silk Road 2.0 was sentenced to 8 years in prison, Reuters, cited in Business Insider, June 4, 2016, http://www.businessinsider.com/r-key-player-in-silk-road-successor-site-gets-eight-years-in-us-prison-2016-6

  21. 21.

    31 U.S.C.§5330. Registration of money transmitting businesses provides in part:

    • (a) Registration with Secretary of the Treasury Required.—

    • (1) In general.—Any person who owns or controls a money transmitting business shall register the business (whether or not the business is licensed as a money transmitting business in any State) with the Secretary of the Treasury not later than the end of the 180-day period beginning on the later of—

    • (A) the date of enactment of the Money Laundering Suppression Act of 1994; or

    • (B) the date on which the business is established.…

  22. 22.

    U.S. v. Faiella , No. 14 MAG 0164 (S.D.N.Y., Jan. 24, 2013), https://www.justice.gov/sites/default/files/usao-sdny/legacy/2015/03/25/Faiella%2C%20Robert%20M.%20and%20Charlie%20Shrem%20Complaint.pdf

  23. 23.

    U.S. v. Ulbricht , 15-1815 (2d Cir. Mar 31, 2017), http://caselaw.findlaw.com/us-2nd-circuit/1862572.html

  24. 24.

    U.S. v. Force , No. 3:15-cr-01319-RS-2 (N.D. Ca., Oct. 20, 2015).

  25. 25.

    U.S. v. Bridges , No. 1:15-mj-02125-BPG (D.C.Md., Oct. 17, 2016).

  26. 26.

    Benjamin Weiser and Matt Apuzzo , Inquiry of Silk Road Website Spurred Agents’ Own Illegal Acts, Officials Say, New York Times, March 30, 2015, https://www.nytimes.com/2015/03/31/nyregion/silk-road-case-federal-agents-charges.html

  27. 27.

    Andrew Blake , Ex Secret Service agent sentenced again for stealing from the government, The Washington Times, Nov. 8, 2017, https://www.washingtontimes.com/news/2017/nov/8/shaun-bridges-ex-secret-service-agent-sentenced-ag/

  28. 28.

    Stan Higgins , Rogue Silk Road Agent Carl Force Jailed for 78 Months, Coindesk, Oct. 19, 2015, https://www.coindesk.com/rogue-silk-road-agent-carl-force-jailed-for-78-months/

  29. 29.

    CNBC, Bitcoin is money, US judge says in case tied to JPMorgan hack, Reuters, Sept. 20, 2016, https://www.cnbc.com/2016/09/20/bitcoin-is-money-us-judge-says-in-case-tied-to-jpmorgan-hack.html

  30. 30.

    Rob Price , Bitcoin isn’t money, a Florida judge rules, Business Insider, July 26, 2016, http://hp.myway.com/flightsearch/ttab02/index.html?n=7839260D&p2=%5EC73%5Exdm007%5ETTAB02%5Eus&ptb=C444429A-0C1B-499B-8321-E6C4D6EF256B&si=CIO_kYacvdECFZmKswodM-4Gcw&coid=52bafe06493b4978be01745e48707b39

  31. 31.

    Florida Money Laundering Act, Ch. 2017-155, §896. 101 as amended, eff. July 1, 2017, https://www.flsenate.gov/Session/Bill/2017/1379/BillText/er/PDF

  32. 32.

    For an earlier report exhibited much frustration about the FBI in investigating crimes involving virtual currency, see (U) Bitcoin Virtual Currency: Unique Features Present Distinct Challenges for Deterring Illicit Activity (April 24, 2012), FBI Intelligence Assessment, http://www.sciencemag.org/news/2016/03/why-criminals-cant-hide-behind-bitcoin

  33. 33.

    Bret Nigh and C. Alden Pelker , Virtual Currency: Investigative Challenges and Opportunities, U.S. Bureau Of Investigation, Sept. 8, 2015, https://leb.fbi.gov/articles/featured-articles/virtual-currency-investigative-challenges-and-opportunities

  34. 34.

    John Bohannon , Why criminals can’t hide behind Bitcoin, Science Magazine, Mar. 9, 2016, http://www.sciencemag.org/news/2016/03/why-criminals-cant-hide-behind-bitcoin

  35. 35.

    SEC v. PlexCorps , 17-Civ-7007 (E.D.N.Y., Dec. 1, 2017), https://www.sec.gov/litigation/complaints/2017/comp-pr2017-219.pdf

  36. 36.

    Autorite Des Marches Financiers, Dossier PlexCoin, Dominic Lacroix condamne a la prison, https://lautorite.qc.ca/grand-public/salle-de-presse/actualite/fiche-dactualite/dominic-lacroix-condamne-a-la-prison/

  37. 37.

    Lisa R. Lifshitz , Cracking Down on a Bad Coin Offering, Canadian Lawyer, Dec. 11, 2017, http://www.canadianlawyermag.com/author/lisa-r-lifshitz/cracking-down-on-a-bad-coin-offering-15064/

  38. 38.

    Voorhees, SEC 3-15902, (2014). See, also, U.S. Securities and Exchange Commission, SEC Charges Bitcoin Entrepreneurs with Offering Unregistered Securities, Press Release, 2014-111, https://www.sec.gov/news/press-release/2014-111

  39. 39.

    In re Sand Hill Exchange, SEC 3-16598 (2015), https://www.sec.gov/litigation/admin/2015/33-9809.pdf

  40. 40.

    SEC v. Willner , 1:17-cv-06305 (E.D.N.Y., Oct. 30, 2017), https://www.sec.gov/litigation/complaints/2017/comp-pr2017-202.pdf

  41. 41.

    Securities and Exchange Commission, Release No. 82452, Jan. 5, 2018, https://www.sec.gov/litigation/suspensions/2018/34-82452.pdf

  42. 42.

    Securities and Exchange Commission, Release No. 44791, Sept. 14, 2001.

  43. 43.

    SEC v. Arisebank , No.-cv- (N.D.Tx, filed Jan. 2018). A summary of the case may be viewed in Securities and Exchange Commission, SEC Halts Alleged Initial Coin Offering Scam, Press Release, Jan. 20, 2018, https://www.sec.gov/news/press-release/2018-8. A copy of the complaint can be found at https://www.sec.gov/litigation/complaints/2018/comp-pr2018-8.pdf

  44. 44.

    CFTC v. Gelfman Blueprint, Inc. , No. 1-17-cv-07181 (S.D.N.Y., filed Sept. 21, 2017).

  45. 45.

    Id.

  46. 46.

    CFTC v. McDonnell, No. 18-cv-0361 (E.D.N.Y., Jan. 18, 2018), http://www.cftc.gov/ide/groups/public/@lrenforcementactions/documents/legalpleading/enfcdmcomplaint011818.pdf

  47. 47.

    CFTC v. Dean , No. 18-cv-00345 (E.D.N.Y., Jan. 18, 2018).

  48. 48.

    CFTC v. My Big Pay, Inc. , No. 18-cv-10077-RWZ (D.C. Ma. Jan. 16, 2018), http://www.cftc.gov/idc/groups/public/@lrenforcementactions/documents/legalpleading/enfmybigcoinpaycomplt011618.pdf

  49. 49.

    Order Granting Plaintiff’s Motion, for an Ex Parte Temporary Restraining Order, Jan. 16, 2018, http://www.cftc.gov/idc/groups/public/@lrenforcementactions/documents/legalpleading/enfmybigcoinpayorder011618.pdf

  50. 50.

    Reuters, Blockchain Startup R3 Sues Rival Ripple Labs, Fortune, Sept. 8, 2017, http://fortune.com/2017/09/08/blockchain-r3-sues-ripple-labs/

  51. 51.

    Ripple Labs Inc. v. R3 LRC LLC , No. CGC 17-561205 (Sup. Ct. San Fran. Sept. 8, 2017). For a copy of the complaint and other court documents, see XRP Chat, Ripple Labs v. R3 (actual court documents) (Sept. 19, 2017), https://www.xrpchat.com/topic/9857-ripple-labs%C2%A0v-r3-actual-court-documents/

  52. 52.

    R3 Holdco LLC v. Ripple Labs, Inc. , No.655781/17 (Sup. Ct. N.Y. Cty). A copy of the documents filed may be found at https://www.xrpchat.com/topic/9857-ripple-labs%C2%A0v-r3-actual-court-documents/

  53. 53.

    Jeff John Roberts, Ripple Claims Early Victory in Court fight with Blockchain Rival R3, Fortune, Oct. 13, 2017, http://fortune.com/2017/10/13/blockchain-ripple-r3/

  54. 54.

    President’s Council of Advisers on Science and Technology, R3 and Distributed Ledger Technology, May 2016, https://obamawhitehouse.archives.gov/sites/default/files/microsites/ostp/PCAST/10.40%20D%20Gran.pdf

Author information

Authors and Affiliations

  1. Lubin School of Business, Pace University, Pleasantville, NY, USA

    Rosario Girasa

Authors
  1. Rosario Girasa
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

Copyright information

© 2018 The Author(s)

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Girasa, R. (2018). Criminal Prosecutions and Civil Litigation Concerning Virtual Currencies. In: Regulation of Cryptocurrencies and Blockchain Technologies. Palgrave Studies in Financial Services Technology. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-78509-7_6

Download citation

  • DOI: https://doi.org/10.1007/978-3-319-78509-7_6

  • Published:

  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-319-78508-0

  • Online ISBN: 978-3-319-78509-7

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)

Publish with us

Policies and ethics

Search

Navigation