Bitcoin is back in the headlines again this week, but for all the wrong reasons. It surfaced yesterday that two operators of bitcoin exchange Coin.mx were being charged by US prosecutors for working without a money transmission license.
This is by no means the first time characters associated to bitcoin have had a brush with the law – the space has certainly witnessed more than its fair share of scams, hacks and deception.
With this in mind, let’s take a trip down memory lane and remind ourselves of some of the more high-profile bitcoin-related court cases.
1. Charlie Shrem: bitcoin’s ‘first’ felon
Back in August 2014, bitcoin entrepreneur Charlie Shrem pleaded guilty to aiding and abetting the operation of an unlicensed money transmitting business.
The former CEO of bitcoin exchange BitInstant violated anti-money laundering duties in his dealings with Robert Faiella, who supplied $1m in digital currency to people buying drugs on the now defunct Silk Road marketplace.
As part of his plea, Shrem agreed to forfeit $950,000 to the US government.
Having been sentenced in December last year, Shrem is currently serving a two-year prison term in Lewisburg Federal Prison Camp, a minimum security prison in Pennsylvania.
2. Ross Ulbricht: life in prison
Ulbricht was found guilty on all charges – including trafficking of narcotics, trafficking on the Internet, conspiracy to commit money laundering, and computer hacking – on the first day of jury deliberations in February this year.
The ruling, considered harsh by some, sent shock waves across the world and is perceived as the benchmark case that will set precedents in cases on online crime and privacy.
3. Carl Mark Force IV and Shaun Bridges: Silk Road saga
Handed down by US District Judge Katherine Forrest in New York, Ulbricht’s life-long sentence put an end to a year and a half-long saga which saw the emergence of various bitcoin auctions as well as the surprise indictment of two former federal agents involved with the Baltimore-based Silk Road investigation.
In a twist of events worthy of a Hollywood blockbuster, Carl Mark Force IV, a former Drug Enforcement Administration (DEA) agent admitted to stealing over $700,000 worth of bitcoin whilst working on the investigation. Force, the lead undercover agent, who communicated with Ulbricht, said he had used fake online personas to steal bitcoin from both the US government and the investigated parties.
US Secret Service special agent Shaun Bridges is also expected to plead guilty to charges of money laundering and wire fraud during his time investigating the online drugs bazaar. Court documents in March indicated Bridges had diverted $800,000 in digital currency to his personal bank accounts without receiving prior authorisation from law enforcement officials.
4. Mark Karpeles: the disgraced CEO
The disgraced CEO of the now defunct bitcoin exchange Mt Gox came under scrutiny after the exchange filed for bankruptcy following the loss of approximately 850,000 BTC (more than $450m at the time) in February last year.
In April 2014, the former CEO was subpoenaed by the United States Department of the Treasury’s Financial Crimes Enforcement Network. However, Karpeles declined to appear to testify.
According to some media reports, Karpeles was allegedly found guilty of fraud when he was tried in absentia in his native France in 2010. He was sentenced to a year in jail but has not yet served his sentence.
The CEO was also implicated in the Silk Road trial, after Ulbricht claimed Karpeles was “Dread Pirate Roberts” – the pseudonym used by the marketplace’s mastermind. Karpeles denied the claims publicly.
5. Jed McCaleb: a legal battle
Jed McCaleb is currently involved in a legal battle over $1m in disputed funds.
In essence, the battle has seen Ripple Labs, its founder and ex-employee McCaleb and the Stellar Development Foundation – McCaleb’s current employer – fight over $1,038,172 currently being held by digital currency exchange Bitstamp.
Both Ripple and Stellar have voiced their opinion on whether the court should grant Bitstamp’s request to be discharged from the court case, after the exchange filed a complaint for interpleader on 1st April, where it requested permission from the court to transfer the funds to Stellar.
The argument put forward by Bitstamp is that it was unable to determine whether Ripple Labs or the defendant, Jacob Stephenson (McCaleb’s cousin) was the rightful owner of the funds in dispute.
It is believed that Stephenson sold the XRP – the Ripple network’s native currency – to Ripple through a sale on Bitstamp, an action that, according to Ripple, was done on McCaleb’s behalf in violation of a settlement agreement.
6. GAW Miners: breach of contract charges
GAW Miners is facing non-payment and breach of contract charges following the filing of a suit by the Mississippi Power Company (MPC).
The company is requesting repayment of approximately $224,000 for services as well as almost $50,000 in installation costs.
Additionally, MPC is looking to collect a further $73,493.48 for breach of contract charges.
A couple of months after the filing was submitted, MPC requested a default judgement in its favour against GAW, citing the firm’s unresponsiveness.
7. Bryan Micon: avoids prison
Having avoided a maximum sentence of 10 years in prison, Bryan Micon, who ran the now-defunct bitcoin poker site Seals with Clubs, pleaded guilty to one count of operating an unlicensed gambling site in the state of Nevada.
Micon will have to pay a $25,000 fine and serve a probation term, the duration of which is yet to be determined.
Additionally, the former operator will have to forfeit property seized during a raid carried out at his home; including $900 cash, around 3 BTC and electronic equipment.
Judge image via Shutterstock.
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