According to an official Memorandum Opinion that was filed two weeks ago, Bitcoin is a form of money in District of Columbia under the Money Transmitters Act.
The defendant, Larry Dean Harmon operated a coin-mixing platform (tumbler) called “Helix” from 2014 to 2017. Allegedly, he managed to scramble more than 354,468 BTC for different marketplaces, including the AlphaBay darknet.
He was indicted for executing schemes related to money laundering and further charged for being an unlicensed money transmitter. Harmon had attempted to dismiss charges by arguing that Bitcoin is not money under the law.
The defendant was charged for managing a cryptocurrency mixing service
Larry Dean Harmon allegedly operated a Bitcoin tumbler platform called Helix on the dark net to obscure data related to Bitcoin transactions. Ultimately, the platform made traceability of activity and transactions very difficult.
Washington D.C. courts charged Harmon in three counts – conspiracy to money laundering, operating an unlicensed money transmitting business and engaging in money exchange business without holding a license.
Conspiracy to money laundering
Count One charges that, from 2014 until about 2017, the defendant conspired with others, including the administrator of AlphaBay, to execute financial transactions – namely, “the sending and receiving of bitcoin” – that he knew involved the proceeds of illegal drug activity, and that he knew were designed to “conceal and disguise the nature, the location, the source, the ownership, and the control of the proceeds of [the] unlawful activity.
The defendant and his co-conspirators were alleged to “to unlawfully enrich themselves by operating a bitcoin money laundering service which would conceal and promote illegal Darknet drug sales and other illegal activity.”
Operating unlicensed money transmitting business
Count Two charges that the defendant, when operating Helix, “knowingly conducted, controlled, managed, supervised, directed, and owned an unlicensed money transmitting business.” The law defines an “unlicensed money transmitting business” as “a money transmitting business which affects interstate or foreign commerce in any manner or degree and” and is illegal one of the following three ways:
(A) is operated without an appropriate money transmitting license in a State where such operation is punishable as a misdemeanor or a felony under State law, whether or not the defendant knew that the operation was required to be licensed or that the operation was so punishable;
(B) fails to comply with the money transmitting business registration requirements under section 5330 of title 31, United States Code, or regulations prescribed under such section; or
(C) otherwise involves the transportation or transmission of funds that are known to the defendant to have been derived from a criminal offense or are intended to be used to promote or support unlawful activity.
Failure to obtain a license as a money transmitter
Finally, Count Three charges that the defendant failed to obtain a money transmitter license in DC, while, through Helix, he was engaged in the business of money transmission, as that term is defined by the MTA.
The District’s MTA defines money transmission as “engaging in the business of receiving money for transmission or transmitting money within the United States, or to locations abroad, by any and all means, including but not limited to payment instrument, wire, facsimile, or electronic transfer.” (D.C. Code § 26-1001(10).
Running a money transmission business without a license violates D.C. Code § 26-1023(c), which provides that “any person who engages in the business of money transmission without a license as provided herein shall be guilty of a felony and, on conviction thereof, shall be fined not more than $25,000, or imprisoned for not more than 5 years, or both.”
Bitcoin and the Law
The court’s decision further establish Bitcoin as a currency. Companies operating in Bitcoin or other cryptocurrencies have to obtain money transmission licenses from US state authority. The Treasury Department has also stated that money laundering using crypto tumblers and mixers is subject to regulation. In a briefing in the White House, the Department said that: “Money transmitters of cryptocurrency must comply with the relevant Bank Secrecy Act obligations, known as BSA, and register with the Financial Crimes Enforcement Network, known as FinCEN.”