Many criminals have turned to Bitcoin to carry out money laundering schemes and other crimes. Dealing with digital currencies is simple and convenient. Think about it: Bitcoin transactions are fast, easy, not regulated then, and next to impossible to trace. Plus, there are no physical borders or any central authority to worry about. It was a criminal’s dream, leading to the opening of the Silk Road — an online black market advertised on the dark web where individuals could buy illegal drugs and other illegal products using Bitcoin as a currency.
Even though the United States has been slow to regulate blockchain technology and cryptocurrencies, federal agencies are using already-existing statutes to investigate and prosecute individuals and entities allegedly using Bitcoin for illegal purposes. The IRS is investigating taxpayers who failed to report all their crypto transactions and is even prosecuting some cases as tax evasion or filing false returns. Entities are being investigated for failing to implement compliance policies or maintain clear AML/KYC procedures under the Bank Secrecy Act. The SEC and CFTC are working with FINRA and FinCEN when analzying ICOs, and sometimes referring these cases to the FBI and DOJ where criminal activity is suspect.
Fraudulent Bitcoin operations are at the top of the list. In early June 2021, the DOJ seized 63.7 Bitcoins valued at about $2.3 million that was paid to ransomware extortionists, DarkSide, after extorting Colonial Pipeline into making a significant Bitcoin ransom payment. Additionally, at the end of June 2021, the U.S. Attorney’s Office for the Northern District of Texas announced a plea by “Doctor Bitcoin” for his illegal operation of a cash-to-crypto conversion business, which converted between $550,000 and $1.5 million to Bitcoin for a fee.