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An interesting new case decision out of the 9th Circuit. In US v. Costanzo, the 9th Cir upheld the conviction of 5 counts of money laundering using bitcoin. #cryptocurrency #cryptotwitter https://law.justia.com/cases/federal/appellate-courts/ca9/18-10291/18-10291-2020-04-17-0.html 1/9
It was a sting. IRS Special Agents posed as drug traffickers, asking Costanzo (in substance) to launder money for them. (Agent Kushner explicitly told Costanzo that he was trafficking black tar heroin. Costanzo laughed and replied, “I know nothing.”) 2/9
The fact that there was never any drugs or trafficking is irrelevant! Under 18 USC 1956(a)(3), if a person tries to conceal the ownership of unlawful activity for property that is “represented to be the proceeds of specified unlawful activity,” that’s money laundering. 3/9
Under the statute, the term “represented” means “any representation made by a law enforcement officer or by another person at the direction of, or with the approval of, a Federal official ….” 4/9
So if a Fed says “please launder this drug money,” it’s money laundering – even if the money isn’t actually drug money. 5/9
On appeal, Costanzo (represented by the Federal Defenders) argued there wasn’t enough connection to interstate commerce. The 9th disagreed, citing “use of global platforms” and use of “a digital wallet, which by its nature invokes a wide and international network.” 6/9
The 9th Cir also recited that a BC “verification may occur anywhere in the world,” and pointed to a
screenshot depicting a verification being performed by a node in Germany. BTC transactions happen EVERYWHERE on the network. 7/9
screenshot depicting a verification being performed by a node in Germany. BTC transactions happen EVERYWHERE on the network. 7/9
What’s the upshot for crypto traders and companies? Know Your Customer. This instance was particularly egregious. (I mean, the agents said they were trafficking heroin.) But … 8/9
Past case law suggests that sufficient *implications* of illegal activity can be enough to trip the statute. So, any crypto company that doesn’t have sufficient KYC in place before buying/selling BTC is courting trouble -- criminal trouble. 9/9
The link to the case at the top of this thread now points to a different decision. Try this one for the right decision: https://cdn.ca9.uscourts.gov/datastore/opinions/2020/04/17/18-10291.pdf
