ST. LOUIS, May 17 (Thomson Reuters Accelus) - U.S.
authorities have seized two accounts linked to a major operator
in the booming Bitcoin digital currency market, Tokyo-based
exchange Mt. Gox. The move may prevent the firm from
facilitating the purchase and sale of Bitcoins in U.S. dollars
at a time when use of the currency and its value has mushroomed.
Bitcoin, which unlike conventional money is bought and sold
on a peer-to-peer network independent of any central authority,
has grown popular among users who lack faith in the established
The price of the volatile currency ballooned in March as a
result of the Cyprus bank crisis. Authorities worry that a lack
of regulation has left the currency vulnerable to money
launderers and other criminals.
A seizure warrant obtained Tuesday by the Department of
Homeland Security froze an account that an Iowa-based online
payment processor, Dwolla Inc, held at Veridian Credit Union in
the name of Mutum Sigillum LLC.
An affidavit filed by an agent with the department's
investigations unit states that Mutum Sigillum, a Mt. Gox
subsidiary incorporated in Delaware, was operating as an
unlicensed money transmitter, in violation of federal law.
Treasury's anti-money laundering unit, the Financial Crimes
Enforcement Network (FinCEN), in March issued guidance that
dubbed digital currency exchanges money transmitters, a finding
that obliged such businesses to register with FinCEN and obtain
any mandated state licenses.
A search of FinCEN's online registration database Friday
morning suggested that neither Mt. Gox nor Mutum Sigillum had
registered. The affidavit cited Mutum Sigillum's failure to
register with FinCEN as sufficient grounds to seize its
Both Mutum Sigillum and Mt. Gox, which says it handles 80
percent of Bitcoin trading, are owned by Mark Karpeles, the
affidavit states. It adds that Karpeles opened an account in
Mutum Sigillum's name at Wells Fargo in May 2011, and that when
doing so completed a form in which he said it was not a money
Karpeles did not immediately respond to a request for
comment. Nor did Dwolla.
The Wells Fargo account was seized earlier this month as
part of the same investigation that prompted the seizure of
Mutum Sigillum's Dwolla account at Veridian Credit Union, the
It also notes that those wishing to use U.S. dollars to buy
Bitcoins deposited money with Dwolla and directed that it be
forwarded to Mt. Gox. When people wanted to cash out, Mt. Gox
wired funds from an account at Sumitomo Mitsui Bank in Japan to
the Wells Fargo account and U.S. dollars were sent to Dwolla.
An Homeland Security department informant based in Maryland
engaged in such transactions, the affidavit states, presenting
the informant's Bitcoin exchanges as evidence of Mutum
Sigillum's purported status as a money transfer firm.
The seizure of the Mt. Gox-linked accounts may threaten the
exchange's ability to do business in U.S. dollars. The impact on
the overall Bitcoin market is unclear.
Some Mt. Gox customers have already taken to message boards
to express concern about their ability to buy Bitcoins with U.S.
dollars or liquidate existing investments. One user posting on a
Bitcoin question and answer site suggested this problem was a
grave one for the currency and Mt. Gox.
"Most of the trading volume is in dollars at Gox if I'm not
mistaken, so this might be the death blow for them," the user's
Thomson Reuters' Compliance Complete reported last month
that Karpeles said all of Mt. Gox's U.S.-dollar activity was
accomplished via a Dwolla account.
When Compliance Complete asked at the time whether Mt. Gox
had registered with FinCEN in the wake of the March guidance,
Karpeles said that it had not, but that it planned to do so. He
added that Mt. Gox and Dwolla were "discussing compliance issues
on a regular basis."
A spokeswoman for Homeland Security declined to comment on
whether the agency, or any foreign law enforcement agency with
which it may be cooperating, plan to seize any other accounts
linked to Karpeles, Mt. Gox, or other Bitcoin exchanges.
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