An Australian national living in Boulder, Colorado was slammed with a one year and a day prison sentence last month for trading bitcoins. An August 23 statement from the Colorado U.S. District Attorney’s Office states that Emilio Testa, 32, was charged with money laundering, and claims Testa knew the funds he was acquiring had been used in narcotics deals. While Testa’s reason for trading was reportedly that “he preferred not to use banks or deal with taxes,” and the type of “narcotics” was not mentioned, the D.A. has pinned him for more serious crimes nonetheless, in an emergent pattern of targeting bitcoin traders while letting big-time criminals like banks, governments, and drug companies off the hook.
Also Read: Cryptocurrencies Such as Bitcoin Cash Shine During Hong Kong Protests
A Pattern of Entrapment
Testa is not alone in his predicament. As news.Bitcoin.com reported last month, 42-year-old William Green of New Jersey could similarly face five years in prison and a $250,000 fine. Bitcoin hobbyist and family man Jason Klein barely avoided five years himself, having to pay a $10,000 fine after two agents posing as friendly bitcoin traders tricked him into selling larger and larger amounts, and used code words to describe drugs which Klein didn’t understand.
It seems that when it comes to over-the-counter (OTC) and peer-to-peer trading these days, no one is safe. In the ominously worded D.A. press release, United States Attorney Jason Dunn threatens:
Trying to hide criminal proceeds in Bitcoin? We’re going to find you.
Steven Cagen, Homeland Security Investigations (HSI) Special Agent in Charge, Denver, states: “Criminals may be sophisticated enough to use cryptocurrency but they’re not smart enough to stay out of jail, as this conviction shows.”
What Is a Criminal?
While the D.A.’s report mentions that Testa “agreed to exchange Bitcoin for narcotics proceeds” and that this was done “while understanding that the transaction would conceal or disguise the nature … of the money,” it fails to detail what specifically was mentioned, and in regard to what type of narcotics. The legal definition of the term is broad and dangerously murky, historically covering anything from from cannabis plants to heroin and crack cocaine. Druglibrary.org claims that there are three main reasons for this ambiguity, where medically and etymologically the term “narcotic” more clearly means a sleep-inducing agent:
One reason is that they are genuinely ignorant about these drugs and their effects …The second reason is that “narcotic” sounds dangerous and makes good headlines …The third reason is that it blurs the line between things like marijuana and heroin. Police can’t take a lot of credit for busting someone with an ounce of pot, so they call it a “narcotics bust.”
This in mind, whether Emilio Testa knowingly laundered money for what he thought were big time drug dealers, or simply sold some bitcoin to a couple guys talking casually about cocaine or pot, remains to be seen. The D.A.’s release also omitted the amount of money that was involved.
Man With Bitcoin Kiosk Pleads Guilty, Pentagon Goes Unpunished
In the case of verified drug dealer Kunal Kalra, known to some as “Kumar,” “shecklemayne,” or “coinman,” an unlicensed bitcoin kiosk was part of an operation that the California D.A. says facilitated up to $25 million of exchanges for the 25-year-old. Kalra’s charges stem from buying $400,000 in bitcoin from an undercover agent at a Los Angeles coffee shop, operating the non-KYC/AML (know your customer/anti-money laundering policy) Bitcoin ATM without a license, and selling “nearly two pounds of methamphetamine to an undercover law enforcement official in exchange for $6,000,” according to an August 23 press release.
While “Shecklemayne” will most likely be doing hard time for these offenses, government officials, state-embedded banks, and big pharma never seem to fare so badly. Medical juggernaut Johnson & Johnson was met with only a $572 million slap on the wrist last week for deceptively peddling opiates, and nobody will face jail time. They may not even have to pay, if their appeal goes through. Early this summer a cargo ship owned by JP Morgan Chase’s asset management unit was found trafficking 15,000 kilos of cocaine. The company is, of course, still in business and doing fine. Though the U.S. Department of Defense continues its sordid tradition of money laundering, conveniently misplacing funds, and is currently embroiled in direct ties to pedophilia, it still exists as a respected institution today.
Even Small Amounts Punished
Harking back to the narcotics charge in Testa’s case, there was another arrest made in 2018 over a bitcoin transaction involving proceeds from the sale of hash oil for about $9,208. In this case, Morgan Rockcoons was arrested in his home by the Department of Homeland Security for money laundering and operating an unlicensed money transmitting business. Rockcoons is currently in federal prison, but will be getting out in about 21 weeks, as per a Twitter update posted August 29.
Hello World, I am happy to say I will be coming home from Federal Prison in about 21 weeks. Cant wait to get back to work on #Bitcoin at @inc_Bitcoin in @CityOfLasVegas
— Morgan (@NODEfather) August 29, 2019
It may be true that hearing about someone selling meth to undercover agents is hard to relate to for the vast majority of crypto holders, traders, and enthusiasts. That said, in Rockcoons’ case, selling a relatively small amount of bitcoins (for the time) to someone who says “Hey, I sell hash oil,” hardly seems a shocking criminal offense. Especially given that the cannabis is not dangerous and has therapeutic value. All the same, the government seems to be very concerned.
Staying Safe In P2P Transaction
When it comes to trading crypto, even transacting directly with a trusted circle of friends, or a network of online acquaintances, poses risk. In many of these Local Bitcoins type busts, the people trading believe that they are meeting with other normal folks, who also share an affinity for crypto. The truth is, it is now an established fact that undercover agents frequent online P2P exchange platforms, and target even small time users. For those who love the true power of bitcoin, which is permissionless, low-fee, instant exchange of value on the blockchain, it seems caution can’t be exercised enough in the current climate of deceit, where even those who are doing nothing wrong are nevertheless targeted by the hypocritical government campaign to secure a monopoly on crime.
What are your thoughts on recent bitcoin trading busts? Let us know in the comments section below.
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The U.S. Attorneys Office from the District of Arizona and the Justice Department has convicted a trader named Thomas Costanzo (AKA Morpheus) who exchanged over $164,000 worth of BTC on the Localbitcoins platform. The officials claim the investigation stemmed from over two years of transactions. Last year in April news.Bitcoin.com reported on Costanzo’s home being raided and when he was detained by Homeland Security on April 20, 2017. At the time local media outlets suggested that the charges against Costanzo stemmed from a nationwide cryptocurrency anti-money laundering crackdown by U.S. federal agencies.