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Arizona-based Bitcoin Trader Charged With Money Laundering

Arizona-based Bitcoin Trader Charged With Money Laundering

Reading Time: 2 minutes by on April 4, 2018 Bitcoin, Finance, News, Regulation
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Arizona-based bitcoin trader Thomas Mario Costanzo, also known as “Morpheus Titana” on Twitter, was recently convicted with five counts of money laundering by a federal jury in Phoenix on March 28, 2018.

According to a Justice Department announcement, US federal agents initiated an investigation on Thomas Mario Costanzo, in 2014 after an advertisement he posted on a peer-to-peer bitcoin exchange website.

Each of Costanzo’s five convictions for money laundering carries a maximum penalty of 20 years in prison, a $250,000 fine, or both. The cryptocurrencies involved in the final transaction will also be forfeited by the United States.

While cryptocurrency trading is legal in Arizona, in June 2017, there were other reported accounts of cryptocurrencies being used in money laundering attempts. With the rise in cryptocurrency money laundering schemes, the global-inter governmental body Financial Action Task Force (FATF), decided to take further action to implement initiatives to address such risks.

Cryptocurrencies as Payments for Illegal Drugs

In 2014, federal agents began investigations on Costanzo after identifying an advertisement he posted on a cryptocurrency exchange website. Costanzo mentioned in the ad that he was willing to engage in cash transactions up to $50,000. The Arizona-based trader was then approached by undercover federal agents pretending to be drug dealers. Throughout their ongoing conversations, Costanzo provided the federal agents with bitcoin and mentioned that cryptocurrencies could help them limit any exposure to law enforcement.

Over the two year period, Costanzo took $164,700 in cash from the undercover agents, exchanging it for bitcoin to disguise the “nature, location, source, ownership, and control of the drug proceeds.” Costanzo also used cryptocurrencies to buy drugs from others and facilitated cryptocurrency and drug purchases from those buying on the internet.

Furthermore, Costanzo offered an online bitcoin exchange service for others to buy drugs without learning his customers’ identities and charged seven and ten percent commission in each of the peer-to-peer transactions.

The Internal Revenue Service Criminal Investigation, the Drug Enforcement Administration, and the US Immigration and Customs Enforcement Homeland Security Investigations, and the Scottsdale Police Department, The Maricopa County Sheriff’s Office, and the United States Postal Inspection Service were involved in investigating Costanzo’s case.  He will be sentenced before US District Judge G Murray Snow on June 11, 2018.

Arizona’s Cryptocurrency Laws

The state of Arizona is relatively open-minded when it comes to cryptocurrencies. On February 6, Arizona State Representative Jeff Weninger put forth a bill intended to protect blockchain node operators from any prohibitions from the government.

Furthermore, on February 8, 2018, the Arizona Senate also passed a bill that allows its residents to pay income taxes with cryptocurrencies that are recognized by the state’s revenue authorities.

According to the Arizona HB2417 bill:

“smart contracts may exist in commerce. A contract relating to a 36 transaction may not be denied legal effect, validity or enforceability 37 solely because that contract contains a smart contract term.”

Arizona’s optimistic stance on cryptocurrencies and blockchain technology makes them a leader when it comes to progressive cryptocurrency laws. While cryptocurrency transactions are legal in Arizona, residents are still, however, expected to abide by the law.

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