For the first time in European history, the French Police arrested three individuals suspected to run an illegal Bitcoin exchange. This marks the first bitcoins obtained by the French Government.
In a recent press release, France’s National Gendarmerie, a branch of the French Armed Forces, announced that they made three arrests during raids in Cannes, Nice, Toulouse and Brussels. The arrested people are suspected of running an illegal Bitcoin exchange. They were targeted due to the lack of certification from the ACPR, as outlined in a report:
“The site used to trade without any approval of the Prudential Control Authority and Resolution (ACPR), French supervisory body for the banking and insurance industries.”
Two people involved in the management of the illegal Bitcoin exchange were indicted by a judge in Foix (Ariège) and put under judicial supervision. The authorities acted on the letter rogatory issued by judge Catherine Ostengo, in charge of investigating illegal practice in banking industry. Besides the seizure of wallets containing 388 bitcoins, €180,000 worth at current prices, at the end of the search the police was able to seize nearly €9000 in cash and multiple credit cards and hardware, the content of which remain to be determined by investigators.
The owner of the website, a 27 year old Tunisian, already convicted in a previous case of organized fraud, is currently charged with “illegal employment, illegal practice of the profession of banker , money laundering and illegal gambling offer.” The latter charge is related to a virtual casino “dedicated to crypto-currency” that the man was setting up. His alleged accomplice, a 36-years old French, presented as the “supplier” of bitcoins for the man’s projects is indicted for “undeclared work and illegal practice of the profession of banker.” The owner’s wife, also arrested, was released after his detention.
According to a judicial source, the exchange in question is www.bestxchanger.com, their homepage now displays a maintenance message. Launched in July 2013 and hosted in the USA, the site made its breakthrough in particular underground circles like blackmarket, as evidenced by this post published on the famous French blackhat forum Meziamus, or in more specific areas such as poker sites. Users praised the speed and anonymity of the service. This exchange allowed anyone to obtain bitcoins using Ukash and Paysafecard vouchers which may be bought in bars, tobacco suppliers and supermarkets very anonymously.
According to investigators, at least 2,750 transactions were processed on this website between November 2013 and July 2014, covering at least 2,500 bitcoins, worthing a total value of more than one million euros. The exchange was taking large commissions, from 30% to 50% on each transaction made. Even if it is, by the admission of the prosecutor, difficult to trace the origin of the funds, that customers were accepting the lose of up to half of the value of money changed into Bitcoin baffled investigators:
“35% or 50% commission, is that not the clear evidence of money laundering purpose? In other words: why are you willing to pay 35-50 euros an intermediary to convert 100 euros in bitcoins, if it’s not due to the “dirty” nature of these 100 euros?”
“This is the first dismantling at European level of such unauthorized bitcoin exchange” assured the French police in a statement. “This is the first bitcoin seizure in France through judicial proceedings,” Olivier told Reuters Caracotch, prosecutor of Foix.
This is the work of a reservist of the Gendarmerie who is “sensitized to computer security issues in his work” that alerted the financial , economic crime and digital research division of Midi-Pyrénées gendarmerie section after completing the purchase of bitcoins on this exchange, and felt worried in April 2014 about such places where “it was very easy to obtain bitcoins completely anonymously” said the Chief Public Prosecutor.
Since their arrest, “the two indicted recognized the facts, but deny having committed crimes,” said Warrant Officer Reveillac member of the cybercrime group within Toulouse research section and main investigator in this criminal case. “The judge will have to determine in which legal framework their activity had to be made ” says Caracotch.
Indeed, this case should help clarifying the legal situation of Bitcoin exchanges located in France. The Bank of France recalled in early January 2014 that “in the context of a buying / selling bitcoin operation against a legal tender currency, […] when operation is made in France, these transactions must be done through a claimant payment services (that is to say, a credit institution, a payment institution or an electronic money institution). ”
@MaxiCookie_ Hello, the banking operations and transactions conducted by
the respondents are illegal, not Bitcoin.
— GendarmerieNationale (@Gendarmerie) 7 Juillet 2014
Last week, the European Banking Authority advised banks to keep away from virtual currencies as a regulatory framework is not in place. The French Financial Markets Authority also underlined the multiple risks (legal, operational and financial) associated with virtual currencies, advocating international coordination and quick action.
A question remains: what will make the French authorities of the 388 bitcoins seized? Will it lead to a new auction sale eventually? All this just a week after the sale of some 30,000 bitcoins seized from Silk Road.
Featured image from Shutterstock.