Illinois Man Convicted of Operating Illegal Money Transfer Business for Selling Bitcoins

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scalesCCN has confirmed with US Attorney’s Office spokeswoman Sharon Paul that one John D. Powell of Normal, Illinois has been convicted on two counts of “operating an illegal money transfer business” and was yesterday sentenced to four years in federal prison.

The spokeswoman could not confirm what the name of the Bitcoin exchange was, but the interesting thing about the indictment is that it also lists a third charge, possession of less than 50 kilograms of marijuana with intent to distribute.

On Reddit, there has been speculation that the man sold his bitcoins using LocalBitcoins and failed to register as a money transferrer, which apparently is what folks in Illinois are required to do.

The marijuana raises the question of whether or not this is actually related to Silk Road or a similar dark web site. According to the indictment, Powell operated from May, 2012 until February, 2014, and converted bitcoins into an amount as much as $3 million.

Court documents which are not available to CCN, according to the Associated Press, indicate that the business was in fact a cash-to-Bitcoin type of operation. To whit,

Bitcoin is a cybercurrency that allows individuals to conduct transactions anonymously. According to court documents, Powell’s exchange business allowed individuals increased anonymity by exchanging cash anonymously for bitcoin.

Also read: LocalBitcoins Sellers are Being Arrested for Violating State MSB Laws

Illegal Money Transfer Using Bitcoin

The swiftness of the trial – just six months – makes it plain that Powell most likely took a plea bargain. According to web resources, with good behavior Powell can get out of prison as much as seven months early.

There was a serious lack of coverage on this case, and the vagueness of all available sources makes it all seem a bit too convenient for prosecutors. The indictment gives little extra information as well and certainly does not allege any victims of the crime.

According to a press release obtained by CCN, “On Sept. 30, 2014, Powell was arrested, and had been ordered detained pending sentencing after the government filed a petition to revoke Powell’s pretrial release supervision. Powell had been placed under pretrial release supervision with conditions, including that the defendant not use or unlawfully possess illegal drugs. In support of revocation of Powell’s pretrial release, the petition cited four occasions from July 29 to Sept. 11, 2014, when the defendant submitted to testing for a prohibited substance and tested positive for cannabis.”

For each of the illegal money transfer service charges, the indictmnent reads:

John D. Powell, did knowingly conduct, control, manage, supervise, direct, and own all or part of an unlicensed money transmitting business which affected interstate commerce, and such business failed to comply with the money transmitting business registration requirements under 31 U.S.C. §5330 and the regulations prescribed thereunder, all in violation of 18 U.S.C. §1960(a) and (b)(1)(B).

Altogether this makes it hard to understand what was done wrong here and could easily be seen as a warning to anyone attempting to convert Bitcoin into USD without special paperwork. The legality of several Bitcoin exchange services has come under scrutiny in recent years, most notably with the arrest in New York of Charlie Shrem. Shrem’s operation BitInstant went under when he was arrested on the very same charge of operating an illegal money transfer business in addition to money laundering back in January.

The indictment does not mention tax evasion or anything related to that, which adds a further lack of clarity as to what this man really did wrong. Often when a business operates in some illegal fashion, fines are imposed and stern warnings are issued. In the United States we have repeatedly witnessed the criminal justice system being leveraged in response to Bitcoin-related enterprises.

All of which leads one to wonder what’s really going on here.

What do you think? Is the government using the criminal justice system to stamp out a competing currency or scare off adoption thereof? Comment below!

Images from Pixabay and Shutterstock.

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