Bitcoin has cash value and, if used for illegal purposes, can get you tossed in jail, a Manhattan federal judge ruled Wednesday, dismissing a bid by the mastermind behind the notorious website Silk Road to have his indictment dismissed.
Ross Ulbricht, who allegedly operated the so-called “deep Web” site, had claimed the IRS recently determined that the encrypted, virtual currency is property — and not a “monetary instrument” — so money laundering charges related to the case against him should be tossed.
But Judge Katherine Forrest, in a 51-page opinion, found federal money-laundering statutes “encompass use of Bitcoin” — and that “any other reading” of the law would be “nonsensical.”
“There is no doubt that if a narcotics transaction was paid for in cash, which was later exchanged for gold, and then convert back to cash, that would constitute a money-laundering transaction. One can money launder using Bitcoin,” she said.
The government claims the virtual currency was used to facilitate money-laundering in support of a host of crimes, including six failed murder-for-hire plots and the sale of cocaine, heroin and other illicit drugs over the Internet.
Ulbricht — who authorities say used the alias “Dread Pirate Roberts,” a reference to a character in the 1987 cult film “The Princess Bride” — was arrested in October for allegedly masterminding the mysterious “deep Web” site.
Ulbricht is set to go to trial Nov. 3.
His lawyer Joshua Dratel declined comment Wednesday.
The US Marshall’s Service on June 27 auctioned off 29,655 Bitcoins — then valued at $17.7 million — seized off Ulbricht’s personal computer.
The feds have seized over 144,000 Bitcoins related to the case.
Dratel has argued the money raised off the sale of the Bitcoins seized off Ulbricht’s computer should be returned to Ulbricht because Bitcoin is “not subject to seizure” by federal law.