New York District Judge Katherine B. Forrest denied a motion to dismiss all counts against alleged Silk Road operator Ross Ulbricht in a July 9th filing out of the United States District Court for the Southern District of New York.
The news comes a little over three months following reports that indicated Ulbricht’s legal counsel had attempted to have all charges against him dropped using a recent IRS guidance on bitcoin.
That guidance dictated that for the sake of Federal tax purposes, bitcoin should be treated as property. Ulbricht’s attorney, Joshua Dratel, used the guidance to his and his client’s advantage by arguing that if bitcoin is property, he couldn’t have been laundering money:
[blockquote style=”2″]Bitcoin does not qualify under any prong of that definition. Both IRS and FinCEN havecategorically declared that Bitcoins are not “funds.” Also, a “monetary instrument” is either “coin or currency of the United States or of any other country, travelers’ checks, personalchecks, bank checks, and money orders,” §1956(c)(5)(i) – again, negated by IRS’s and FinCEN’s pronouncements – or “investment securities or negotiable instruments, in bearer formor otherwise in such form that title thereto passes upon delivery[,]” §1956(c)(5)(ii) – a character neither IRS nor FinCEN has ascribed to Bitcoin.[/blockquote]
Judge Forrest didn’t quite see it that way, writing the following in the decision:
[blockquote style=”2″]The money laundering statute is broad enough to encompass use of Bitcoins in financial transactions. Any other reading would — in light of Bitcoins’ sole raison d’etre — be nonsensical.[/blockquote]
[blockquote style=”2″]There is no doubt that if a narcotics transaction was paid for in cash, which was later exchanges for gold, and then converted back to cash, that would constitute a money laundering transaction.[/blockquote]
The bottom line, according to Judge Forrest is that, “One can money launder using Bitcoin.”
Forrest concluded that “the defendant’s motion to dismiss is DENIED in its entirety.”
Ross Ulbricht’s trial is slated to begin on the 3rd of November.