Below is a summary of some of the significant legal and regulatory actions that occurred over the past week. This alert is not intended to be a comprehensive list of all such developments, but rather a selection of publicly-reported news that may be of particular interest.
Florida. Anthony Murgio and Yuri Lebedev, operators of bitcoin exchange service Coin.mx were arrested on July 21, 2015 for operating the exchange without a money transmission license. The U.S. Attorney’s Office of the Southern District of New York charged Murgio and Lebedev each with one count of operating an unlicensed money transmitting business and one count of conspiracy to operate an unlicensed money transmitting business. Murgio was also charged with one count of willful failure to file a suspicious activity report and one count of money laundering.
According to the charges, Murgio and Lebedev exchanged at least 1.8 million dollars for bitcoin between October 2013 and January 2015, in violation of federal anti-money laundering (“AML”) laws and regulations, which require money services businesses to meet registration and reporting requirements. Some of the transactions were for victims of “ransomware” attacks, in which criminals block access to a victim’s computer until they are paid a ransom in bitcoin. The charges allege that Murgio facilitated these exchanges with knowledge that they were related to criminal activity, but failed to file any suspicious activity reports.
The allegations state that Murgio and Lebedev tried to conceal their activities by operating through a company called the “Collectables Club,” with a website that portrayed the business as a “members-only association of individuals who discussed, bought, and sold collectable items, such as sports memorabilia.” To further avoid scrutiny, Murgio also gained control over a federal credit union in New Jersey and conducted Coin.mx’s banking operations through this credit union. The National Credit Union Administration eventually discovered the activity and forced the credit union to cease its banking activities for Coin.mx, at which point Murgio transferred his business to overseas payment processing channels.
The investigation of Coin.mx was conducted jointly by the US Federal Bureau of Investigation and the US Secret Service, with the assistance of the National Credit Union Administration. The case will be tried in the Middle District of Florida.
Australia. This week, the Australian Securities and Investment Commission (ASIC) issued an interim stop order against the investment prospectus submitted by Melbourne-based Bitcoin Group Ltd. Generally, a stop order allows the ASIC to prevent companies from using disclosure documents to offer, issue, sell or transfer their shares while an order remains in force. An interim stop order lasts up to 21 days, during which time a hearing must be held, giving the company a chance to present its case to an independent delegate. Following the hearing, the ASIC can either lift the order or place a final stop order on the disclosure document.
Although the reasons for the stop order remain undisclosed, such orders can, according to the ASIC, be issued if any submitted prospectus document is deemed to contain “misleading or deceptive” content, omit any required information, or is subject to pending revision following entry.
This development is the latest in a string of exchanges between the Bitcoin Group and the ASIC. This past February, a social media post designed to gauge investor interest, prompted the ASIC to ban the company from issuing statements on its proposed IPO until after the filing of a formal prospectus.