It's All About the Bitcoins

Warrant Reveals Homeland Security Seized Mt. Gox’s Dwolla Account for ‘Unlicensed Money Transmitting’

Money transferring businesses must register with FinCEN, which Mt. Gox did not do.
Mr. Karpeles (Photo: Twitter)

Mr. Karpeles (Photo: Twitter)

Yesterday the Department of Homeland Security shut down Bitcoin trading platform Mt. Gox’s ability to accept or send transfers using Dwolla, a mobile payment service. A representative from Dwolla told Betabeat that the DHS had sent them a “seizure warrant” for the account, but declined to provide further detail. Now, in the warrantobtained by Ars Technica, the reason for the seizure has been revealed: DHS believes Mt. Gox is operating an “unlicensed money transmitting business.”

In the warrant, a special agent for Homeland Security Investigations states that he has reason to believe Mt. Gox is breaking 18 U.S.C. section 1960, a crime punishable by up to 5 years in jail. The law reads:

(a) Whoever knowingly conducts, controls, manages, supervises, directs, or owns all or part of an unlicensed money transmitting business, shall be fined in accordance with this title or imprisoned not more than 5 years, or both.
(b) As used in this section—
(1) the term “unlicensed money transmitting business” means a money transmitting business which affects interstate or foreign commerce in any manner or degree…

According to the warrant, DHS used an undercover informant who bought Bitcoins using Dwolla and then had them converted to dollars. Explains Ars:

Tracing that money, HSI was able to see that the money passed through a Wells Fargo account, number 7657841313, which was created by a single authorized signer: Mark Karpeles, the president and CEO of Mt. Gox.

Because Mr. Karpeles did not register Mt. Gox as a money transferring business when he opened the Wells Fargo account, the DHS says they have the right to seize the funds in Mt. Gox’s Dwolla account, which is comprised of “Mt. Gox customers that withdraw said funds from Mt. Gox and direct their transfer to Dwolla.”

You can read the full warrant here.

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