[NEW YORK] A Southeast Asia-based bitcoin website was charged with securities fraud after 72 others like it were seized and shut down this month by Manhattan's district attorney.
Bitcoinhyip.org and other companies registered to YouYou Finance were seized Jan 16 after an investigation that began in July, District Attorney Cyrus Vance Jr. said told an association of money-laundering specialists. An undercover agent e-mailed the site and was told he "could not lose money in the investment," according to the complaint filed Monday in state court in Manhattan.
"All you had to do, they said, was send them one bitcoin, and they'd send you three bitcoins in return, within 48 hours," according to a copy of Vance's speech. "When our undercover investigator transferred a bitcoin to the operator's bit- address, they kept it, and he never heard from them again." The price of bitcoin has fallen almost 77 per cent from its peak of US$1,137 in November 2013 to about US$267.
A federal case in Texas involving a US$4.5 million Ponzi scheme was described by US prosecutors in November as the first of its kind tied to bitcoins. Trendon Shavers, founder of Bitcoin Savings & Trust, raised at least 764,000 bitcoins by promising investors a return of as much as 3,641 per cent, prosecutors have said. Instead, he used bitcoins from new investors to cover payments owed to earlier clients and paid for his own Las Vegas gambling and spa treatments, they said.
Vance has been an instrumental part of law enforcement investigations into money laundering at large banks including BNP Paribas SA and Standard Chartered Plc.
A year ago, Vance also testified at hearings convened in New York to discuss the regulation of bitcoins and other virtual currencies after the indictment of former Bitcoin Foundation Inc Vice Chairman Charlie Shrem for money-laundering linked to Silk Road, a bitcoin-driven website allegedly used for buying drugs and other illicit goods. Shrem pleaded guilty and was sentenced in December to two years in prison.
Digital currencies have been linked to money laundering in the case of Liberty Reserve SA, described by the US as a "black-market bank" that masked more than US$6 billion in criminal proceeds. A manager pleaded guilty in August to conspiracy and operating an illegal money-remitting business, and seven people were charged by Manhattan US Attorney Preet Bharara in May 2013.
On Monday, San Francisco-based startup Coinbase Inc. started the first licensed US bitcoin exchange. Backed by the New York Stock Exchange, Coinbase Exchange can be used in the 24 states that support USD Wallets, according to a press statement.
The BITCOINHYIP.ORG website currently has no information on it, and has been replaced by www.seizedbymanhattanda.org.
"Unregulated currency makes this kind of conduct too easy, and too untraceable," Vance said in his address to the Association of Certified Anti-Money Laundering Specialists Risk Management conference in New York.
"You may have seen news recently about an effort to 'take bitcoin mainstream' by creating the first regulated bitcoin exchange for American customers," Vance said. "We are watching efforts like these with intense interest."