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Feds seized $2.9M in Bitcoin funds from Mt. Gox, court docs show

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The federal government sent a strong signal to Bitcoin traders earlier this year when the U.S. Department of Homeland Security seized an account belonging to Mt. Gox, the most popular exchange for people to buy and sell the crypto-currency. It was unclear at the time just how much currency the government confiscated.

But a new filing in Baltimore federal court (embedded below) shows the feds seized $2,915,507.40 held in an account controlled by Dwolla, a third-party payment platform similar to PayPal. The funds belonged to Mutum Sigillum LLC, a U.S. subsidiary of Tokyo-based Mt. Gox.

It’s unclear what will become of the funds. Neither the US Attorney’s Office in Maryland nor Mt. Gox immediately returned a request for comment.

The feds decided to seize the account because Mt. Gox owner Mark Karpeles had allegedly concealed the fact that he opened the account in order to run a money transfer business. Karpeles has since stated that Mt. Gox is in compliance with federal and state financial regulations.

At the time, the seizure was significant because Dwolla-based payments to Mt. Gox were the easiest way that Americans could buy and sell large quantities of Bitcoin. While Mt. Gox has continued to process American transactions after the seizure, it has been slow to deliver withdrawals and has from time to time suspended them.

The company has blamed the slowdowns on technical measures and implemented new techniques to boost performance. But in recent months, its role as the dominant Bitcoin exchange has come to be challenged by newer competitors like Bitstamp.

Other startups like Coinbase, which is backed by prominent venture capitalist Fred Wilson, have also arrived on the scene, promising to make the crypto-currency experience more consumer friendly.

Even as people continue to debate whether Bitcoin is a fad or here to stay, entrepreneurs are offering new twists on the currency — including a fantastical machine that turns bills in Bitcoin.

The value of Bitcoins, which are also swapped informally in places like New York’s Satoshi Square, has stabilized in recent months at around $110.

Bitcoin Mt Gox Warrant Executed

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12 Responses to “Feds seized $2.9M in Bitcoin funds from Mt. Gox, court docs show”

  1. jdat747

    the important take away here is that they confiscated USD … something to think about when you are deciding what form to store the fruits of your labor in.

  2. Seth T Wilson

    And, to add to my previous comment, I think I saw somewhere that Dwolla was operating as a credit union, or in such a capacity. That is significant because some fairly stringent regulations would therefore apply to Dwolla accounts, meaning Dwolla accounts are subject to forfeiture in much the same way regular bank accounts are. There may have been a way for Mt. Gox to hold accounts in the US but it sure looks like they didn’t do things properly, which opened them up to this whole fiasco.

    • Seth T Wilson

      tasty, according to the beginning of the write-up above, the seizure warrant issued by the US District in Baltimore is part of a civil forfeiture proceeding. This means the government is saying that the owner of the Dwolla account (the Mt. Gox owner) either earned the funds through criminal activity or was using them for something illegal. He’s going to have a hell of time getting his $2.9mil back (he ain’t gettin’ it). Civil forfeiture and confiscation is perhaps most commonly used against folks like alleged drug dealers. To recover your property you basically have to prove you didn’t gain it illegally, which they say he did by concealing the fact that he was running a money transfer business. He obviously was if (wait for it…) the government admits that BTC is money. Or perhaps it was enough that funds deposited by customers could be easily converted to foreign currency, like USD to Euros. Either way, they got him, or his money at least.

  3. mike sangha

    Bitcoins are for real. Yes, if you are still having trouble with credit cards, or worse yet with online payments – you think this a lot of hoopala about nothing. The Germans dont think so anymore. You can use bitcoins for private payments. If you still dont get digital currency (or are looking for ways to get the paper out of your pillow case), read up. Here is one: