Bitcoin exchanges under investigation over links with drug marketplace


by CBR Staff Writer| 20 May 2014

Manhattan federal prosecutors have issued subpoenas to several bitcoin exchanges.

Authorities in the US are probing bitcoin exchanges for any possible link with the closed online drug market place Silk Road.

People familiar with the development told Wall Street Journal that several bitcoin exchanges including closed down Tokyo-based Mt. Gox have been sent out subpoenas by Manhattan federal prosecutors earlier this year.

The subpoenas have been sent following one bitcoin exchange was charged in January for its alleged connection with Silk Road.

In January, bitcoin businessman Charles Shrem was criminally charged for money laundering through his company BitInstant, which exchanges dollar in lieu of bicoin charging some fee.

US prosecutors claimed that Shrem helped customers to swap dollars against bitcoins to use them on the drug marketplace.

Manhattan court however did not plead Shrem and his alleged accomplice guilty and further trial in this case is scheduled in September.

The subpoenas received by Mt. Gox seek customer-transaction logs and materials related to solicitation of investors.

Sources also told the agency that that federal prosecutors and agents from Federal Bureau of Investigation are probing whether these exchanges carried out transactions which are related to Silk Road.

The sources however did not reveal which are the other exchanges against whom the prosecutors have sent subpoenas.

Last year US government shut down Silk Road and founder Ross Ulbricht was charged in San Francisco for drug trafficking, money laundering and computer hacking.

In February this year, the world's largest Bitcoin exchange Mt. Gox had filed for bankruptcy after claiming that it has outstanding debts of around $64m.

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