BITCOIN: Is Cryptocurrency the next Criminal Frontier in the Dark Web?

What is Cryptocurrency?

Cryptocurrency is a means of secured value exchange. Cryptocurrency is actually not currency at all but in fact is the manner is which value is exchanged between two people. The “currency” part of cryptocurrency comes in when the exchange of value results in one or both people receiving something tangible. These results could include paper money, tangible items, drugs, weapons and even people (sex-trading). Bitcoin, Bitcoin Cash, Ethereum and Ripple are all examples or types of cryptocurrency. As history has shown, when people can exchange value in ways other than when the physical exchange of money takes place, criminal activity will soon follow.

Why does cryptocurrency lend itself to criminal activity?

Many people recall the Silk Road from a couple years ago. Silk Road became the go-to place for people to buy drugs, weapons and sex from other people online in almost complete anonymity. Silk Road was built on cryptocurrency. Cryptocurrency advertises itself as “completely anonymous” although we are quickly finding out that is not completely true. However, it is as close to an anonymous transaction as you can get. Since a nearly anonymous transaction of value can take place, people inevitably feel safer making transactions involving criminal activities and enterprises. Another reason people are increasingly using cryptocurrency to commit crime is due to the “here today, gone tomorrow” nature of cryptocurrency. In Texas, if you are arrested for a felony and have cash on you or used cash in the commission of the felony, the State of Texas will seize that money and ask the court to forfeit all of that money to the State. That is not so easy with cryptocurrency. First, the blockchain, as you have probably heard of by now, is a very complex and confusing network of computing problem-solving. To access the cryptocurrency, you have to solve the blockchain problem. Not an easy thing for prosecuting attorneys to do. Second, currently in Texas, there are no laws that give the State any right to seize cryptocurrency. The federal government will likely pass legislation in the coming years to rectify this, but as of right now, if a criminal uses cryptocurrency in the commission of a crime, the cryptocurrency remains intact. People can also make the criminal transaction completely anonymous using a TOR, or The Onion Router. TOR is basically a server, normally set up in a European country, that takes your personal IP address and bounces it off one of its own rotating servers and gives you a new anonymous IP address. Using a TOR with cryptocurrency can make a transaction completely untraceable.

If I am using cryptocurrency for criminal activity, which laws am I breaking?

Other than theft of actual cryptocurrency – which by the way is very easy - tax evasion, money laundering, wire fraud, computer fraud, contraband transactions, and extortion are some of the more common crimes associated with cryptocurrency. Think about tax evasion. If there is no way for the federal government to monitor the transactions and no real ledger of value to compute, how will the government tax you? They simply can’t. Money laundering is also extremely easy using cryptocurrency. If you exchange physical money or physical currency for cryptocurrency, it not only launders or “filters” the money, unlike traditional money laundering, cryptocurrency laundering actually changes the physical form of the money. Instead of passing physical dollars through a series of laundering mechanisms to hopefully “clean” the money, you are taking physical dollars and making them digital. It is unlike anything the world has ever seen and something that the federal and state governments will be scrambling to combat. Transactions involving contraband, namely drugs and guns are already rampant in the Dark Web. Instead of having to personally meet your drug dealer on the street corner or instead of finding the shady gun dealer at your local gun show, you can simply exchange cryptocurrency anonymously with a person you never have to actually see and receive basically anything you want. How the items get to you is a whole other issue, but you can bet that as cryptocurrency becomes more mainstream, dealers will find new, anonymous means to complete delivery. Lastly, extortion attempts have been making headlines for the past couple of years. Just recently, an Iranian national hacked into the servers at HBO and demanded $6 million worth of Bitcoin in exchange for him not releasing the script of a Game of Thrones episode before its schedule release. He was later identified and criminally charged. This type of extortion, however, will continue to become more commonplace as hackers perfect the idea of complete anonymity.

How do I keep myself from being criminally charged?

Cryptocurrency is already revolutionary. It is unlike anything anyone has ever seen, but there are serious risks involved if you don’t know what you are doing. We are here to answer any questions you might have about digital cryptocurrency transactions. If you have any questions before making a cryptocurrency transaction or if you have been charged with a crime involving cryptocurrency call the federal criminal defense attorneys Nickols & White, PLLC, at (817) 617-7500 for a private consultation.