Coin.mx Operator Admits Fraud and Money Laundering

On Monday, January 9, 2017, the United States Attorney for the Southern District of New York announced the long-awaited guilty plea in the Coin.mx case. Preet Bharara, the aforementioned US attorney, said Anthony Murgio, the owner of Coin.mx, pleaded guilty in front of U.S. District Judge Alison J. Nathan. Murgio, according to the recently released court documents, illegally processed more than $10m in Bitcoin and participated in a multi-million dollar fraud scheme.

The case nearly set standards for the crypto-currency—Bitcoin and likely all forks and similar currencies—in September 2016. Murgio fought many of the charges and used the IRS’s definition of Bitcoin to do so. The IRS, when cryptocurrencies started growing in popularity, felt the need to define Bitcoin and similar virtual currencies as property—not currency at all.

According to IRS Virtual Currency Guidance: Virtual Currency Is Treated as Property for U.S. Federal Tax Purposes; General Rules for Property Transactions Apply

“The notice provides that virtual currency is treated as property for U.S. federal tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency.  Among other things, this means that: …A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.”

Judge Nathan disagreed. Despite the implications a decision such as hers could bring to a sector, the general public believed this decision indicated relevant progression. She said during the hearing that “Bitcoins are funds within the ordinary meaning of that term. Bitcoins can be accepted as payment for goods and services or bought directly from an exchange with a bank account.” She continued after reminding the court that this referenced the money laundering charges—not fraud. “They, therefore, function as pecuniary resources and are used as a medium of exchange and a means of payment.”

Her decision went unopposed by the state of Florida. Florida, in another recent case, made their disagreement with the IRS definition—from 2014—very clear.

Murgio pleaded guilty to operating Coin.MX in violation of federal money is transferring laws. Coin.mx, according to court documents, neglected to meet both state and federal licensing laws created by the Department of Treasury. He admitted to unlawfully operating this illegal currency exchange between 2013 and July 2015. Additionally, Murgio admitted committing fraud and money laundering in the name of Coin.mx.

Three others already pleaded guilty to Coin.mx crimes. Judge Nathan scheduled Murgio’s sentencing for June 16, 2017.