US v. Faiella

Category: Discusses Bitcoin

Relevance: Relevant to cryptocurrency
Type: Memorandum Order
Location: United States District Court, S.D. New York
Filed: August 19, 2014

Link to the decision: US v. Faiella


Parties

These United States – The United States of America

Robert M. Faiella – Early bitcoin businessman.

Dispute

Mr. Faiella, and co-defendant Charlie Shrem operated a market in Bitcoin on the website Silk Road. After the indictment Mr. Faiella moved to dismiss the charges against him claiming first, that Bitcoin does not qualify as “money” under 18 U.S.C. § 1960; second, that operating a Bitcoin exchange does not constitute “transmitting” money under 18 U.S.C. § 1960; and third that Mr. Faiella was not a “money transmitter” under 18 U.S.C. § 1960.

Result

The Court denied Mr. Faiella’s motion, and the charges remained.

Relevance to Cryptocurrency

In denying Mr. Faiella’s motion the court came to the following conclusions: Bitcoin is money under 18 U.S.C. § 1960, the defendant was engaged in money transmission, and Mr. Faiella was a money transmitter for purposes of 18 U.S.C. § 1960.

In determining whether Bitcoin is money the Court leans on Merriam Webster’s definition of what is money, noting an example that money may be something that functions as a unit of accountant when a coin or physical currency does not exist. This distinction makes Bitcoin clearly money in the Court’s eye, because of the ability to purchase goods and services for Bitcoin.

The Defendants sold bitcoin on Silk Road, and by facilitating the exchange of US dollars for Bitcoin they were transmitting money. Specifically, Mr. Faiella received cash deposits from his customers and then, after exchanging them for Bitcoins, transferred those funds to the customers’ accounts on Silk Road.

Mr. Faiella was deemed an exchanger of virtual currency and thus a money services business under Fin-CEN’s regulations, specifically, a money transmitter, unless a limitation to or exemption from the definition applies to the person. No such limitation or exemption applied to Mr. Faiella.

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