Feeds

US government nabbed $2.9m in May Bitcoin seizure

Mt. Gox's Dwolla account yielded a pretty purse

Top three mobile application threats

More information has come to light regarding the US government's recent seizure of funds from online accounts belonging to Mt. Gox, the world's largest Bitcoin exchange.

El Reg reported in May that the Department of Homeland Security had frozen an account with mobile payment processor Dwolla belonging to Mutum Sigillum LLC, a subsidiary of Tokyo, Japan–based Mt. Gox.

At the time, all that was known was that traders could no longer transfer funds between Bitcoin and US dollars using Dwolla as an intermediary, because all money transfers had been halted under what was described as a "seizure warrant."

On Tuesday, a Baltimore federal court filing obtained by GigaOm revealed the full extent of that seizure: $2,915,507.40 (£1,859,735.11), in all. Based on the price and available volume of Bitcoins at the time, the seizure amounted to about 0.2 per cent of all of the Bitcoins in existence.

The move was just the opening volley in what has become a mounting effort by US state and federal officials to establish clear regulatory oversight over virtual electronic currencies – something that Bitcoin and other such currencies were specifically designed to avoid.

Most recently, the US Senate ordered various federal regulatory and law enforcement agencies to explain what steps they were taking to enforce US finance laws on traders of virtual currencies, while the New York Department of Financial Services demanded the same information of companies in the Bitcoin trading industry.

In the Dwolla case, the DHS reportedly froze Mutum Sigillum's account because it allegedly opened the account without revealing to regulators that it was intended for use by a money transfer business.

Just what will happen to the $2.9m that was seized is not clear. Should Mutum Sigillum be cleared of violating US finance law, it could eventually be returned. But given that a federal judge has recently ruled that Bitcoin should be considered a form of money, that seems a tad unlikely.

More significant than the loss of funds, however, has been the impact that the seizure and similar government actions have had on Bitcoin trading in the US. Dwolla had been one of the easiest ways to get US funds in and out of Bitcoin. Shortly after the May seizure, OKPay, another payment processor, announced that it was also halting transfers to and from the virtual currency. The mounting pressure has put a strain on Mt. Gox, and it has even occasionally had to suspend trading in US dollars.

Doubtless this is not the last legal action we will see against Bitcoin businesses. But with so many different government agencies now trying to plant their stakes in the regulatory turf, it will likely be a long while to come before the dust clears and Bitcoin's legal status is fully understood. ®

High performance access to file storage

More from The Register

next story
Putin tells Snowden: Russia conducts no US-style mass surveillance
Gov't is too broke for that, Russian prez says
One year on: diplomatic fail as Chinese APT gangs get back to work
Mandiant says past 12 months shows Beijing won't call off its hackers
Record labels sue Pandora over vintage song royalties
Companies want payout on recordings made before 1972
Edward Snowden on his Putin TV appearance: 'Why all the criticism?'
Denies Q&A cameo was meant to slam US, big-up Russia
Lavabit loses contempt of court appeal over protecting Snowden, customers
Judges rule complaints about government power are too little, too late
MtGox chief Karpelès refuses to come to US for g-men's grilling
Bitcoin baron says he needs another lawyer for FinCEN chat
Don't let no-hire pact suit witnesses call Steve Jobs a bullyboy, plead Apple and Google
'Irrelevant' character evidence should be excluded – lawyers
EFF: Feds plan to put 52 MILLION FACES into recognition database
System would identify faces as part of biometrics collection
Ex-Tony Blair adviser is new top boss at UK spy-hive GCHQ
Robert Hannigan to replace Sir Iain Lobban in the autumn
Judge halts spread of zombie Nortel patents to Texas in Google trial
Epic Rockstar patent war to be waged in California
prev story

Whitepapers

Securing web applications made simple and scalable
In this whitepaper learn how automated security testing can provide a simple and scalable way to protect your web applications.
3 Big data security analytics techniques
Applying these Big Data security analytics techniques can help you make your business safer by detecting attacks early, before significant damage is done.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Top three mobile application threats
Learn about three of the top mobile application security threats facing businesses today and recommendations on how to mitigate the risk.
Combat fraud and increase customer satisfaction
Based on their experience using HP ArcSight Enterprise Security Manager for IT security operations, Finansbank moved to HP ArcSight ESM for fraud management.