A trio of men from New York are currently facing time in jail after allegedly attempting to use bitcoins to get away with crime, according to authorities.
A federal grand jury indicted Richard Petix, 30, of Rochester NY with operating an unlicensed money transmitting business and making material false statements. In a separate indictment, Queens residents Zhe Wang, 20, and Kevin Szura, 20, were charged with conspiracy to distribute controlled substances, money laundering conspiracy, money laundering, and conducting a monetary transaction in criminal derived property.
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According to authorities, Petix lied to federal probation officers and other law enforcement agents about owning and operating a laptop computer and smartphone. The 30-year-old is on supervised release from a 2009 federal child pornography conviction and is required to notify his probation officers of any computers he uses and police must be allowed to examine the computer for any suspicious activity.
On Oct. 20, 2015 Petix allegedly told his probation officer he had not used any computers or the Internet, authorities said, however on Dec. 3, 2015 Petix conducted a bitcoin sale with an undercover federal agent.
Petix transferred 37 bitcoins — values at about $13,000 — but when he was confronted he allegedly claimed that the laptop and smartphone were not his, prosecutors said.
The Rochester resident is accused of allegedly unlawfully operating a bitcoin-exchange business between August 2014 and Dec. 3, 2014, which sold about $200,000 in bitcoins.
If convicted, Petix faces up to five years in prison for each of his charges.
“This case demonstrates the ever-growing ways in which the virtual world is intersecting with, and being exploited by, real life crime and criminals,” said U.S. Attorney William J. Hochul Jr. “Those involved in such illicit activities should know that law enforcement is prepared to track them into the deep and dark portions of the web in order to bring criminals to justice.”
Based on information from the separate indictment for Wang and Szura, between March 2015 and March 7 of this year the two Queens men did and conspired to purchase about $74,000 in bitcoins.
According to prosecutors, the dup used the earnings from drug sale to buy the bitcoins and then used the bitcoins to purchase large quantities of drugs off the dark web in order to distribute.
Wang and Szura largely handled Xanax bars, that they allegedly imported from Canada, but also conspired to distribute mollies (MDMA), authorities said.
Based on the criminal complaint, in October 2015 Wang was one of four individuals arrested by the Erie County Sheriff’s Office on state controlled substance charges. During the execution of a search warrant at 72 Winspear Ave. in Buffalo, NY officers seized about 2,500 bars of Xanax.
Later when Wang and Szura were arrested on March 7 by federal agents, they were trying to purchase about $8,000 in bitcoins to buy more Xanax, authorities said. The two men had a total of over $30,000 in their possession. Szura had also allegedly brought some Xanax pills for an undercover agent to sample.
If convicted of the charges, Wang and Szura face up to 20 years in jail.
"Dismantling the fraudulent financial operations of transnational criminal organizations is critical because these groups can succeed only so long as they can funnel their illicit proceeds freely and without detection,” said J. Michael Kennedy, Acting Special Agent in Charge of Homeland Security Investigations. "HSI will continue to aggressively target illegally functioning new alternatives to traditional financial institutions that deliberately enable businesses and individuals to further their criminal schemes."
Bitcoins are known as a “virtual” currency, which serve as a medium of exchange that operates as a form of currency, according to authorities. Bitcoins are converted to real currency and — although are not essentially illegal — has allowed the creation of a “shadow banking system” where criminals can use in Internet-based black markets.
For a transaction, each party only needs to provide their individual Bitcoin address, which does not reveal any information that could identify themselves.
The equivalent value of the bitcoins is not determine by any one entity and varies. According to authorities, between August 2014 and March 2016, the trading value of a bitcoin varied between about $200 and $600 in United States Currency.