Understanding Bitcoin Money Laundering Charges

The term “money laundering” was first used at the turn of the 20th Century. It was a label used against organizations who took income derived from illegal activity and washed it into the flow of legal money in the general economy.


Until recently, though, if you needed to move a lot of money around, you had to transfer it through intermediaries. Typically banks in less regulated countries are used, such as the Swiss Banking System.


Then came the arrival of Bitcoin and other cryptocurrencies. Using them, anyone can essentially become their own bank, thus cutting out any intermediaries. Moreover, because cryptocurrencies are both decentralized and notoriously opaque, it’s a lot easier to hide exactly where the money is coming from.


A perfect, private system, right?


Except that law enforcement agencies around the world are well aware of the potential for cryptocurrencies to be used in this way, and they are getting better, and more determined, at tracking the funds and locating alleged money launderers.


Case-in-point: 10 people were arrested in the Netherlands in January for Bitcoin money laundering. Closer to home, an Arizona Bitcoin trader was convicted of money laundering on March 28.


The consequences are quite serious, too.


According to the Justice Department, each of the five charges the Arizona trader was convicted of caries a maximum penalty of 20 years in prison, $250,000 in fines, or some combination of both.


All of this begs the question: how exactly do money laundering charges work when Bitcoin is involved?


Bitcoin and Money Laundering: How the Law Works


Money laundering is a criminal act both under Texas state laws and at the federal level.


However, the definition of money laundering differs a bit.


Federally, money laundering essentially means knowingly taking the proceeds gained from an illegal activity and conducting (or trying to conduct) a financial transaction with those proceeds, or otherwise move them into or out of the country:


  • (i) with the intent to promote the carrying on of specified unlawful activity; or
  • (ii) with intent to engage in conduct constituting a violation of section 7201 or 7206 of the Internal Revenue Code of 1986; or…
  • to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or
  • to avoid a transaction reporting requirement under State or Federal law.


Texas law is a bit broader. It says someone commits money laundering if he or she knowingly:


  • acquires or maintains an interest in, conceals, possesses, transfers, or transports the proceeds of criminal activity;
  • conducts, supervises, or facilitates a transaction involving the proceeds of criminal activity;
  • invests, expends, or receives, or offers to invest, expend, or receive, the proceeds of criminal activity or funds that the person believes are the proceeds of criminal activity; or
  • finances or invests or intends to finance or invest funds that the person believes are intended to further the commission of criminal activity.


Houston Money Laundering Lawyer

The first part expands the offense a bit in Texas, since it does not specify that a financial transaction must take place. The way the statute is written, knowingly possessing the proceeds of a criminal activity can be enough.


How exactly can investigators prove Bitcoin money laundering if the service is so secretive and opaque in regard to who owns individual accounts and transaction history?


Though Bitcoin has proven to be quite resistant to regulation and transparency so far, law enforcement does have one tried-and-true way to monitor transactions: they have to wait for people to convert Bitcoins to fiat currency at banks.


When this happens, banks are able to see the complete history of those individual Bitcoins – including how they have been used. This information tells law enforcement officials whether those Bitcoins may have been used in illegal activities. If there is belief that they have been, officials will then follow up with account holders.






As evidenced in the above cases, though, it’s definitely working. Moreover, there are several startups working hard to come up with ways to make Bitcoin transactions even more transparent.

What to Expect If You’re Charged with Money Laundering Through Bitcoin and How to Fight Back


What to Expect If You’re Charged with Money Laundering Through Bitcoin and How to Fight Back

If you are charged or investigated for laundering money using Bitcoin, you will most likely be facing federal consequences since the very nature of cryptocurrency makes it almost impossible not to cross state – and possibly even national – lines.


Penalties for federal conviction include fines of up to $500,000 and up to 20 years in prison.


If you are instead charged at the state level in Texas, your charges will be based on the value of the funds in question and can range from a state jail felony (180 days – 2 years in jail, up to $10,000 in fines) to a first degree felony (5-99 years in jail, up to $10,000 in fines).


In either situation, the best way to protect your rights, your family, your future, and your good name is to enlist the help of a knowledgeable money laundering attorney with a track record of success handling these types of cases. The sooner you get in touch, the more likely you are to receive a positive outcome, so do not hesitate to reach out to our office.