"Yet like Jason Voorhees the myth of virtual currency's anonymity refuses to die. See Friday the 13th (Paramount Pictures 1980)."
A lively reminder from the federal bench that cryptocurrencies can be traced.
Posted May 17, 2022 by Daren Firestone
In a recently unsealed opinion, U.S. Magistrate Judge Zia M. Faruqui found probable cause that a defendant named in a criminal complaint had violated U.S. sanctions by operating an unnamed payment platform to send cryptocurrency to an unnamed sanctioned country (likely Russia, Iran, or North Korea). It’s unusual for a magistrate judge to issue an opinion on the existence of probable cause to support a criminal complaint. Usually, prosecutors file criminal complaints with little public judicial commentary. It’s even more unusual for a magistrate judge to issue an opinion on probable cause while, as here, the case remains under seal.
But Judge Faruqui had something he wanted to say. In concluding his nine-page opinion, Judge Faruqui wrote:
Issue One: virtual currency is untraceable? WRONG. See Saturday Night Live, The McLaughlin Group – SNL, YouTube (Oct. 3, 2013) https://www.youtube.com/watch?v=QOLF_D7JVZM.
Issue Two: sanctions do not apply to virtual currency? WRONG. See Saturday Night Live, The McLaughlin Group Halloween Cold Open (John McLaughlin) – SNL, YouTube (Oct. 20, 2017), https://www.youtube.com/watch?v=WYBpWAiwW34.
Judge Faruqui was almost gleeful in recounting how the defendant was caught with good old-fashioned subpoenas to virtual currency exchanges, email search warrants, and banking information that allowed the government to “reliably dox Defendant.” He underscored the importance of exchanges complying with “legally-required know-your-customer information which—wait for it—allowed [the virtual currency exchange in question] to know who its customer was: Defendant.”
This is not the first time Judge Faruqui has challenged the myth of cryptocurrency’s criminal utility. In a January 2021 opinion supporting the forfeiture of cryptocurrency from the user of a darknet website purveying child exploitation material, Judge Faruqui remarked, “The horror story of unhosted wallets is fiction, not fact.” He explained, “BTC [bitcoin] in an unhosted wallet is like cash in a personal safe or hidden under the mattress, while BTC in a hosted wallet is like money in a bank account. In fact, cryptocurrency exchanges are subject to the Bank Secrecy Act.”
In dispelling crypto myths, Judge Faruqui has brought humor and pop-culture savvy. In his latest opinion, Jason Voorhees, the undead star of Friday the 13th, received a nod, with Judge Faruqui quipping, “Yet like Jason Voorhees the myth of virtual currency’s anonymity refuses to die. See Friday the 13th (Paramount Pictures 1980).”