But at the multibillion-dollar virtual banking operation, it didn't matter.
Authorities say the recent investigations of Liberty Reserve and the hidden website
"The perpetrators feel they can more easily conceal their activity, their identities and their proceeds," Deputy U.S. Attorney
Hard cash carries the burden of needing to be physically smuggled and hand-delivered, Zabel said. By contrast, in the
At the same hearing,
The dialogue comes at a time when Bitcoins and other virtual currencies have been gaining the backing of legitimate investors and mainstream businesses. Last month,
Users exchange cash for digital money using online exchanges, then store it in a wallet program in their computer. The program can transfer payments directly to a merchant who accepts the currency or to private parties anywhere in the world, eliminating transaction fees and the need to provide bank or credit card information.
Some Bitcoin advocates say they welcome limited regulation but claim the negative publicity brought by criminal prosecutions is misleading. In the past year, there are signs that the virtual currency phenomenon has moved beyond the early days when it was an oddity embraced by a small cadre of libertarians and computer geeks and later by criminals during its "vice phase," said
"The vice phase is in the rearview mirror," Wilson said. "Are people still doing bad things with Bitcoin? Sure. Is the majority of the Bitcoin activity vice? Not a chance."
The Liberty Reserve case had no shortage of vice. Prosecutors estimated that over roughly seven years, the
People banking with Liberty Reserve couldn't transfer money into their accounts or withdraw it directly — a system that would normally leave a paper trail. Instead, to add another layer of anonymity, it required customers to wire money to and from third-party money exchangers in locations in
Once an account was funded, a customer could make deals — for stolen credit card numbers, drugs and other illicit services — with other Liberty Reserve account holders using a virtual currency called LR. Liberty Reserve would charge a 1 percent transaction fee, plus an optional privacy fee that allowed users to hide their account number.
Liberty Reserve "provided its users with nearly impenetrable anonymity and enabled them to conduct untraceable financial transactions," Zabel said.
Among those arrested in the case was a defendant using the name BTCKing, who operated a service that allowed customers to obtain Bitcoins by depositing cash into a bank account controlled by a third party. The only identifying information provided was an email address.
Prosecutors haven't revealed what they plan to do with their Bitcoin haul, possibly because they face a volatile market for the decentralized currency. The exchange rate for Bitcoins, which has peaked at around
Ulbricht, 29, has pleaded not guilty and is contesting the forfeiture. A website established to help fund his defense accepts donations in Bitcoins.
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