Bitcoin exchanges investigated over possible Silk Road links

Bitcoin exchanges investigated over possible Silk Road links

Summary: Reports suggest that Bitcoin exchanges including Mt. Gox are under investigation over potential ties to the online marketplace Silk Road.

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A number of Bitcoin exchanges, including Mt. Gox, have received subpoenas relating to possible ties to shuttered online drug marketplace Silk Road.

The Wall Street Journal reports that Bitcoin exchanges, including bankrupt Mt. Gox, are being investigated in relation to possible ties to Silk Road, an illegal online marketplace shut down by the FBI in October last year.

Silk Road used the Tor network to keep purchases in the marketplace as untrackable as possible. After closing down the marketplace, over $28 million in Bitcoin was seized. According to US prosectors, Silk Road accounted for over one million users who used the marketplace to purchase items which may not have been illegal, spanning from marijuana to fake passports and drugs. Silk Road only accepted Bitcoin as currency, which allowed users to anonymously purchase such products, and some argue that this association has tainted overall acceptance of the cryptocurrency.

In relation to Mt. Gox, subpoenas sought customer-transaction logs and materials related to investor solicitation. Citing people familiar with the matter, the publication says that prosecutors and the FBI are examining whether the exchange processed transactions connected to Silk Road.

Mt. Gox was once the dominant Bitcoin exchange online. The Bitcoin exchange closed in February and later filed for bankruptcy following apparent cyberattacks which rinsed the firm of millions of dollars' worth of Bitcoin, leaving the company without the funds to operate. Mt. Gox founder and CEO Mark Karpeles is wanted for questioning in the US over the site's closure and bankruptcy, but lawyers have advised him against the trip from Tokyo.

It is unclear which other Bitcoin exchanges have received subpoenas. The investigation is at an early stage and US officials have not reached any conclusions on whether the Bitcoin exchanges have links to the illegal online marketplace.

Last month, Bitcoin entrepreneur and one-time member of the Bitcoin Foundation, Charlie Shrem was indicted by a federal jury on charges of funneling money through Silk Road. Shrem is accused of conspiring to sell over $1 million in BTC to Silk Road users in the knowledge that it would be used for illegal activities.

The Bitcoin Foundation has suffered due to these allegations made against Shrem, who once held the role of vice chairman. In addition to this blow to reputation, the organization — which is the closest body to a regulator Bitcoin has — is enduring a member exodus after the election of director Brock Pierce, due to past allegations of alleged sexual misconduct and doubt cast on his character.

Topics: Government US, Legal, Tech Industry

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  • Bitcoin is so last February.

    It's on a downhill slide. The mainstream is no longer excited with it.
  • The word 'duh' comes to mind

    Of course, the illegal uses are the main reason bitcoin gained any momentum in the first place.

    Just another nail in the coffin - it's about time.
  • Bitcoin: Libertarian fantasy crashses into reality

    Bitcoin was a fantasy for criminals, tax cheats, and con men. When it started to implode, they all scurried back into the woodwork faster than roaches in a kitchen at 2 am when you flip the light on. I only wish more Libertarians (right wing Republicans who think drugs and prostitution should be legal) and Objectivists (right wing Republicans who think drugs and prostitution should be legal for themselves but not everyone else) had sunk their entire life's saving into Bitcoins before the inevitable collapse.
    Sir Name
  • Seriously misinformed people

    Wow, such ignorant comments here. Bitcoin is currently trading for $500 apiece, and has held that level consistently for months. I'm not sure why anyone would want such a great concept to fail, but just assuming that some ignorant people would want such a thing, their comments about the failure of Bitcoin only serve to make themselves feel better. Because they are breathtakingly wrong.
    • Why pay money to get money?

      All money is a representation of value... a dollar is a dollar; a pound is 1.5 dollars etc. Who cares what a bitcoin is worth? If its a global entity we still have to buy it in a local currency therefore there is no gain. OK if I want to gamble on the 'value of something, or perhaps deal in something dodgy but I know of absolutely nobody in any way interested in this gamble. How many folk lost out with the recent collapses, and how much did they lose? No doubt it was virtual and you'll tell me they lost nothing.. BUT you'll be quick enough to tell me when it's real. In real dollars, and we're back to the start again. Its no more than a fad, like a pyramid scheme, as far as I can see.
  • LOL at the Bitcoin "experts"

    You guys need to look at the actual market once in a while. Bitcoins aren't about to disappear anytime in the foreseeable future. Lots of people bought at $440 ten days ago to see it rise to well over $550 this week... Keep whistling past that graveyard.