Bitcoin exchanges investigated over possible Silk Road links
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.
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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.