[Tiberium Wolf]

Alleged Silk Road Founder’s Lawyer Moves to Dismiss Charges Against His Client

The most interesting argument in the motion-to-dismiss — filed over the weekend — surrounds the money laundering charge. Dratel argues that the charge doesn’t apply because it’s lacking the primary ingredient needed for money laundering — a “monetary instrument.” Since Bitcoins, the currency with which drugs were bought and sold on Silk Road, does not qualify as “funds” or “monetary instrument,” the charge does not hold, Dratel asserts in his motion.

Dratel’s Bitcoin argument cleverly turns a recent IRS determination about Bitcoin against prosecutors.

The money laundering statute defines a monetary instrument as “coin or currency of the United States or of any other country, travelers’ checks, personal checks, bank checks,and money orders, or … investment securities or negotiable instruments, in bearer form or otherwise in such form that title thereto passes upon delivery.”

But last week the IRS issued a notice stating that virtual currency “does not have legal tender status in any jurisdiction” and that “virtual currency is treated as property” and “not … as currency.”

“Both IRS and FinCEN have categorically declared that Bitcoins are not ‘funds,’” Dratel writes in his memorandum of law supporting the motion to dismiss. “Thus, an essential element of §1956 – a ‘financial transaction’ – is absent because a necessary component thereof – either ‘funds’ or ‘monetary instruments’ – is lacking. Consequently, it is respectfully submitted that Count Four must be dismissed.”