The U.S. Department of Justice (DOJ) has charged Maximiliano Pilipis, the operator of the cryptocurrency exchange AurumXchange, with money laundering related to transactions from the notorious Silk Road darknet marketplace. In a statement released on October 28, the DOJ alleges that Pilipis processed millions of dollars through AurumXchange, with a significant portion linked to Silk Road accounts.
Silk Road Background
Silk Road, founded by Ross Ulbricht—known online as “Dread Pirate Roberts”—operated from 2011 to 2013 as an anonymous online marketplace on the Tor network, infamous for facilitating illegal drug sales.
AurumXchange Operations and Allegations
Pilipis, 53, reportedly ran AurumXchange from 2009 to 2013 without the necessary licenses, overlapping with Silk Road’s operation period. The DOJ claims that over $30 million across approximately 100,000 transactions flowed through the exchange, including 10,000 Bitcoin, which was valued at about $1.2 million at that time.
The charges include bypassing federal regulations for cryptocurrency exchanges. Pilipis allegedly failed to register AurumXchange with the U.S. Treasury Department and did not report the exchange’s activities as required by law. Furthermore, the DOJ contends that he neglected to implement Know Your Customer (KYC) protocols, violating Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) regulations.
Following the closure of AurumXchange, authorities allege that Pilipis attempted to conceal his profits by splitting and transferring Bitcoin and other assets. The DOJ claims he converted cryptocurrency into U.S. dollars, using those funds for real estate investments in Arcadia and Noblesville, Indiana. Additionally, despite generating significant income in 2019 and 2020, he allegedly failed to file tax returns for those years.
Potential Consequences
Pilipis faces five counts of money laundering and two counts of willfully failing to file tax returns. If convicted, he could face up to 10 years in prison and a maximum fine of $250,000.
Supreme Court Declines Case on Seized Silk Road Bitcoin
In a related legal context, earlier this month, the U.S. Supreme Court declined to hear a case involving 69,370 Bitcoin, valued at approximately $4.38 billion, seized from the Silk Road. Battle Born Investments, a company claiming ownership of the Bitcoin, sought Supreme Court review, arguing it had acquired rights to the seized cryptocurrency through a bankruptcy estate. However, the Court’s refusal to take up the case leaves the government’s control over the Bitcoin largely unchallenged, paving the way for potential sale of this significant stash.
The legal battle began when Battle Born claimed it obtained the Bitcoin through a bankruptcy claim following Silk Road’s closure in 2013. The firm alleged that Raymond Ngan, a debtor in the bankruptcy proceedings, was the “Individual X” who had illicitly acquired billions of dollars worth of Bitcoin from Silk Road. Despite these assertions, courts have consistently ruled against the company, with a district court and a subsequent appeals court both dismissing its claims as legally invalid.
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