Bitcoin “Twist” Not Enough to Save Money Launderer From Jail

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A money launderer has failed in his attempt to avoid jail by claiming that the charges shouldn’t stick because he used Bitcoin instead of cash. Thomas Costanzo, who was sentenced to almost four years in prison in 2018 after being caught in an FBI sting operation, failed to convince an Arizona Ninth Circuit panel that his use of Bitcoin meant that his actions did not affect interstate commerce, on which his five-count conviction rested.

Costanzo the “Bitcoin Broker”

Costanzo was arrested in 2017 after FBI agents took him up on his offer to act as a Bitcoin broker, services he was advertising on LocalBitcoins. Following a tip from the Inland Revenue Service, who had become aware of Costanzo’s activities two years prior, agents enlisted Costanzo’s ‘help’ to launder Bitcoin they made clear was to help fund their drug-dealing operation.

After laundering $160,000 worth of Bitcoin across five transactions, Costanzo was arrested and charged on five counts of money laundering – one for each transaction. He was sentenced to 41 months in prison by an Arizona District Court in July 2018 but appealed, claiming that bitcoin transactions did not affect interstate commerce, a point critical to all five charges.

Appeals Panel Upholds Conviction

Unfortunately for Costanzo, the three-judge panel upheld the conviction, creating a precedent in the process:

…a reasonable trier of fact could have found beyond a reasonable doubt that the money-laundering transactions at issue, in which payment was made via bitcoin, affected interstate commerce in some way or to some degree…

One of the appeal judges, Judge Hawkins, described the trial as being “a straightforward money laundering transaction with a twist”, that twist being the use of Bitcoin as the medium, but in all other respects it was an open and shut case.

The result also calls into question Costanzo’s claim to FBI agents that Bitcoin is the “most fearless currency” with “no regard for national borders anywhere”, and is a reminder that while Bitcoin itself may not be tangible, the repercussions of using it to break the law very much are.