## Facts

- Federal prosecutors charged Robert M. Faiella (also known as “BTCKing”) in connection with transactions involving Bitcoin and the darknet marketplace Silk Road.
- The indictment alleged Faiella sold Bitcoin to Silk Road users in exchange for government-issued currency, enabling customers to use Bitcoin to transact on Silk Road, including for unlawful purchases.
- Count One charged Faiella with operating an unlicensed money transmitting business in violation of 18 U.S.C. § 1960; Count Three charged conspiracy to commit money laundering under 18 U.S.C. § 1956(h).
- Faiella moved pretrial to dismiss Count One, arguing § 1960 did not apply to Bitcoin-related activity and that applying it would violate fair-notice principles.
- For purposes of the motion, the court accepted the indictment’s factual allegations as true and evaluated only whether they stated an offense under § 1960.

## Issues

1. Whether Bitcoin qualifies as “money” or “funds” within the meaning of 18 U.S.C. § 1960.
2. Whether the alleged Bitcoin-exchange activity constitutes “money transmitting,” defined as “transferring funds on behalf of the public by any and all means,” under § 1960(b)(2).
3. Whether, under § 1960 and applicable FinCEN regulations and guidance, Faiella was a “money transmitter,” including whether a regulatory exemption for activity “integral” to selling goods or services applied.
4. Whether the rule of lenity or due process barred prosecution because § 1960’s application to Bitcoin was purportedly novel or unforeseeable.

## Decision

- The court denied the motion to dismiss Count One.
- The court held that Bitcoin is “money” or “funds” as used in § 1960, because it functions as a medium of exchange, a measure of value, and a means of payment, and can be exchanged for conventional currency.
- The court held the indictment alleged “money transmitting” because the conduct involved transferring value on behalf of customers, which falls within the statute’s broad definition covering transfers “by any and all means.”
- The court held Faiella fit within the meaning of “money transmitter” and that the claimed regulatory exemption did not apply to a virtual-currency exchange business.
- The court rejected lenity and due-process arguments, finding the statutory text sufficiently clear and noting alleged facts suggesting actual awareness of licensing requirements.

## Legal Principles

- Under 18 U.S.C. § 1960, “money transmitting” includes “transferring funds on behalf of the public by any and all means,” and this language is not limited to traditional fiat-currency mechanisms.
- “Funds” and “money” in § 1960 can include virtual currency when it operates as a medium of exchange and store/measure of value used in financial transactions.
- A virtual-currency exchanger who accepts government-issued currency and provides virtual currency for customers’ use can be treated as providing money-transmission services rather than merely selling a good.
- FinCEN’s regulatory framework and guidance may support treating virtual-currency exchangers as money transmitters subject to registration and licensing requirements.
- The rule of lenity does not apply where statutory language is not grievously ambiguous, and due process is not violated where the statute provides fair notice and allegations indicate awareness of compliance obligations.

## Conclusion

The court held that § 1960’s broad prohibition on unlicensed money transmitting reaches Bitcoin-exchange activity alleged to transfer value on behalf of the public, and it allowed the unlicensed money transmitting charge to proceed.


United States v. Faiella, 39 F. Supp. 3d 544 (S.D.N.Y. 2014)