Arizona-Based Peer-To-Peer Bitcoin Trader Convicted of Money Laundering
PHOENIX – On March 28, 2018, Thomas Mario Costanzo, a.k.a. Morpheus Titania, of Mesa, Ariz., was found guilty of five counts of money laundering by a federal jury in Phoenix. The case was tried before U.S. District Judge G. Murray Snow. Sentencing is set before Judge Snow on June 11, 2018.
The evidence at trial showed that federal agents initiated an investigation of Costanzo in 2014, after identifying an advertisement he posted on a peer-to-peer bitcoin exchange website. In the advertisement, Costanzo advertised that he was willing to engage in cash transactions up to $50,000. When undercover federal agents approached Costanzo and told him that they were drug dealers, Costanzo provided them with bitcoin and told them it was a great way to limit their exposure to law enforcement. The jury found that over a two-year period, Costanzo took $164,700 in cash from the agents (whom he believed to be heroin and cocaine traffickers) and exchanged it for bitcoin in order to conceal and disguise the nature, location, source, ownership, and control of the drug proceeds. The evidence at trial also showed that Costanzo used bitcoin to purchase drugs from others and that he provided bitcoin to individuals who were buying drugs via the internet.
The evidence at trial also showed how bitcoin operates. Bitcoin is a decentralized form of electronic currency. Bitcoin may be used for legitimate purposes, and anyone can obtain bitcoin from a commercial on-line exchange by paying about 1.5% as a commission and providing identity information to the exchange. In contrast, Costanzo charged between 7% and 10% in his peer-to-peer transactions and did not learn his customers’ identities.
Each of the five convictions for money laundering carries a maximum penalty of 20 years in prison, a $250,000 fine, or both. The bitcoin involved in the final transaction is also subject to forfeiture by the United States.
The investigation in this case was jointly conducted by Internal Revenue Service Criminal Investigation, the Drug Enforcement Administration, and the U.S. Immigration and Customs Enforcement Homeland Security Investigations, and the Scottsdale Police Department, with assistance from the Maricopa County Sheriff’s Office and the United States Postal Inspection Service. The prosecution was handled by Carolina Escalante, Gary Restaino, and Matthew Binford, Assistant U.S. Attorneys, District of Arizona, Phoenix.
CASE NUMBER: CR-17-00585-PHX-GMS
RELEASE NUMBER: 2018-030_Costanzo
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For more information on the U.S. Attorney’s Office, District of Arizona, visit http://www.justice.gov/usao/az
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