Case 1:24-cr-00009-JMS-MKK Document 98 Filed 02/13/25 Page 1 of 21 PageID #:
`851
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`UNITED STATES OF AMERICA,
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`
`Plaintiff,
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`vs.
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`MAXIMILIANO PILIPIS,
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`Defendant.
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF INDIANA
`INDIANAPOLIS DIVISION
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`ORDER
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`1:24-cr-00009-JMS-MKK
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`-01
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`On October 16, 2024, the Government filed a Superseding Indictment charging Defendant
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`Maximiliano Pilipis with five counts of Money Laundering in violation of 18 U.S.C. § 1957 and
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`two counts of Willful Failure to File Tax Return in violation of 26 U.S.C. § 7203. [Filing No. 66.]
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`Presently pending before the Court is Mr. Pilipis's Motion to Dismiss Counts 1-5 of the
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`[Superseding] Indictment, [Filing No. 77], which is ripe for the Court's decision.
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`I.
`BACKGROUND
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`The Superseding Indictment describes the conduct underlying Counts 1 through 5 as
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`follows:
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`AurumXchange.com [("AurumXchange")] was a currency exchange website
`operated through Aurum Capital Holdings, Inc. by [Mr. Pilipis] out of Noblesville,
`Indiana from in or about 2009 through in or about 2013. AurumXchange
`exchanged virtual currencies for other virtual currencies or for fiat currencies[1] for
`its customers. AurumXchange also exchanged fiat currencies for other virtual
`currencies for its customers. The customers paid fees to AurumXchange for these
`transactions, which were paid to [Mr. Pilipis] in the form of virtual currency and/or
`fiat currency.
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`
`
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`*
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`*
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`1 "Fiat currency" is "'real money' – currency that is backed by a government, such as dollars."
`Hawes v. Argo Blockchain plc, 2024 WL 4451967, at *2 n.2 (S.D.N.Y. Oct. 9, 2024).
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`*
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`Case 1:24-cr-00009-JMS-MKK Document 98 Filed 02/13/25 Page 2 of 21 PageID #:
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`Beginning on a date unknown but at least as early as 2009 and continuing until at
`least as late as 2013, [Mr. Pilipis], through AurumXchange and its associated
`entities, transferred funds on behalf of the public by receiving virtual currencies
`and/or fiat currencies from customers, and transferring other virtual currencies or
`fiat currencies back to these customers, in exchange for a fee. For instance, [Mr.
`Pilipis], through AurumXchange:
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`Exchanged virtual currencies for other virtual currencies;
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`Exchanged virtual currencies for fiat currencies; and
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`Exchanged fiat currencies for virtual currencies.
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`a.
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`b.
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`c.
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`To exchange virtual currencies for other virtual currencies, the AurumXchange
`customer would transfer virtual currency from their virtual currency account to a
`virtual currency account controlled by [Mr. Pilipis]. [Mr. Pilipis] would then
`transfer a different virtual currency to that customer's respective virtual currency
`account. [Mr. Pilipis] would charge a fee for this transaction.
`
`To exchange virtual currencies for fiat currencies, an AurumXchange customer
`would transfer virtual currency from their virtual currency account to a virtual
`currency account controlled by [Mr. Pilipis]. [Mr. Pilipis] would then transfer fiat
`currency to the customer through AurumXchange in one of several ways. For
`example, the customer would purchase an instant load debit card from
`AurumXchange. AurumXchange would mail the instant load debit card to the
`customer. [Mr. Pilipis] would load the instant load debit card with fiat currency.
`In addition, [Mr. Pilipis] would also send wire transfers of fiat currency directly to
`customer accounts. [Mr. Pilipis] would charge a fee for these transactions.
`
`To exchange fiat currencies for virtual currencies, an AurumXchange customer
`would send cash and/or wire transfers of fiat currency to an account controlled by
`[Mr. Pilipis]. [Mr. Pilipis] would then transfer virtual currency from a virtual
`currency account controlled by [Mr. Pilipis] into the customer's virtual currency
`account. [Mr. Pilipis] would charge a fee for this transaction.
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`During the timeframe that AurumXchange operated, it served over 8,000 customers
`and conducted over 100,000 transactions to exchange virtual and fiat currencies for
`those customers, resulting in over 30 million dollars['] worth of funds being run
`through AurumXchange. [Mr. Pilipis] collected fees worth millions of dollars over
`the course of the operation of the business.
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`During the timeframe that AurumXchange operated, neither Aurum Capital
`Holdings, Inc., [AurumXchange], [Mr. Pilipis], nor any other entity affiliated with
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`Case 1:24-cr-00009-JMS-MKK Document 98 Filed 02/13/25 Page 3 of 21 PageID #:
`853
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`[Mr. Pilipis] ever registered as a money transmitting business with FinCEN,[2] as
`required by the relevant laws and regulations.
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`By not registering as a money transmission business, [Mr. Pilipis] ran
`AurumXchange with no oversight by FinCEN or other federal agencies. As a
`result, customers of AurumXchange were able to exchange virtual currency and fiat
`currency anonymously. Additionally, AurumXchange was able to conduct
`transactions much more quickly by not having to comply with the statutes and
`regulations imposed on registered money transmitting businesses. As such,
`AurumXchange provided a safe haven for those who engaged in illegal activities
`to conceal their proceeds. For instance, a portion of the funds flowing through
`AurumXchange came from accounts that were held on Silk Road, an anonymous
`Internet marketplace that hosted illicit activities, including but not limited to the
`sale of drugs.
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`In conducting these transactions, AurumXchange was an unlicensed money
`transmitting business as defined under [18 U.S.C. §§ 1960(b)(1)(B) and (C)].
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`In or around 2013, [Mr. Pilipis] ceased to operate Aurum Capital Holdings, Inc. At
`that time, [Mr. Pilipis] controlled over 10,000 Bitcoin that were derived from the
`unlicensed money transmitting business valued at approximately 1.2 million dollars
`at that time.
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`[Mr. Pilipis] began to split up and transfer the Bitcoin that he had accumulated
`through AurumXchange to various anonymously held Bitcoin addresses. Over the
`next several years, [Mr. Pilipis] transferred Bitcoin multiple times to other
`anonymously held addresses to conceal the proceeds.
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`The Bitcoin remained in those addresses for years until in or about 2018, when [Mr.
`Pilipis] began converting the virtual currency proceeds into U.S. currency in order
`to spend and convert them to other assets. [Mr. Pilipis] used, spent, and converted
`the unlawful proceeds from the unlicensed money transmitting business in amounts
`exceeding $10,000, including the following:
`
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`On or about September 10, 2018, [Mr. Pilipis] purchased the
`property located at 109 South West Street, Arcadia, Indiana 46030
`for $119,454 paid from his Morgan Stanley account ending in 1245.
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`a.
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`2 FinCEN is the Financial Crimes Enforcement Network, "a bureau of the U.S. Department of the
`Treasury [whose] mission is to safeguard the financial system from illicit activity, counter money
`laundering and the financing of terrorism, and promote national security through strategic use of
`financial authorities and the collection, analysis, and dissemination of financial intelligence."
`https://www.fincen.gov/what-we-do.
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`Case 1:24-cr-00009-JMS-MKK Document 98 Filed 02/13/25 Page 4 of 21 PageID #:
`854
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`b.
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`c.
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`d.
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`e.
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`f.
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`On or about April 3, 2019, [Mr. Pilipis] purchased the property
`located at 1296 Conner Street, Noblesville, Indiana for $278,954
`paid from his Morgan Stanley account ending in 1245.
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`On or about November 8, 2019, [Mr. Pilipis] wired $20,000 from
`his Morgan Stanley account ending in 1245 to his First Merchants
`Bank account ending in 4443.
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`On or about January 30, 2020, [Mr. Pilipis] wired $28,000 from his
`Morgan Stanley account ending in 1245 to his First Merchants Bank
`account ending in 4443.
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`On or about June 25, 2021, [Mr. Pilipis] sold the property located at
`109 South West Street, Arcadia, Indiana 46030 and received
`$139,560.27 in his Bank of America account ending in 4797.
`
`On or about August 31, 2021, [Mr. Pilipis] sold the property located
`at 1296 Conner Street, Noblesville, Indiana and received
`$297,360.26 in his Bank of America account ending in 5481.
`
`
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`[Mr. Pilipis] also invested a large portion of the Bitcoin he cashed out using an
`investment account at Morgan Stanley and, through that investment account,
`realized hundreds of thousands of dollars in income in 2019 and 2020. [Mr. Pilipis]
`failed to file tax returns for Tax Years 2019 and 2020 as required by law.
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`[Filing No. 66 at 1-7.]
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`
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`Mr. Pilipis is charged with five counts of Money Laundering in violation of 18 U.S.C. §
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`1957 in connection with the April 3, 2019, November 8, 2019, January 30, 2020, June 25, 2021,
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`and August 31, 2021 transactions described above. [Filing No. 66 at 7-8.] He is also charged with
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`two counts of Willful Failure to File Tax Return in violation of 26 U.S.C. § 7203 for the calendar
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`years 2019 and 2020. [Filing No. 66 at 8-9.] Additionally, the Superseding Indictment seeks the
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`forfeiture of "any property, real or personal, involved in [the Money Laundering counts], and any
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`property traceable to such property [(the "Subject Property")]." [Filing No. 66 at 9-11.] The
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`Government has also initiated a civil forfeiture action related to two of Mr. Pilipis's bank accounts.
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`See United States v. All Funds Seized From and/or on Deposit From Morgan Stanley Accts. 658-
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`Case 1:24-cr-00009-JMS-MKK Document 98 Filed 02/13/25 Page 5 of 21 PageID #:
`855
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`091821-245 & 658-095221-245, Cause No. 1:23-cv-02081-JMS-MJD (the "Civil Forfeiture
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`Case").
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`Mr. Pilipis filed his Motion to Dismiss in this case on October 25, 2024 and seeks dismissal
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`of Counts 1 through 5 – the Money Laundering counts – only. [Filing No. 77.] The Motion to
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`Dismiss is now ripe for the Court's consideration.
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`II.
`STANDARD OF REVIEW
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`An indictment must: "(1) state[ ] the elements of the offense charged; (2) fairly inform[ ]
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`the defendant of the nature of the charge so that he may prepare a defense; and (3) enable[ ] him
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`to plead an acquittal or conviction as a bar against future prosecutions for the same offense."
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`United States v. Miller, 883 F.3d 998, 1002 (7th Cir. 2018) (quotation and citation omitted). A
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`defendant may move to dismiss an indictment pursuant to Federal Rule of Criminal Procedure
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`12(b). Specifically, Rule 12(b)(1) allows a defendant to "raise by pretrial motion any defense,
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`objection, or request that the court can determine without a trial on the merits." Further, Rule
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`12(b)(3)(B)(v) requires the defense of "failure to state an offense" to be raised "by pretrial motion
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`if the basis for the motion is then reasonably available and the motion can be determined without
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`a trial on the merits." In considering a motion to dismiss an indictment, the Court must "view all
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`facts in the light most favorable to the government." United States v. Yashar, 166 F.3d 873, 880
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`(7th Cir. 1999).
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`III.
`DISCUSSION
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`The Court notes at the outset that the Superseding Indictment charges two specified
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`unlawful activities to support the Money Laundering charges: (1) a violation of 18 U.S.C. §
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`1960(b)(1)(B), which defines "unlicensed money transmitting business" as one which "fails to
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`Case 1:24-cr-00009-JMS-MKK Document 98 Filed 02/13/25 Page 6 of 21 PageID #:
`856
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`comply with the money transmitting business registration requirements under [31 U.S.C. § 5330],
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`or regulations prescribed under such section"; and (2) a violation of 18 U.S.C. § 1960(b)(1)(C),
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`which defines "unlicensed money transmitting business" as one which "otherwise involves the
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`transportation or transmission of funds that are known to the defendant to have been derived from
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`a criminal offense or are intended to be used to promote or support unlawful activity." [See Filing
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`No. 66 at 7-8.] In order to have violated either § 1960(b)(1)(B) or § 1960(b)(1)(C),
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`AurumXchange had to have been considered a "money transmitting business." See 18 U.S.C. §
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`1960(a) (setting forth penalties for conducting, controlling, managing, supervising, directing, or
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`owning all or part of an unlicensed "money transmitting business"); 18 U.S.C. § 1960(b) (defining
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`"unlicensed money transmitting business") (emphasis added). Accordingly, the Court begins by
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`considering whether AurumXchange was a "money transmitting business" such that it could have
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`violated § 1960(b)(1)(B) or (C) and then have engaged in money laundering related to the property
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`it derived from those violations. The parties focus their arguments on § 1960(b)(1)(B), but to the
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`extent they discuss whether AurumXchange was a "money transmitting business," their arguments
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`apply with equal force to § 1960(b)(1)(C).3
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`In support of his Motion to Dismiss, Mr. Pilipis argues that § 1960(b)(1)(B) "criminalizes
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`the failure to comply with the money transmitting business registration requirements under section
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`5330 of title 31 of the Bank Secrecy Act," but argues that AurumXchange was not required to
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`3 The parties' specific arguments regarding § 1960(b)(1)(C) focus on whether the Government
`alleged in the Superseding Indictment that Mr. Pilipis knew that funds AurumXchange allegedly
`transported or transmitted were "derived from a criminal offense or [were] intended to be used to
`promote or support unlawful activity." 18 U.S.C. § 1960(b)(1)(C). [See Filing No. 80 at 7 n.2;
`Filing No. 92 at 9-10; Filing No. 96 at 7-9.] The Court need not decide that issue because, as
`discussed below, it finds that AurumXchange was not a "money transmitting business" subject to
`any of the subsections of § 1960, including § 1960(b)(1)(C).
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`Case 1:24-cr-00009-JMS-MKK Document 98 Filed 02/13/25 Page 7 of 21 PageID #:
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`register as a virtual currency exchange with FinCEN prior to March 2013 so there is no specified
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`unlawful activity to support Counts 1 through 5. [Filing No. 80 at 7-10.] Mr. Pilipis asserts that
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`prior to March 18, 2013, "it was unclear whether virtual currency sellers like [AurumXchange]
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`were required to register with FinCEN" because the term "money transmission service" as used in
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`applicable statutes only included entities who accepted currency and then transmitted the currency.
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`[Filing No. 80 at 8.] He contends that according to the Superseding Indictment, AurumXchange
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`was selling virtual currency but "did not act as a third-party intermediary, did not transmit any
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`funds from one person to another, did not utilize any banks, and was not a transmitter." [Filing
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`No. 80 at 8.] Mr. Pilipis argues further that before 2013, FinCEN had not determined whether the
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`terms "funds," "currency," or "value that substitutes for currency" included virtual currency like
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`Bitcoin, and that "[a]t the time, the legal landscape was, at best, unclear even for entities that –
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`unlike [AurumXchange] – were actually transmitting virtual currency." [Filing No. 80 at 8-9
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`(emphasis omitted).] Mr. Pilipis points to FinCEN's 2011 Final [Money Service Businesses
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`("MSB")] Rule, which he contends excluded from the definition of "money transmitter" entities
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`that "[a]ccept[ ] and transmit[ ] funds only integral to the sale of goods or the provision of services,
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`other than money transmission services, by the person who is accepting and transmitting the
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`funds." [Filing No. 80 at 9 (quotation and citation omitted).] He argues that on March 18, 2013,
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`FinCEN issued guidance (the "2013 Guidance") in response to questions raised by financial
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`institutions, law enforcement, and regulators, which expanded the "money transmitter" definition
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`to include those who "make a business of exchanging, accepting, and transmitting convertible
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`virtual currencies, like Bitcoin." [Filing No. 80 at 9-10 (quotations and citation omitted).] Mr.
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`Pilipis notes that "the 2013 Guidance was the first time FinCEN addressed virtual currencies at all
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`and the first time that it defined the term 'convertible virtual currencies.'" [Filing No. 80 at 10.]
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`He asserts that the Government cannot cite to any cases in which a virtual currency exchanger was
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`criminally charged with a violation of 18 U.S.C. § 1960(b)(1)(B) for activity that occurred before
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`March 2013 because "prior to the issuance of [the 2013 Guidance], no one believed such activity
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`was obviously criminal." [Filing No. 80 at 10-11 (emphasis omitted).] He argues further that,
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`under the Rule of Lenity, "when in doubt, ambiguity concerning the ambit of criminal statutes
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`should be resolved in favor of lenity." [Filing No. 80 at 11-21 (quotation and citation omitted).]
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`Finally, Mr. Pilipis argues that "[t]he government's actions are explainable only by a motivation to
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`forfeit [Mr.] Pilipis's Bitcoin, which is worth over 250 times more than it was in 2013." [Filing
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`No. 80 at 12.]
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`In its response, the Government argues that the facts alleged in the Superseding Indictment
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`meet § 1960's definition of "money transmitting," which is defined as "transferring funds on behalf
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`of the public by any and all means." [Filing No. 92 at 7 (quotation and citation omitted).] It asserts
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`that "[b]oth the transfers of fiat currency and the transfers of virtual currency clearly constitute the
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`transmission of 'money' or 'funds.'" [Filing No. 92 at 8.] The Government also argues that
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`AurumXchange falls within the definition of "money services business"4 set forth in 31 U.S.C. §
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`5330(d)(1)(A) because that definition includes "any person who engages as a business in an
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`informal money transfer system or any network of people who engage as a business in facilitating
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`the transfer of money domestically or internationally outside of the conventional financial
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`institutions system." [Filing No. 92 at 9 (quotation and citation omitted).] The Government
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`contends that because the Superseding Indictment sufficiently charges that Mr. Pilipis violated §
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`1960, it need not also charge that he violated FinCEN regulations but, in any event, "[t]he FinCEN
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`4 Section 5330(d)(1)(A) defines "money transmitting business," so the Court surmises that the
`Government's reference to "money services business" is a typographical error.
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`Case 1:24-cr-00009-JMS-MKK Document 98 Filed 02/13/25 Page 9 of 21 PageID #:
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`regulations clearly apply to [Mr. Pilipis's] actions alleged in the superseding indictment, and
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`extended not just to fiat currencies, but also virtual currencies." [Filing No. 92 at 11.] It argues
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`that the FinCEN regulations "make clear that the [registration] requirement applies to any entity
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`falling within one of the categories of 'money services business'" and that by 2009, "at least one
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`court had already ruled that the regulations in place at the time applied to virtual currencies."
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`[Filing No. 92 at 11-12 (citation omitted).] The Government asserts that in 2011, FinCEN issued
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`a Final Rule in order to "reflect…evolving technologies," which "made it explicit that companies
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`that transmit 'value that substitutes for currency' fell under the regulatory definition of a money
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`transmitter." [Filing No. 92 at 12-13 (citation and quotation omitted).] It argues that Mr. Pilipis's
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`reliance on FinCEN's 2013 Guidance is misplaced because the Superseding Indictment does not
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`refer to the 2013 Guidance and his "argument that FinCEN intended to create new law or liability
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`by issuing the 2013 Guidance is without merit and has already been rejected by the courts." [Filing
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`No. 92 at 14-15.] The Government contends that the 2013 Guidance "merely reasserts what the
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`FinCEN Regulations themselves already made clear – that the definition of a money transmitter
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`does not differentiate between real currencies and convertible virtual currencies" – and cites to
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`cases that it argues "rejected the argument that the 2013 Guidance is what criminalized the
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`defendant's conduct." [Filing No. 92 at 16-17 (quotation and citations omitted).] Finally, the
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`Government argues that the Rule of Lenity does not apply because "there is no irreconcilable
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`ambiguity in §§ 1960 or 5330." [Filing No. 92 at 18.]
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`In his reply, Mr. Pilipis argues that the Government misstates the definition of "money
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`transmitter" in the 2011 Final Rule and also does not acknowledge Limitation F contained in the
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`2011 Final Rule, which excluded from the definition of "money transmitter" an entity that
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`"[a]ccepts and transmits funds only integral to the sale of goods or the provision of services, other
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`than money transmission services, by the person who is accepting and transmitting the funds."
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`[Filing No. 96 at 2 (quotation and citation omitted).] He asserts that "[n]ot until 2013 was the
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`simple commercial sale of Bitcoin regulated by FinCEN under the newly minted 2013 definition
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`for a convertible virtual currency 'exchanger,' a new sub-type of MSB financial institution defined
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`by FinCEN in the 2013 Guidance." [Filing No. 96 at 3.] Mr. Pilipis reiterates that the 2013
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`Guidance is relevant because it stated that it was issued to clarify the application of regulations
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`implementing the Bank Secrecy Act to people exchanging virtual currencies. [Filing No. 96 at 3.]
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`He notes that the Department of Justice's Asset Forfeiture Policy Manual cites only to the 2013
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`Guidance and argues further that the cases the Government relies upon in its response "involved
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`either: (1) defendants who were 'money transmitters' under the 2011 definition (and not mere
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`exchangers); or (2) activity that took place after the 2013 Guidance and after the defendant would
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`have had notice of the change in definition" or "the defendant was also charged with a substantive
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`violation of 18 U.S.C. § 1960." [Filing No. 96 at 4-5.] Mr. Pilipis asserts that "[c]ontrary to the
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`government's continued declarations to the contrary, this is a never-before-seen case and there is
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`a reason for that – it is legally deficient." [Filing No. 96 at 7.]
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`18 U.S.C. § 1960 provides in relevant part:
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`(a) Whoever knowingly conducts, controls, manages, supervises, directs, or
`owns all or part of an unlicensed money transmitting business, shall be fined in
`accordance with this title or imprisoned not more than 5 years, or both.
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`(b)
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`As used in this section –
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`
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`the term "unlicensed money transmitting business" means a money
`(1)
`transmitting business which affects interstate or foreign commerce in any
`manner or degree and –
`
`
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`*
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`*
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`*
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`(B) fails to comply with the money transmitting business
`registration requirements under [31 U.S.C. § 5330], or regulations
`prescribed under such section; or
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`(C) otherwise involves the transportation or transmission of
`funds that are known to the defendant to have been derived from a
`criminal offense or are intended to be used to promote or support
`unlawful activity.
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`18 U.S.C. § 1960 (emphasis added). Section 1960(b)(2) defines "money transmitting" to include
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`"transferring funds on behalf of the public by any and all means including but not limited to
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`transfers within this country or to locations abroad by wire, check, draft, facsimile or courier." 18
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`U.S.C. § 1960(b)(2).
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`
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`The version of 31 U.S.C. § 5330 in effect at the time the acts alleged in the Superseding
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`Indictment occurred provided in relevant part:
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`Registration with Secretary of the Treasury required. –
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`In general. – Any person who owns or controls a money transmitting
`(1)
`business shall register the business (whether or not the business is licensed
`as a money transmitting business in any State) with the Secretary of the
`Treasury [as provided for in the statute].
`
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`*
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`*
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`*
`(d) Definitions. – For purposes of this section, the following definitions shall
`apply:
`
`(a)
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`
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`(1) Money transmitting business. – The term "money transmitting
`business" means any business other than the United States Postal Service
`which –
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`Provides check cashing, currency exchange, or money
`(A)
`transmitting or remittance services, or issues or redeems money
`orders, travelers' checks, and other similar instruments or any other
`person who engages as a business in the transmission of funds,
`including any person who engages as a business in an informal
`money transfer system or any network of people who engage as a
`business in facilitating the transfer of money domestically or
`internationally outside of the conventional financial institution
`system;
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`(B)
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`is required to file reports under section 5313; and
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`(C)
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`31 U.S.C. § 5330(d)(1) (eff. Oct. 26, 2001 to Dec. 31, 2020). "Money transmitting service," as
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`is not a depository institution (as defined in section 5313(g)).
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`referred to in § 5330(d)(1)(A), was defined as:
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`[A]ccepting currency or funds denominated in the currency of any country and
`transmitting the currency or funds, or the value of the currency or funds, by any
`means through a financial agency or institution, a Federal reserve bank or other
`facility of the Board of Governors of the Federal Reserve System, or an electronic
`funds transfer network.
`
`31 U.S.C. § 5330(d)(2) (eff. Oct. 26, 2001 to Dec. 31, 2020).
`
`The crux of Mr. Pilipis's argument is that: (1) AurumXchange does not fit within the
`
`definition of "money transmitting service" – and, therefore, was not a "money transmitting
`
`business" subject to § 1960 – because it only "conduct[ed] a purchase or sale with its customer,"
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`and did not "act as a third-party intermediary, did not transmit any funds from one person to
`
`another, did not utilize any banks, and was not a transmitter"; and (2) even if AurumXchange was
`
`a "money transmitting service," it was not clear that § 1960 applied to the transmission of virtual
`
`currency. [Filing No. 80 at 8-9.] The crux of the Government's argument is that: (1) in order to
`
`be a "money transmitting business," AurumXchange does not have to be a "money transmitting
`
`service," but can be "any person who engages as a business in an informal money transfer system
`
`or any network of people who engage as a business in facilitating the transfer of money
`
`domestically or internationally outside of the conventional financial institute system," which
`
`AurumXchange did; and (2) it was clear that § 1960 applied to the transmission of virtual currency
`
`during the time frame that AurumXchange was operating. [Filing No. 92 at 9 (quotation and
`
`citation omitted); Filing No. 92 at 14-19.]
`
`
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`Case 1:24-cr-00009-JMS-MKK Document 98 Filed 02/13/25 Page 13 of 21 PageID #:
`863
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`The Superseding Indictment charges that AurumXchange exchanged virtual currencies for
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`other virtual currencies or for fiat currencies, and exchanged fiat currencies for virtual currencies,
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`and that this constituted acting as a "money transmitting business" for purposes of § 1960. [See
`
`Filing No. 66 at 1-3.] Mr. Pilipis seizes on the portion of the definition of "money transmitting
`
`business" in the statute that includes a "money transmitting service," arguing that AurumXchange
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`did not "transmit" anything. [Filing No. 80 at 8.] The Government focuses on other portions of
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`the definition of "money transmitting business." [Filing No. 92 at 9.] Below, the Court considers
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`each component of the definition of "money transmitting business" in effect at the time the
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`activities that are the subject of the Superseding Indictment occurred.
`
`A.
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`"Money Transmitting Service"
`
`The Superseding Indictment alleges that:
`
`• For a customer exchanging virtual currency for virtual currency, the customer
`would transfer virtual currency from their virtual currency account to a virtual
`currency account controlled by Mr. Pilipis. For a fee, Mr. Pilipis would then
`transfer a different virtual currency to the customer's virtual currency account.
`
`• For a customer exchanging virtual currency for fiat currency, the customer
`would transfer virtual currency from their virtual currency account to a virtual
`currency account controlled by Mr. Pilipis. For a fee, Mr. Pilipis would then
`transfer fiat currency to the customer through AurumXchange by:
`
` o
`
`
`
`
`
`the customer purchasing an instant load debit card from AurumXchange,
`which Mr. Pilipis would then load with fiat currency and mail to the
`customer; or
`
`o sending a wire transfer of fiat currency directly to the customer's account.
`• For a customer exchanging fiat currency for virtual currency, the customer
`would send cash and/or wire transfers of fiat currency to an account controlled
`by Mr. Pilipis. For a fee, Mr. Pilipis would then transfer virtual currency from
`a virtual currency account controlled by Mr. Pilipis into the customer's virtual
`currency account.
`
`[Filing No. 66 at 4-5.]
`
`
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`Case 1:24-cr-00009-JMS-MKK Document 98 Filed 02/13/25 Page 14 of 21 PageID #:
`864
`
`A "money transmitting service" – as defined in the version of 31 U.S.C. § 5330(d)(2)
`
`effective at the time of the activities described in the Superseding Indictment – is an entity that
`
`engages in "accepting currency or funds denominated in the currency of any country and
`
`transmitting the currency or funds, or the value of the currency or funds, by any means through a
`
`financial agency or institution, a Federal reserve bank or other facility of the Board of Governors
`
`of the Federal Reserve System, or an electronic funds transfer network." 31 U.S.C. § 5330(d)(2)
`
`(eff. Oct. 26, 2001 to Dec. 31, 2020). The Superseding Indictment alleges that Mr. Pilipis used
`
`wire transfers to accomplish some exchanges of virtual currency for fiat currency. [See Filing No.
`
`66 at 4 (Superseding Indictment alleging that in order to exchange a customer's virtual currency
`
`for fiat currency, Mr. Pilipis would sometimes "send wire transfers of fiat currency directly to
`
`customer accounts")]. The use of financial institutions for the wire transfers might suggest that
`
`AurumXchange was a "transmitter." See also 18 U.S.C. § 1960(b)(2) (defining "money
`
`transmitting" as "transferring funds on behalf of the public by any and all means including but not
`
`limited to transfers within this country or to locations abroad by wire, check, draft, facsimile, or
`
`courier"). But in order to be a "money transmitting service," AurumXchange still had to be
`
`accepting "currency or funds denominated in the currency of any country" from a customer. 31
`
`U.S.C. § 5330(d)(2) (eff. Oct. 26, 2001 to Dec. 31, 2020). In considering whether virtual currency
`
`fell within that scope during the time frame that AurumXchange was operating, the Court finds
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`FinCEN's 2013 Guidance particularly significant.
`
`
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`Case 1:24-cr-00009-JMS-MKK Document 98 Filed 02/13/25 Page 15 of 21 PageID #:
`865
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`Specifically, the 2013 Guidance provides a picture of the world's view of cryptocurrency
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`prior to that time.5 FinCEN noted that the 2013 Guidance was to "clarify the applicability of the
`
`regulations implementing the Bank Secrecy Act…to persons creating, obtaining, distributing,
`
`exchanging, accepting, or transmitting virtual currencies." [Filing No. 77-2 at 1.] It went on to
`
`state that for de-centralized virtual currencies like Bitcoin, "(1) that has no central repository and
`
`no single administrator, and (2) that persons may obtain by their own computing or manufacturing
`
`effort":
`
`[A] person that creates units of convertible virtual currency and sells those units to
`another person for real currency or its equivalent is engaged in transmission to
`another location and is a money transmitter.
`
`[Filing No. 77-2 at 5.] This approach is reflected in the Anti-Money Laundering Act of 2020,
`
`when Congress expanded the definition of "Money transmitting business" to include "any other
`
`person who engages as a business in the transmission of currency, funds, or value that substitutes
`
`for currency." 31 U.S.C. § 5330(d)(1)(A) (eff. Jan. 1, 2021). The 2013 Guidance suggests th