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Silk Road’s logo

Last week, the IRS issued new tax guidance for bitcoin, stating that the virtual currency was a form of property rather than currency. While the decision is still controversial in bitcoin circles, at least one high-profile bitcoin user appears to be delighted with the policy: Accused Silk Road mastermind Ross Ulbricht.

In a new filing submitted by his attorney to the District Court of the Southern District of New York, Ulbricht’s team asks that all “money laundering” charges relating to the case be dropped. If the IRS has definitively ruled that bitcoin isn’t “money,” the filings explain, then existing laws about money laundering do not apply to bitcoin.

Count Four, which alleges money laundering, is defective because it fails to allege sufficiently an essential element of the offense – that Mr. Ulbricht engaged in, or conspired to engage in, “financial transactions” – as Bitcoin, the alleged “payment system that served to facilitate the illegal commerce conducted on the site,” does not constitute either “funds” or a “monetary instrument, either of which is a necessary component of “financial transaction.”

Even if the court agrees with defense attorney Joshua Dratel’s motion and dismisses the money laundering charges specific to bitcoin, other charges in the case may still apply. As Wired reports:

The other charges are a narcotics conspiracy charge, one count of running a criminal enterprise, and one count of conspiracy to commit computer hacking. Dratel, in his motion to dismiss, is asking those counts to be thrown out on the grounds that the laws are unconstitutionally vague and have been misapplied to the case, since they do not cover Ulbricht’s alleged conduct. He further asserts that the term “access without authorization” in the computer hacking charge is “undefined.” … If he were to win the motion, Ulbricht would still face serious charges in a separate federal indictment in Maryland.

Should the bitcoin-related charges be dropped, the fate of the 144,000 BTC seized from Ulbricht as part of the case is also unclear.

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