The first Bitcoin bust, administered by the US Drug Enforcement Administration, lead to South Carolina man Eric Daniel Hughes for buying drugs on Silk Road. The government is releasing few details right now, but the DEA stated that it seized 11.02 Bitcoins from Hughes, which converts to $814. Charleston, South Carolina, police charged Hughes in June for distributing marijuana and prescription pills.
Police raided the suspect’s house and found an additional 10 bags of Suboxone, various white powders and pills, and a loaded pistol among other items.
The Deep, Deep Internet
Most people will only ever see the Internet in its typical form—the everyday face of the Internet that we all know and love. However, just beneath its surface exists a deep, dark Internet full of black market websites like Silk Road. It was here where the first Bitcoin bust took place. According to Hughes’s affidavit, undercover officials completed two transactions in April where the suspect sold drugs in an online sting operation.
Regarding Silk Road and the Deep Internet, DailyMail.co.uk Member Opine comments on the situation:
Your going to start hearing a lot more about the Deep Web, its where all the naughty, nasty and downright evil hang out, and these bit-coins are really nasty, they are use to pay for everything from drugs, illegal guns, child porn, and anything illegal because they are as untraceable as cash, well actually even less traceable, its all dressed up as nice and legal but you dig just below the surface and all the rotten smell start coming up…Its an evil place with evil people in it doing evil things. the thing is that most people never see what is right under their nose, there are sub-cultures underneath the surface of life that go totally with out notice unless you are in them or work through them, it is quite scary what we don’t know is going on, and I don’t mean the government, they dabble but they just catch the careless, there are no ‘good’ criminals in prison, just the careless and the foolish. [sic]
It is unclear how authorities seized Hughes’s bitcoins as they are a nontangible item. However, there have been many assumptions made. According to LetsTalkBitcoin.com, the DEA likely used the word seizure “to imply that the money was received in the process of a Silk Road sting operation, rather than actually seized the bitcoin user’s wallet.” Meanwhile, DailyMail.co.uk states the police could have also used Hughes’s wallet to make a transaction to confiscate the bitcoins.
Was the First Bitcoin Bust a Result of Liberty Reserve?
Back in May, US authorities indicted Liberty Reserve—a digital currency and money-transfer business that allegedly laundered more than $6 billion through 55 million transactions over seven years. The payment service provider allowed criminals to create accounts under blatantly-fictitious names and supported illegal and unregulated industries such as stolen credit card data, Ponzi schemes, computer hackers, gambling, drug dealing, investment fraud, and child pornography.
However, many believed that the Liberty Reserve indictment would lead to disaster for Bitcoins. Was the first Bitcoin bust a result of Liberty Reserve? Will authorities shut down Bitcoins temporarily or even indefinitely? Although it was a known fact that Bitcoins were used for both legal and illegal purposes, at the time there was no evidence that proved users sold and purchased illegal goods and services—until now.
Did the Winklevoss Twins Enter the Bitcoin World Too Soon?
According to CNBC, the Winklevoss twins told The New York Times that they invested $11 million into the Bitcoin world. The two also encourage Bitcoin to seek government regulations to protect the integrity of the digital currency.
“Regulations will help give creditably to bitcoin,” said Cameron Winklevoss during a panel discussion at the NExT conference in New York, “which has a reputation of being used by criminals laundering dirty money.”
When it comes to the payments industry, government regulations are imperative when ensuring trusted, honest transactions—especially in the online payments industry. They will also help to ensure the form of legal tender will not collapse due to illegal transactions. Cameron Winklevoss believes regulations will only help Bitcoins, but perhaps the Winklevoss twins should have sought regulations prior to such a hefty financial investment.
Bitcoin ATMs to Hit the Pavement
Lamassu, the first maker of an ATM machine that accepts Bitcoins, predicts many will begin pre-ordering his cash machine sometime during the summer. However, was Co-founder Zach Harvey a little pre-mature when making that assumption? With the future of Bitcoin in the air, investors in technology and the currency itself may find themselves at a loss—a very expensive financial loss.
Stick to Credit Cards and Cash
Many users purchase illegal goods with Bitcoins, but many merchants also sell legal goods while accepting this digital currency. The instability of the Bitcoin world, with the first Bitcoin bust as proof, makes it difficult to know if accepting Bitcoins is worth the hassle.
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