United States v. Faiella

The United States charged Robert Faiella (defendant) with operating an illegal money-transmitting business in violation of 18 U.S.C. § 1960. The charge arose from Faiella’s alleged role in selling Bitcoin on the Silk Road website. At some point, Faiella told the Silk Road’s operator that Bitcoin exchanges had to be licensed and that Faiella feared law-enforcement seizure of his funds. Faiella moved to dismiss the indictment, arguing that, under § 1960, (1) Bitcoin was not money, (2) operating a Bitcoin exchange did not constitute transmitting money, and (3) Faiella was not a money transmitter pursuant to a Treasury Department Financial Crimes Enforcement Network (FinCEN) rule (codified at 31 C.F.R. § 1010.100(ff)(5)(ii)(F)) stating that a person involved in the sale of goods or services was not a money transmitter. In addition, Faiella asserted that the rule of lenity precluded the charges against him because the charges represented a novel and unanticipated construction of § 1960. With respect to his second argument, Faiella claimed that he did not engage in money-transmission services because he merely sold Bitcoin as a product. The United States responded that Faiella’s Bitcoin transactions involved the transfer of Bitcoin to his customers’ Silk Road accounts; the United States further argued that these were transfers to third-party agents because Faiella’s customers did not have full control over such Bitcoin due to the Silk Road’s ability to block or seize user funds. Thus, according to the United States, Faiella transmitted money.