The Australian Federal Police arrested a 27-year bitcoin exchange operator for running a drug distribution ring.
Joint AUSTRAC and @AusFedPolice media release: One man charged and two cryptocurrency businesses suspended following organised crime investigation https://t.co/dbF6jNK4FT— AUSTRAC (@AUSTRAC) March 8, 2019
A 27-year-old Bulleen man has been arrested during the second phase of an Australian Federal Police (AFP) investigation into an organised crime syndicate. Following the arrests, AUSTRAC suspended the registrations of two digital currency exchange businesses the man is associated with.
The initial phase of the investigation led to two men being charged for drug trafficking offences in October 2017. The AFP continued its investigation into those responsible for allegedly importing border controlled drugs via international mail into Melbourne.
On Thursday, 7 March 2019, AFP officers executed search warrants in the Melbourne suburbs of Bulleen, Templestowe Lower and Malvern, seizing steroids, Australian currency and cryptocurrency related items.
The 27-year-old Bulleen man was subsequently arrested and charged with importing, trafficking and possessing a total of approximately 30 kilograms of drugs, such as MDMA, cocaine, methamphetamine and ketamine.
Police will allege in court that the 27-year-old played a key role in directing the operations of the criminal syndicate, which used various dark net sites, bitcoin accounts and legitimate business for the sourcing, payment and distribution of the illicit drugs.
In a separate action, the AFP-led Criminal Assets Confiscation Taskforce (CACT) successfully sought the restraint of assets related to the investigation. Orders were obtained from the County Court of Victoria to restrain property valued in excess of $2 million.
This included several bank accounts, real estate properties, motor vehicles, a motorbike, cash and cryptocurrency. The restraining orders were made under the Proceeds of Crime Act 2002 (Cth.)
Following the arrests, AUSTRAC suspended the registration of two digital currency exchange businesses where the man was a key member, removing their ability to continue to conduct business.
AFP Detective Superintendent Paul Hopkins said targeting assets allowed authorities to remove the profit motivation that drives most criminal activity.
“When you take the profit out of crime, you hit offenders where it hurts most. Combined with serious criminal charges attracting long prison sentences, this highlights how trafficking drugs is simply not worth it in the long-run,” Detective Superintendent Hopkins said.
“Investigations such as this are inherently complex and the operational results achieved by the investigative team are a testament to good police work and strong interagency cooperation.”
AUSTRAC National Manager, Regulatory Operations, Dr Nathan Newman, said that this outcome demonstrates the close collaboration between AUSTRAC and the AFP.
Dr. Nathan Newman, the national manager of AUSTRAC, reminded the drug offenders that their complex investigation process was sufficient in tracking crimes that use digital currencies as a shield. He said:
“AUSTRAC’s role is to deter and disrupt criminal exploitation of Australia’s financial system and we take swift action where there is a reasonable risk of compromise. Our decision to suspend the registration of the two businesses means they can no longer lawfully operate.”
Dr. Newman said that they had given enough time and opportunity to cryptocurrency exchanges to comply with their amended Anti-Money Laundering and Counter-Terrorism Financing Act 2006. However, in light of the recent events, it has become even more necessary for them to register their business, report suspicious transactions, implement know-your-customer, notify over-threshold cash transactions, and comply with record-keeping requirements.
“It’s important that digital currency exchange providers meet their obligations so we can identify any instances of criminal activity using their services to launder money, fund terrorism or commit other serious crimes,” Dr. Newman stated.
At the same time, the investigation could now progress towards people who purchased drugs from the arrested 27-year old man. If they were careless, the AFP could still trace their bitcoin transactions back to their public accounts. In conclusion, Bitcoin is not privacy-centric and its use in darknet – as many global enforcement agencies believe – is highly overrated.
The man appeared before the Melbourne Magistrates Court on Thursday, 7 March 2019 charged with:
- One count of importing a commercial quantity of a border controlled drug into Australia, namely MDMA contrary to section 307.1(1) of the Criminal Code (Cth). The maximum penalty for this offence is life imprisonment.
- Two counts of importing marketable quantities of border controlled drugs into Australia, namely cocaine and ketamine contrary to section 307.2 (1) of the Criminal Code (Cth). The maximum penalty for this offence is 25 years imprisonment.
- One count of trafficking a marketable quantity of a controlled drug, namely MDMA contrary to section 302.3(1) of the Criminal Code (Cth). The maximum penalty for this offence is 25 years imprisonment.
- Four counts of trafficking controlled drugs, namely cocaine, methamphetamine, MDMA and ketamine contrary to section 302.4(1) of the Criminal Code (Cth). The maximum penalty for this offence is 10 years imprisonment.
- Three counts of possessing commercial quantities of border controlled drugs, namely MDMA, methamphetamine and MDA contrary to section 307.8(1) of the Criminal Code (Cth). The maximum penalty for this offence is life imprisonment.
- Three counts of possessing marketable quantities of border controlled drugs, namely heroin, ketamine and cocaine contrary to section 307.9(1) of the Criminal Code (Cth). The maximum penalty for this offence is 25 years imprisonment.
