$25,000 in Bitcoin Seized from Alleged Software Scam Operator

A cache of bitcoins and litecoins has been seized by federal law enforcement officials as part of an investigation into alleged counterfeit software sales and distribution.

Approximately 105 BTC and 900 LTC were cited in a civil forfeiture that included more than $7m, hundreds of gold and silver bars and coins, and a number of luxury items including sports cars, wedding rings and a diamond-encrusted Rolex.

The operation involved a number of companies based in Missouri, Nevada, Washington state and Maryland. The digital currency holdings were confiscated from Rex Yang, a Seattle-based business operator who allegedly sold $1.4m in stolen codes.

In a separate filing, US law enforcement officials placed a restraining order on a number of buildings in Seattle owned by or tied to Yang, as well as additional $2.2m in funds.

The filing reads:

"The defendants bitcoin and litecoin, which are virtual currencies, were seized on December 10, 2014, at the residence of Yang in Seattle, Washington. As of January 22, 2015, the bitcoin had a value of $25,087.29 and the litecoin had a value of $1,269.87."

The investigation into a group of individuals suspected of selling fraudulent software codes and digital media was filed on 30th January, according to court documents filed in the US District Court for the Western District of Missouri.

Digital currency tied to software scam

The court documents state that the bitcoins seized were purchased from Coinbase through a Wells Fargo bank account tied to a company owned by Yang and others involved with the alleged scheme called Technolutions.

Seized on 10th December, the digital currency holdings were linked, according to the filing, to the "illegal sale of software".

While the filing doesn't outline how the bitcoins and litecoins were used to facilitate the alleged scheme, purchases of both cryptocurrencies were debited to the Yang-owned Wells Fargo account 20 times between 10th December, 2013 and 30th September, 2014.

A Department of Justice spokesperson declined to comment on the seizure of Yang’s digital currency holdings, telling CoinDesk:

“Because this is a case that is at least indicated to the court that there is a potential criminal investigation ongoing as well, it’s really not appropriate for us to make any comment on the case at this time.”

Controversial practice

Civil forfeiture has become an increasingly controversial practice in the US because of its legal nature and the prevalence of "policing for profit", by which civil forfeiture is used as a funding mechanism for American police forces.

Critics of the policy say law enforcement officials are given too much discretion when conducting civil forfeitures. Efforts on the state and federal level are underway to reform the practice, though some question whether or not loopholes exist that give police forces leeway to seize assets during investigations.

The best-known case of the civil forfeiture of bitcoins dates to the confiscation of holdings from Ross Ulbricht and the now-defunct Silk Road marketplace, who earlier this month was found guilty of drug trafficking, money laundering and computer hacking charges.

Police officer image via Shutterstock

Civil No. 15-0079-CV-W