The U.S. Department of Justice (DOJ) has charged the operator behind the former cryptocurrency exchange AurumXchange, Maximiliano Pilipis, with allegedly laundering money for the notorious dark web marketplace Silk Road. The department released a press statement on October 28 disclosing this information.
Federal prosecutors have accused Pilipis of managing the unlicensed exchange AurumXchange from 2009 to 2013, handling funds purportedly related to Silk Road sales without obtaining a license to conduct payment business. According to the DOJ charges, he could face up to 10 years in prison.
AurumXchange's Connection to Silk Road and Alleged Circumvention of Federal Regulations
Prosecutors claim that the 53-year-old Pilipis facilitated over $30 million in transactions through his unlicensed cryptocurrency exchange AurumXchange, including 10,000 Bitcoins—valued at approximately $1.2 million at the time of the transactions.
The DOJ's statement alleges that Pilipis did not register AurumXchange with the U.S. Department of Treasury, thereby bypassing anti-money laundering (AML) and counter-terrorism financing (CTF) compliance requirements. Authorities have accused Pilipis of also neglecting to implement standard "Know Your Customer (KYC)" protocols, which are crucial in preventing crime through financial channels.
AurumXchange operated during the 2011-2013 period when the dark web marketplace Silk Road was at its most active, until its shutdown. Between 2011 and 2013, Silk Road operated on the Tor network, allowing users to trade drugs and other products anonymously. Ross Ulbricht created Silk Road with the primary aim of establishing a dark web trading market, which became an underground black market predominantly known for selling illegal goods, especially drugs.
AurumXchange abruptly dissolved after the 2013 closure of Silk Road, sparking DOJ suspicions about the link between the two platforms. The U.S. DOJ stated that transactions through AurumXchange included funds traceable to accounts linked to Silk Road, indicating Pilipis's exchange was involved in dark web activities.
Asset Concealment and Real Estate Purchases After AurumXchange's Closure
The DOJ claims that after the closure of AurumXchange, Pilipis took steps to hide his financial gains by transferring cryptocurrency assets through various accounts. Court documents state that he converted Bitcoin into U.S. dollars and used these funds to make significant real estate investments in Indiana, purchasing properties in Arcadia and Noblesville.
Furthermore, the U.S. DOJ alleges that in the years following AurumXchange's closure, Pilipis also generated considerable income, particularly in 2019 and 2020. However, despite these earnings, he allegedly failed to file tax returns, forming another basis for the current charges against him. A federal grand jury has indicted Pilipis on five counts of money laundering and two counts of willfully failing to file a tax return.
The DOJ further stated its zero tolerance for the illegal use of crypto assets, indicating that violators would face severe consequences.
Statement from Federal Prosecutor Zachary A. Myers
Zachary A. Myers, the U.S. Attorney for the Southern District of Indiana, said: "Combatting the criminal misuse of cryptocurrencies and other digital assets is a critical priority for the Department of Justice."
Myers also noted that the DOJ is working in cooperation with other federal law enforcement agencies to investigate and prosecute offenders.
If convicted, Pilipis could face up to 10 years of federal imprisonment and a fine of approximately $250,000. A federal district court judge will determine the sentence based on U.S. Sentencing Guidelines and other related factors.
U.S. Supreme Court Refusal to Hear Silk Road Seized Bitcoin Hearing
This case is the latest in a series of legal actions related to Silk Road, with the Supreme Court recently indirectly addressing the issue. Early in October, the U.S. Supreme Court declined to hear a case involving 69,370 Bitcoins seized from Silk Road, valued at around $4.38 billion.
Battle Born Investments, a private entity, claimed ownership of these Bitcoins and sought court review for asset acquisition, arguing it had legal rights through bankruptcy proceeds. However, the Supreme Court's refusal left the government's control over the cryptocurrency unchallenged, paving the way for potential future sales of the seized Bitcoins.