Bitcoin worth over $1 million has been confiscated by a judge in Canada’s Supreme Court.
This ruling came after it was found the accused, Matthew Phan, had been using Bitcoin to purchase illegal items such as weapons and drugs on the dark web.
A total of 281.14 BTC was seized and Phan was charged with attempting to import a gun and possession of illicit substances, including cocaine, PCP and ketamine.
Authorities analysed the man’s computer and found clear evidence of him using Bitcoin to finance the dark web escapades.
A forfeiture hearing in February drove the decision, wherein Phan argued that over half of the Bitcoin was not used for the illegal transactions.
This led to him fighting the forfeiture order, on the basis that he was using it for trading on various exchange platforms.
Nabbing a dark web dealer
Phan was arrested in late 2015 after being the subject of a tip-off to Toronto police.
This was a part of a sting operation conducted by an agent working for the United States government.
When Phan tried to order a Glock pistol on a dark web site called Agora, the agent, posing as the seller, sent him a flare gun instead.
This, coupled with the tip off, resulted in Phan being nabbed by the police.
After obtaining a search warrant for his house, law enforcement officials found “thousands of grams” of illicit substances such as marijuana, cocaine, ketamine, MDEA and various appliances used for trafficking narcotics.
It was at this point the man’s Bitcoin was seized, in what was the first case of Canadian authorities seizing cryptocurrency from a criminal.
They were then classified as the proceeds of Phan’s crimes, leading to the need for an approval of a forfeiture order.
When he appeared in court to fight the order, Phan argued that he also used the cryptocurrencies to trade gold bars online. However, there was no proof of his transactions used to trade gold.
He went on to state that he bought the Bitcoins in 2012, where they were priced around $10 each. Today, his stash is valued at $1.9 million, making this forfeiture one of the biggest moves of the Canadian government towards restricting the spread of Bitcoin for illegal purposes.
A landmark case
To get an expert opinion on the case, the judge brought in David Jevans, the founder and CEO of a company known as CipherTrace Inc.
This is a US-based company that performs tracing operations on cryptocurrency transactions to notice illegal activities.
Jevans stated in his report that Phan was indeed dealing on the dark web using Bitcoin, after performing transactional analysis of the accused’s wallet addresses.
In an email to Canadian press, Dwayne King, a former Toronto financial crimes officer, said: “(The case) forced agencies to start thinking about cryptocurrency investigations as a reality more than a possibility.”
This was also due to the involvement of CipherTrace which was instrumental in securing the forfeiture order.
The movement of the case also represents a shifting attitude of regulators towards Bitcoin and cryptocurrencies, to the point where they are not only being looked at as evidence, but also as assets that can be seized.