A federal judge in the Southern District of New York delivers a ruling that reverberates far beyond the courtroom. In the case of United States v. Murgio, the court determines that Bitcoin qualifies as “funds” under federal law — a decision that carries enormous implications for how cryptocurrencies are regulated, prosecuted, and ultimately understood within the American legal system.
TL;DR
- Federal court in New York rules Bitcoin constitutes “funds” under 18 USC § 1960, rejecting defense arguments that cryptocurrency falls outside money transmission laws
- Defendant Anthony Murgio accused of running Coin.mx, an unlicensed Bitcoin exchange linked to the massive JP Morgan data breach
- Coin.mx operated through fake fronts including “Collectables Club” to deceive banks about the nature of its transactions
- The exchange allegedly facilitated ransomware payments by helping victims convert cash to Bitcoin
- Ruling conflicts with a Florida state court decision that declared Bitcoin is not money, creating a deepening legal patchwork
The Coin.mx Saga: A Bitcoin Exchange Hiding in Plain Sight
The case centers on Anthony R. Murgio, a Florida-based operator of Coin.mx, an unlicensed Bitcoin exchange that ran from 2013 until its shutdown amid federal charges. According to prosecutors, the operation was anything but straightforward. Coin.mx processed transactions through a federal credit union and disguised its activities behind several fake business fronts, most notably one called “Collectables Club.” The ruse was designed to trick financial institutions into believing the business was a members-only community interested in stamps and other collectibles rather than cryptocurrency trading.
The scope of the alleged criminal enterprise extended well beyond unlicensed money transmission. Prosecutors tie Coin.mx to Gery Shalon, an Israeli national accused of masterminding a massive hacking operation alongside Ziv Orenstein and Maryland-born Joshua Samuel Aaron. According to the indictment, this criminal enterprise hacked into the networks of a dozen companies and stole personal data belonging to more than 100 million people — including the infamous JP Morgan breach that compromised tens of millions of customer records.
Murgio himself was not directly accused of the hacking offenses, but prosecutors argued that Coin.mx served as a critical financial infrastructure for the broader criminal network. The exchange charged fees for converting cash to Bitcoin and, crucially, did business with individuals it knew might be engaged in criminal activity.
The Ruling That Defines Bitcoin as Money
At the heart of the September 2016 ruling is a fundamental question: does Bitcoin count as “funds” under federal law? Murgio’s defense team argued that because Bitcoin is a decentralized digital currency, not issued by any government, it falls outside the scope of 18 USC § 1960, the federal statute that criminalizes operating an unlicensed money transmitting business.
The court disagrees emphatically. In a memorandum and order filed in the Southern District of New York, the judge rules that “Bitcoins are funds within the plain meaning of that term.” The decision means that anyone operating a Bitcoin exchange in the United States without proper licensing is potentially violating federal law — regardless of whether the currency in question is issued by a central bank.
This ruling carries immediate practical consequences. Bitcoin exchanges operating in the United States must comply with the same registration and anti-money laundering requirements as traditional money services businesses. Failure to do so exposes operators to federal prosecution under statutes that carry significant prison sentences.
A Conflicting Legal Landscape Emerges
The New York ruling does not exist in a vacuum, however, and it directly contradicts another judicial opinion issued months earlier. In a Florida state court case, a judge had ruled that Bitcoin is not money under state law, creating a confusing split between state and federal jurisdictions.
This legal patchwork creates significant uncertainty for cryptocurrency businesses trying to operate within the law. Depending on which court has jurisdiction and which specific statute is at issue, Bitcoin might be treated as money, as property, as a commodity, or as something else entirely. The lack of consistent legal definition at the federal level leaves businesses, regulators, and law enforcement to navigate a patchwork of sometimes contradictory rulings.
The Commodity Futures Trading Commission has already classified Bitcoin as a commodity under the Commodity Exchange Act. The Internal Revenue Service treats it as property for tax purposes. The Financial Crimes Enforcement Network requires Bitcoin businesses to register as money services businesses. Each agency applies its own framework, and the September 2016 Murgio ruling adds yet another layer to this already complex regulatory picture.
Ransomware Connection Deepens Regulatory Urgency
The Coin.mx case also highlights the growing intersection between unlicensed cryptocurrency exchanges and the ransomware epidemic sweeping through 2016. According to prosecutors, Murgio’s operation helped victims of ransomware attacks convert cash into Bitcoin to pay their attackers, without filing the suspicious activity reports required of licensed money transmitters.
This detail is particularly significant in the context of September 2016. The FBI reports that ransomware attacks cost victims $209 million in the first quarter alone, and cybersecurity firm Datto estimates the total annual economic damage at $75 billion. The vast majority of ransomware payments are demanded in Bitcoin, and unlicensed exchanges like Coin.mx serve as the on-ramp that makes the entire extortion economy possible.
Bitcoin trades at approximately $598 on September 3, 2016, with a market capitalization of $9.48 billion. Ethereum sits at $11.76. The cryptocurrency market is still relatively small, but the legal precedents being established in cases like United States v. Murgio will shape the regulatory framework for an industry that is about to experience explosive growth.
International Regulatory Pressure Mounts
The American legal proceedings unfold against a backdrop of increasing global regulatory scrutiny. In Russia, Deputy Director Pavel Livadny of the Federal Drug Control Service publicly warns that the Russian mafia is using Bitcoin for drug trafficking, signaling a hardening stance from Moscow. The European Banking Authority has also flagged concerns about cryptocurrency’s use in money laundering and terrorist financing.
Meanwhile, the Bitfinex exchange continues its recovery from a devastating August hack that cost 120,000 BTC, worth approximately $72 million. The exchange begins monthly BFX token redemptions in September, working to make customers whole while regulators worldwide watch closely to see how the cryptocurrency industry handles its own security crises.
Why This Matters
The Murgio ruling represents one of the first clear federal judicial statements that Bitcoin is subject to the same financial regulations as traditional currency. This precedent establishes that operating an unlicensed Bitcoin exchange is a federal crime, full stop. It also foreshadows the regulatory enforcement wave that will intensify in coming years, from the SEC’s crackdown on unregistered securities offerings to the Treasury Department’s tightening of cryptocurrency reporting requirements. Every major regulatory action against a cryptocurrency business in subsequent years traces its legal lineage, at least in part, back to this foundational question: is Bitcoin money? In September 2016, a federal court in New York answers yes.
Disclaimer: This article is for informational purposes only and does not constitute financial or legal advice. Past events and legal proceedings discussed herein should not be interpreted as indicators of future regulatory actions or legal outcomes.
Coin.mx hiding behind Collectables Club to process Bitcoin transactions is almost comical. stamps and collectibles, really?
tying an unlicensed exchange to the JP Morgan hack is wild. Murgio was small time but the connections ran deep.
the conflict between this ruling and the Florida court saying BTC isnt money is exactly why crypto regulation is such a mess in the US. two courts, two answers.