On August 2, Thomas Mario Constanzo, who went by the alias Morpheus Titania, was sentenced to 41 months in federal prison for using bitcoin to launder drug money.
Constanzo was arrested in April 2017, but had a previous conviction for marijuana possession. He was initially indicted for being a convict in possession of weapons (a box full of ammunition, to be exact).
A superseding indictment followed, adding five money laundering charges and two counts of operating an unlicensed money transmitting business. However, the filing of this second indictment may have been the intention from the beginning, as federal agents had been investigating Constanzo since 2014. Constanzo reportedly came under scrutiny after posting an advertisement on a peer-to-peer bitcoin exchange website, offering to engage in transactions of up to $50,000. This led to a joint investigation that included DEA, IRS, and ICE agents, and the Scottsdale police department.
Constanzo was convicted of all five money laundering charges in March 2018. The presiding judge on the case, Murray Snow, has now sentenced Constanzo to 41 months in prison and ordered his forfeiture of 50 bitcoin (today worth roughly $380,000).
The Justice Department's announcement regarding the case stated the evidence "showed that Costanzo used bitcoin to purchase drugs from others and that he provided bitcoin to individuals who were buying drugs via the internet." However, all the money laundering charges in the indictment relate to "property represented by a law enforcement officer to be proceeds for specified unlawful activity," meaning Constanzo was only convicted of laundering money provided by the agents who were investigating him. The largest of these transactions was for $107,000, more than double the amount Constanzo originally advertised as his maximum transaction amount.
Still, Constanzo may have gotten off easy. Each of these money laundering charges carried a maximum penalty of 20 years in prison and a fine of up to $500,000. Compared to a possible life sentence and a $1.25 million fine, 41 months and 50 bitcoin seems like a lenient punishment. He has also been granted time served. As he has already been in jail for 16 months, only a little over two years remain.