DOJ Charges AurumXchange Operator with Money Laundering and Tax Violations

According to a DOJ report on October 28, Pilipis allegedly processed more than $30 million in transactions through AurumXchange, some of which originated on Silk Road, a darknet marketplace run by Ross Ulbricht under the alias “Dread Pirate Roberts.” Between 2011 and 2013, the marketplace allowed users to buy and trade criminal things anonymously using digital currencies.

Filings by the DOJ show that from 2009 to 2013, Pilipis operated AurumXchange without a license and ignored federal regulations that placed crypto exchanges under the obligation to register with the U.S. Treasury Department. Additionally, according to the Department of Justice, he did not follow Know Your Customer guidelines, which are a component of AML/CTF regulations. He allegedly earned millions of dollars in commissions from processing transactions while operating the website, and among other things, he allegedly received roughly 10,000 Bitcoins, which are today valued at nearly $1.2 million.

After AurumXchange shut down, Pilipis was accused of dispersing assets to obscure their origins, converting cryptocurrency into U.S. dollars for real estate purchases in Indiana. Additionally, authorities assert that he neglected to file tax forms for 2019 and 2020, failing to disclose significant profits from these assets.

In a significant step, a federal grand jury returned a superseding indictment against Maximiliano Pilipis, the AurumXchange owner. The indictment makes serious allegations, including five charges of money laundering and two counts of tax violations.

Pilipis bears a substantial risk. If convicted, he may face up to ten years in prison and a fine of $250,000. However, the indictment does not primarily affect the final outcome. A federal district court will eventually decide his sentence, taking into account certain statutory factors and sentencing standards that could result in a lesser punishment.

Around $2 billion in Bitcoin, previously seized by the DOJ and linked to the Silk Road dark web marketplace, was transferred to a new wallet address. On April 2, blockchain data indicated that a DOJ-associated wallet initially sent a small transaction of 0.001 BTC to a Coinbase Prime address, likely as a test. Shortly after, this same DOJ wallet transferred a significant 30,174 BTC—valued at approximately $2 billion to a fresh address.

Source: FBI

This Bitcoin stash is associated with James Zhong, who was convicted in 2022 of wire fraud related to Silk Road. In 2012, Zhong managed to illicitly acquire over 50,000 BTC from Silk Road. Nearly a decade later, a 2021 raid by U.S. authorities at Zhong’s residence uncovered the crypto holdings, including a single-board computer with Bitcoin hidden in a popcorn tin under blankets. The recent transaction involved crypto from the same address that had previously moved over 30,000 BTC on April 2.

The DOJ’s handling of this seized Bitcoin follows an earlier sale in March 2023, where authorities liquidated approximately 9,861 BTC for over $215 million. This latest transaction comes as Bitcoin’s value declined by over 7%, reaching $65,475 at the time.

The takedown of the founder, Ross Ulbricht, in 2013 closed the Silk Road—a platform that allowed the illegal trade of items ranging from weapons to narcotics to stolen financial information. Ulbricht serves two life sentences without parole.