Court Denies Motion to Suppress Seized Bitcoin in Payza Money Laundering Case

News | May 17, 2024 By:

On Wednesday, May 1, 2024, the United States District Court for the District of Columbia denied Firoz Patel’s motion to suppress 450 bitcoins that were seized by the government.

Patel, who had previously pleaded guilty in 2018 to money laundering and operating an unlicensed money-transmitting business called Payza, was attempting to prevent the cryptocurrency from being used as evidence in his upcoming criminal trial. However, Judge Dabney Friedrich ruled that the exclusionary rule did not apply in this case since the prosecution did not intend to introduce the seized bitcoin at trial.

The case stems from Patel’s operations of Payza, which transmitted millions of dollars without proper licensing between 2011 and 2013. As part of a plea deal in his previous case, Patel had agreed to forfeit over $4.6 million in assets involved in or derived from his crimes. This included any Bitcoin or other cryptocurrency held in his accounts.

In April 2021, after Patel’s sentencing but before reporting to prison, the Department of Justice alleges he consolidated around 477 bitcoins derived from Payza’s activities into a private digital wallet, then transferred approximately 450 bitcoins worth around $24 million at the time to an interest-bearing account on the Blockchain.com platform.

Blockchain is a public-distributed ledger that underlies cryptocurrencies like bitcoin. It records all transactions in a permanent, transparent way through cryptography and a process called mining. Bitcoin addresses on the blockchain don’t reveal owners’ identities but can be traced through surrounding transactions. This is what led investigators to link the address holding the 450 bitcoins to Patel.

In denying Patel’s motion, Judge Friedrich found that since prosecutors stated they did not plan to use the actual seized bitcoin as evidence, the exclusionary rule did not apply. This rule is meant to deter unlawful searches and seizures by law enforcement by excluding improperly obtained evidence from criminal trials.

The judge also said Patel had no reasonable expectation of privacy over the blockchain transaction data since the system publicly records information like senders, receivers, and amounts transferred when users engage in cryptocurrency trades. Friedrich ruled investigators lawfully obtained this tracing evidence without a warrant.

While Patel’s motion focused on alleged misrepresentations in the seizure warrant affidavit, Judge Friedrich said probable cause existed to issue the warrant anyway based on the indictment and Patel’s admission of criminally derived bitcoin holdings. The court found the cryptocurrency properly subject to pretrial forfeiture as funds “involved in” money laundering offenses.

Patel still has options like filing a civil claim over property rights to the seized 450 bitcoin. But for now, his bid to suppress this digital currency evidence from his upcoming money laundering and transactions with illegal proceeds trial was denied.

Please contact BlockTribune for access to a copy of this filing.