A neurologist from Pheonix, Arizona has been indicted by a grand jury with operating an unlicensed money transmitting business. Dr. Peter Steinmetz was charged by the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) with violating the Banking Secrecy Act. FinCEN claims that Dr. Steinmetz and co-defendant Thomas Mario Costanzo “enabled their customers to exchange cash for ‘virtual currencies’ charging a fee for their service.” Dr. Steinmetz and Costanzo avoided legal conflicts and prosecution for years. According to the charges made against them, the two men operated their business through LocalBitcoins.com and conducted transactions in person.
During his time as a bitcoin trader, Dr. Steinmetz received an anonymous donation of $10,000 worth of bitcoin to help fund his research. Dr. Steinmetz conducted research on memory at the Barrow Neurological Institute. The donation was received in 2014. At the time Dr. Steinmetz told The Republic that, “This is a novel way for research to be funded. It’s almost appropriate actually, that a cutting-edge method of funding is used to fund cutting-edge research.” Not long after that article was published, Dr. Steinmetz left the institute after he was arrested for a pro-gun protest he participated in at a local airport. Charges against him were dropped after he voluntarily agreed not to bring a firearm to the airport for at least two years.
Dr. Steinmetz’s business partner, Thomas Costanzo, was a bitcoin trader from Mesa, Arizona who was raided by a federal task force earlier this year. Costanzo, also known as Morpheus Titania, is being held as he awaits a detention hearing. Costanzo is also being charged with possession of three boxes of Winchester ammunition of different calibers. The boxes of ammunition contained sixty cartridges. The bitcoin trader was prohibited from possessing firearms and ammunition due to a marijuana conviction from 2015. The investigation against Costanzo was lead by the Department of Homeland Security and was unrelated to firearms.
Ironically, Costanzo’s apartment was raided on 4/20. In 2014 Costanzo received three different charges and was convicted in 2015 under Arizona’s felony marijuana laws. Costanzo did not have an Arizona medical marijuana card, without which possession of any amount of marijuana in the state is a felony offense. Prosecutors usually end up seeking misdemeanor charges or treatment for those facing marijuana charges, and on two of Costanzo’s charges he was convicted of misdemeanors. However, the third charge Costanzo was convicted of was a felony. Arizona’s citizen initiated Proposition 205, a ballot initiative that would have legalized marijuana, was very narrowly rejected in 2016. Another marijuana legalization initiative is expected to be on the ballot in Arizona in 2018. Had Arizona had marijuana legalization in 2014, he would not have been a criminal for possessing marijuana and would not have lost his right to keep and bear arms.
The investigation by the Department of Homeland Security was being conducted because of suspicions that Costanzo was operating an unlicensed money transmitting business and that he was also dealing in illegal drugs and laundering the profits from the sales. The search warrant for Costanzo’s apartment was signed by federal magistrate David Duncan. Authorities obtained the warrant with intentions to search and seize illegal drugs, computers, cellphones, bitcoin and other financial records, among other items. In addition to that search warrant, law enforcement also obtained another warrant which required Costanzo’s cellphone service provider to track his location for the task force. The second warrant also requested that the cellphone service provider also turn over Costanzo’s past location information. Costanzo has denied that the ammunition that was found in his apartment belong to him.
The indictment against the two men includes eight charges, two of which are again Dr. Steinmetz and six of which are against Costanzo. Costanzo is charged with hiding $150,000 in profits he acquired through his unlicensed bitcoin selling business. Federal civil asset forfeiture proceedings have begun against Dr. Steinmetz’s Tempe, Arizona home and other property. Civil asset forfeiture is a process which enables government to take property without a conviction, and many privacy advocates call the process unconstitutional, a violation of the 4th amendment and 5th amendment. Dr. Steinmetz has plead not guilty to the charges against him. Dr. Steinmetz and Costanzo jointly face a jury trial scheduled for August 1st.