The exchange market leader had a run-in with US regulators earlier in the year when their US subsidiary, Mutum Sigillum LLC, had its bank account and Dwolla account shut down due to a lack of licensing. Soon afterwards the site changed their policies requiring all customers wishing to perform any USD withdraws/deposits to first verify their identity. As the majority of Mt. Gox’s businesses is in USD/BTC trades, their decision to appease US regulators is unsurprising.

Via Bitcoin Magazine..

The license lists MtGox as intending to carry out money services business activities in sixty US territories including all fifty states, granting the company federal permission to carry out their Bitcoin exchange activities in all of those regions (although the exchange still needs money transmitter licenses from forty eight states just like all other exchanges in the US; these are much harder to obtain, although certainly not impossible. Notably, the license specifically lists MtGox, Inc and not Mutum Sigillum LLC; this is not a mistake, as MtGox set up a new Delaware corporation with that name on June 11, presumably intending to use it for all Bitcoin exchange-related activities in the United States in the near future.

Since MtGox has received the MSB license, it can be assumed that they are simultaneously working with the Department of Homeland Security to resolve that agency’s Dwolla complaint. However, there is still one major thorn in MtGox’s side that remains unresolved: the Coinlab deal. On February 27, MtGox announced a deal with Coinlab in which Coinlab would take over MtGox’s activities in the United States, but in the months that followed it appears that MtGox procrastinated on their side of the agreement, leading to Coinlab suing them for contract violation on May 2. Perhaps MtGox intends to make amends with Coinlab and follow through on the agreement, in which case MtGox would not need to bother with money transmitter licenses; that would be Coinlab’s respnsibility. Alternatively, MtGox may be setting itself up to forge ahead in the United States on its own; the decision to create a new Delaware corporation can certainly be interpreted as evidence pointing at least slightly toward that conclusion.

Although MtGox’s recent legal and banking debacles, culminating with their recent decision to suspend all USD withdrawals, have led to serious difficulties for the exchange, its market share is remaining surprisingly resilient at 65-70% – much lower than the 75-90% the exchange was used to before the sudden rise in Bitcoin price and popularity earlier this year

Effective immediately, BitPay has temporarily stopped using Mt. Gox for determining the exchange rate for our invoices.

 The rate calculation that BitPay uses for each invoice is now as follows:

 1.  Pull the full Level II market depth, on the bid side, from multiple exchanges.

 2.  Merge the market depths into one Consolidated Level II table.

 3.  Calculate the blended clearing price for the amount of the invoice, assuming an auto-routing market sell order across all exchanges, with zero commission.

BitPay is committed to offering the fairest possible rate to the buyer, while minimizing our counterparty risk.

Over the past weeks Mt. Gox has experienced rising volumes of deposits and withdrawals from established and upcoming markets interested in Bitcoin. This increased volume has made it difficult for our bank to process the transactions smoothly and within a timely manner, which has created unnecessary delays for our global customers. This is especially so for those in the United States who are requesting wire transfer withdrawals from their accounts.

We are currently making improvements to process withdrawals of United States Dollar (USD) denominations, and as a result are temporarily suspending cash withdrawals of USD for the next two weeks.

Please be reassured that USD deposits and transfers to Mt. Gox will remain unaffected, as will deposits and withdrawals in other currencies, and we will be resuming USD withdrawals once the process is completed.

Shortly after the announcement Mt. Gox issued a further statement via their Facebook page to ‘clarify’ the situation. In the statement they assure customer that their funds are “safe, sound and accounted for” and that they are “working with new banks and alternative methods for transmitting money” to improve the situation.

With their recent guidance, FinCEN decided that virtual currency exchangers are money transmitters.

“An administrator or exchanger that (1)accepts and transmits a convertible virtual currency or (2) buys or sells convertible virtual currency for any reason is a money transmitter under FinCEN’s regulations.”

Mt. Gox is not a US company; however, it does a lot of business in the States and is not registered with FinCEN.

An informant working with a Homeland Security agent signed up for both Mt. Gox and Dwolla accounts. After making a few transactions, he was able to determine that his funds had gone through a Wells Fargo bank account owned by Mt. Gox and opened by the exchanges’ CEO Mark Karpeles. The account was opened by Mark in May 2011 who at the time signed a Wells Fargo form declaring that his business was not a Money Services business or a Money Transmitter.  Of course this was almost 2 years prior to FinCEN’s guidance on the issue.

The Warrant states that Mt. Gox is in violation of 18 U.S.C. section 1960. The punishment for this can include fines and up to 5 years in prison.

Ars Technica obtained a copy of the warrant which can be read here.

The Department of Homeland Security appears to have shut down the ability to use Dwolla, a mobile payment service, to withdraw and deposit money into Mt. Gox, a Bitcoin trading platform. A Dwolla representative confirmed the move to Betabeat.

A representative for Dwolla told Betabeat that the company is “not party” to this matter and encourages those with questions to reach out to Mt. Gox or the DHS.

“The Department of Homeland Security and U.S. District Court for the District of Maryland issued a ‘Seizure Warrant’ for the funds associated with Mutum Sigillium’s Dwolla account (a.k.a. Mt. Gox),” he said. “In light of the court order, procured by the Department of Homeland Security, Dwolla has ceased all account activities associated with Dwolla services for Mutum Sigillum while Dwolla’s holding partner transferred Mutum Sigillium’s balance, per the warrant.”

Mt. Gox has posting the below statement to their Facebook page.

Like many who have contacted us, MtGox has read on the Internet that the United States Department of Homeland Security had a court order and/or warrant issued from the United States District Court in Maryland which it served upon the Dwolla mobile payment service with respect to accounts used for trading with MtGox. We take this information seriously. However, as of this time we have not been provided with a copy of the court order and/or warrant, and do not know its scope and/or the reasons for its issuance. MtGox is investigating and will provide further reports when additional information becomes known.

Below is a screen shot of the email being received by Dwolla users who have recently made trasnfers to Mt. Gox.

CoinLab alleges that Mt. Gox failed to uphold their end of the bargain and is requesting damages for breach of contract.

A copy of the complaint can be read here.

CoinLab’s statement via their website can be read here.

And Mt. Gox’s statement on the matter can be read here.

Both CoinLab’s founder Peter Vessenes and Mt. Gox CEO Mark Karpeles are board members of the Bitcoin Foundation.

The foundation released this statement on the matter…

“The complaint of May 2nd, 2013, is between Mt Gox and CoinLab Inc., and does not involve the Bitcoin Foundation.  The Foundation exists to serve the best interests of Bitcoin and not the best interests of individual board members.  If the best interests of Bitcoin are not being served or if the mission to standardize the protocol and protect and promote Bitcoin is in jeopardy, then the board is prepared to take thoughtful action to ameliorate.

Bitcoin is not only relevant within a single jurisdiction, but its reach is global. With strong and growing support from many countries around the world, the Bitcoin Foundation is acutely aware of its global mission.”

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