Mustafa Goklu, who operated under the alias "Mustangy," ran a bitcoin-to-cash exchange business charging commission fees through the website localbitcoins.com in 2018 and 2019. The DEA began investigating after seeing his advertisements offering to exchange significantly larger amounts of bitcoin than others in the area. Over eight months, undercover agent Patrick O'Kain met with Goklu six times, exchanging roughly $130,000 worth of bitcoin for cash, with Goklu taking an 8% commission on each transaction.
Circuit Judge John G. Park, writing for the panel, rejected Goklu's core argument that his conduct didn't involve "transferring funds" to another person or location. "Goklu accepted funds (bitcoin) from O'Kain and transmitted currency to him representing the value of the funds," Park wrote, noting that both ends of the transaction involved movement of funds to another location. The court found that physically moving cash constitutes a "means" of transferring funds, pointing to statutory language that includes transfers "by any and all means."
Goklu had challenged his conviction on three grounds: that the district court violated his right to an impartial jury by seating a juror with positive views toward law enforcement, that the evidence was insufficient for the money transmitting conviction, and that the court improperly instructed the jury after his closing argument. The Second Circuit also dismissed his sentencing challenges as moot since he had completed his 16-month prison term and raised no issues with his supervised release.
The decision clarifies that cryptocurrency exchanges fall within federal money transmitting regulations, aligning with FinCEN guidance treating bitcoin-to-cash exchangers as money transmitters. The ruling could impact other cryptocurrency businesses operating without proper federal registration, as courts continue grappling with how traditional financial regulations apply to digital currency operations.