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Not quite. The US gov is accusing these men of putting wealth through the Silk Road (which was believed to be untraceable) in order to get this wealth off the books to avoid taxes and investigations of the source of this wealth.

Edit: Not necessarily their own wealth.

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Where does it say that they used it for personal wealth laundering? As far as I can tell it was only for providing a service for purchasing BTC anonymously with cash.

It seems to be that BitInstant CEO sold BTC to a known Silk Road BTC dealer, who was aware of what the BTC was being used for.

Basically this, also surprised anybody would buy Bitcoins from a SR vendor. Also another reminder for companies to encrypt their internal emails this is also how they busted Megaupload because of stupid things they emailed each other 'hey where is Batman uploaded?'

The court will just order them to turn it over unencrypted. And if you won't they can use that as evidence against you.

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