Keene residents seek dismissal of some charges in cryptocurrency case

Aug. 11—Keene libertarian activists Ian Freeman and Aria DiMezzo have signaled a potential new defense strategy and filed for dismissal of some of the federal charges alleging they operated an illegal bitcoin business.

Prosecutors claim Freeman, DiMezzo and several co-conspirators violated federal law by running an unlicensed virtual currency-exchange business that handled more than $10 million in transactions over several years.

According to the government, Freeman and other co-defendants used personal bank accounts and accounts in the names of "purported religious entities" — including the Shire Free Church, the Crypto Church of NH, the Church of the Invisible Hand and the Reformed Satanic Church — to conceal the nature of their business. Prosecutors say they then directed customers to falsely report that they were donating to churches or buying rare coins, not purchasing cryptocurrency.

But in a motion to dismiss filed last month in U.S. District Court of New Hampshire in Concord, DiMezzo's lawyer, Richard Guerriero, argues that at the time prosecutors allege DiMezzo and Freeman operated the illegal bitcoin exchange, federal law regulating financial businesses did not extend to cryptocurrency.

"Its pretty simple. Congress makes the laws, not federal agencies," Guerriero said in a phone interview Tuesday. "... Virtual currency didn't exist at the time they passed the law."

Freeman has joined that motion, which asks the court to dismiss a charge of conspiracy to operate an unlicensed money-transmitting business and a charge of operating an unlicensed money-transmitting business, according to court documents.

The FBI arrested Freeman and DiMezzo, as well as four other New Hampshire residents, in March 2021 in connection with the bitcoin business. Three of the alleged co-conspirators have pleaded guilty to wire fraud. In April, the federal government dropped charges against an Alstead woman who had been indicted as a co-conspirator.

The FBI also conducted several searches in Keene in March 2021, including at 73-75 Leverett St. and at two properties on Route 101.

Those properties were linked to the libertarian activist group known locally as Free Keene — which has ties to some of the defendants — because of a blog by the same name. The Route 101 searches were at 661 Marlboro Road, at a business called Bitcoin Embassy N.H., and 659 Marlboro Road, which is owned by Shire Free Church Holdings LLC. The FBI also conducted an operation at a convenience store near downtown Keene, with an employee at the time telling The Sentinel agents removed a bitcoin ATM.

Freeman, who is known locally for his radio show "Free Talk Live," faces 25 charges in connection with the business and DiMezzo faces nine, according to court documents.

The U.S. Treasury Department erred when it started regulating cryptocurrency exchanges without explicit direction from Congress, Guerriero argues in his 23-page motion to dismiss, citing precedent set by a recent U.S. Supreme Court decision.

In that case, West Virginia v. Environmental Protection Agency, the Supreme Court ruled in June that the executive branch cannot make major regulatory decisions without direction from Congress.

While bitcoin was not invented until 2008, Guerriero argues in the motion that the law his client is accused of violating had been on the books since 2001 and was not updated by Congress to include cryptocurrency until 2021. The updated law did not go into effect until after the time period when prosecutors allege Freeman and DiMezzo operated the bitcoin business, he argues.

The court has scheduled a hearing on that motion and a motion seeking to exclude expert and non-expert testimony on forensic blockchain analysis for Sept. 1, according to court documents. The bitcoin blockchain is a ledger of every transaction that has occurred in the history of bitcoin and is publicly available, according to the motion by Guerriero, which Freeman's defense team has also joined.

In addition to the two charges he is seeking to have dismissed, Freeman — who is running for state Senate — faces a charge of conspiracy to commit wire and bank fraud, 12 counts of wire fraud, four counts of money laundering, conspiracy to commit money laundering, four counts of attempting to evade taxes, and continuing financial-crimes enterprise. A federal grand jury in April returned a superseding indictment on those 25 charges. That indictment overrode 11 original charges he'd faced but realleged many of them.

That indictment charges DiMezzo — who is running for a seat in the state House of Representatives — with four counts of wire fraud and three counts of money laundering in addition to the two charges she is seeking to have dismissed.

"She did not defraud anyone and is innocent of those seven counts," Guerriero wrote in his motion. "She will fight those out at trial."

DiMezzo and Freeman are tentatively scheduled for trial later this year.

With the trial looming, Freeman's lawyer, Mark Sisti, late last month filed a notice of public authority defense with the court.

This notice is required when a defendant might assert that they committed the alleged crimes in response to a request from an agency of the government, according to the U.S. Department of Justice website.

Attached to the notice is a letter dated Nov. 10, 2017. The letter, by Seth Hipple, a lawyer representing the Shire Free Church, responds to a request from itBit, a cryptocurrency asset-trading company, for a legal opinion on whether the church must be registered or licensed as a money transmitter under state or federal law.

Arguing in the letter that the church does not have to be registered or licensed, Hipple cites testimony from Maryam Torben-Desfosses, an official with the N.H. Banking Department, speaking before the state Legislature's Commission to Study Cryptocurrency in 2016.

The letter quotes Torben-Desfosses as drawing a distinction between when a bitcoin "vending machine" sells its own bitcoin versus when the machines are selling bitcoin that are owned by a third party.

"The Bitcoin machine owns its own Bitcoin: we don't regulate that," she said, according to the letter. "And we've told several companies, 'We don't regulate that; enjoy, have fun.' "

Ryan Spencer can be reached at 352-1234, extension 1412, or rspencer@keenesentinel.com. Follow him on Twitter at @rspencerKS