Bitcoin trader Burton Wagner is facing five years in jail after being arrested in Colorado for the operation of an unlicensed money transmitting business.

In a filing to the United States District Court, the Federal Government claims that Wagner “did knowingly conduct, control, manage, supervise, direct, or own all or part of an unlicensed money transmitting business” and that he further “operated without an appropriate money transmitting license in a state where such operation is punishable as a misdemeanor or felony under state law.”

Further allegations claim that he “failed to comply with the money transmitting business regulations under Section 5330 of Title 31, United States Code” and was involved “in the transport and transmission of funds that were known to the defendant to have been derived from a criminal offense and were intended to be used to promote and support unlawful activity.”

Wagner claims in his defense that he was arrested for simply buying and selling Bitcoin and that “The federal prosecutor believes a person must have a money transmittal license to buy and sell Bitcoins for individual investment.”

While Wagner was involved in buying and selling Bitcoins, his online persona doesn’t offer many details, and after conversations with him, we are perhaps more confused.

He pops up from time to time, but is an active participant on Bitcoin forums where he uses the name BurtW; this is where the story gets interesting.

Wagner was a participant in HYIP scams, including a program called “Pirate Pass Through,” a ponzi scam offered by the disgraced Bitcoin Savings & Trust; Trendon T. Shavers, aka “pirateat40,” the operator of Bitcoin Savings & Trust was arrested in 2013 for running a Ponzi scam. We can’t ascertain at this stage whether Wagner was involved in running the scam or was simply an investor at the top of the ponzi pyramid, but there is ample evidence that he was pushing the program.

How the charges Wagner is facing are related to his involvement in HYIP scams isn’t clear, although certainly the fourth charge relating to transport and transmission of funds used in a criminal offense certainly would fit the definition.

The part that will be concerning to the Bitcoin community is that the primary charge relates only to buying and selling Bitcoin without a license; it seems to be being used as a catchall, but if he’s found guilty it could potentially be used as a precedent to charge anyone trading in Bitcoin with transmitting money without a license.

Along with five years in jail, the prosecution is seeking a $250,000 fine and forfeiture of any property Wagner owns.

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