The Department of Homeland Security (DHS) filed documents in a court in Maryland on Tuesday and executed a seizure warrant to shut down the largest bitcoin exchange worldwide for operating a money transmitting service without a license, according to a report from Jonathan Easley of The Hill.

bitcoin

The DHS stated that Mt. Gox, a company that converts government-backed currencies into untraceable digital currency known as bitcoins violated government laws. According to the agency, United States laws require money exchanges to register and obtain a license with the federal government in order to operate a business. The law also does not allow any business derived from an exchange or that could be used to support illegal activity. The agency confiscated the bank accounts of Mt.Gox.

The report cited that the DHS warrant only referred to the violation of Mt. Gox for operating a bitcoin exchange without a license. Consumers generally use bitcoins to buy drugs online. DHS spokesperson Nicole Navas did not provide specific details regarding the agency’s ongoing investigation on the business operations of the world’s largest bitcoin exchange.

In an e-mail statement, Navas said, “In order not to compromise this ongoing investigation being conducted by ICE [Immigration and Customs Enforcement] Homeland Security Investigations (HSI) Baltimore, we cannot comment beyond the information in the warrant, which was filed in the District of Maryland yesterday.”

Court documents revealed that Mark Karpeles was identified as the owner of Mt. Gox.  He opened an account at Wells Fargo & Co (NYSE:WFC) to operate a bitcoin exchange in the United States. His company is based in Tokyo.

Mt. Gox charges customers with a fee to transfer bitcoins. Customers have bitcoin accounts set up at Mt. Gox. The company maintains a registry of bitcoin ownership and every owner is given account numbers. Mt. Gox partnered with Dwolla, a payment processor based in Iowa, to complete the exchange and use bitcoins as payments. The DHS built its case against Mt. Gox with the help of a confidential informant who converted U.S. dollars to bitcoins and from bitcoin to U.S. dollars.

Many consumers, investors, technology enthusiasts became attracted to bitcoins as they seek independent and decentralized alternatives to government-backed currencies. The price of bitcoins rose significantly last month from $40 to $250, which was considered to be a short speculative bubble. Currently, there are $1 billion worth of bitcoins available for circulation and its price stabilized at around $110 per bitcoin.

Mt. Gox operates 80 percent of all bitcoin trades. Last month, its trading was halted after experiencing a very strong denial of service attack, which was triggered by a mass panic sale of bitcoins.