French police have seized 388 bitcoins from a bitcoin exchange operating illegally in the country. The coins are worth roughly €200,000 (or $272,800) at current prices.

Three were arrested in Cannes, Nice and Toulouse on suspicion of operating a website that illegally sold and lent bitcoin to its registered users. Sources said a retired policeman tipped off the financial authorities when he bought bitcoin at the exchange.

The prosecutor in the investigation Olivier Caracotch said that this is the first European case in which judicial action has brought on the closure of an illegal virtual currency exchange, adding:

“It’s also the first time in France that bitcoins have been seized as part of a judicial procedure.”

The parties in question are the site’s administrator, his wife and one of the site’s suppliers. One of the suspects has since been released from his detention, while the other two were presented to a judge and placed under judicial supervision. They are being examined on potential charges of illegal banking, money laundering and operating an illegal gambling website.

The French authorities also confiscated credit cards, computer hardware and €9,000 in cash.

Currency of the criminals

At least 2,500 bitcoins totalling more than €1m were transacted in at least 2,750 exchanges on the site between November 2013 and July 2014. The website was unapproved by the Autorité de contrôle prudentiel et de resolution, the body responsible for supervising the banking and insurance sectors, the police said.

“Like all virtual currencies,” they told Le Point, “it has a high risk of criminal abuses taking into account, on the one hand, the opacity that surrounds their existence and operation and, on the other hand, the complete absence of regulation by money market participants.”

La Maison du Bitcoin founder Eric Larchevêque rebutted that comment and said the news is unsurprising since gambling in France is so heavily regulated:

“From our point of view, it confirms that bitcoin is not the ‘dream currency of the criminals’, as police investigations succeeded to shut down the operation in the same way they would have done with euro-operated activities.”

Bitcoin in France

La Maison du Bitcoin is France’s first bitcoin centre. It opened in April, several months after the country’s central bank issued a warning against the volatility of bitcoin, stating that it does not pose a threat to financial stability, but poses risks for those who choose to invest in it.

That same month, the Ministry of Economy and Finance issued guidance outlining that bitcoin is not considered legal currency in line with France’s monetary and financial code, however income from cryptocurrency transactions could still be taxed.

French tribunal image via Shutterstock