There have been some new twists in the strange case of an alleged attempt to blackmail Mitt Romney for $1 million in bitcoins, raising additional legal questions about the digital currency.

Two months ago I explained how an anonymous ransom letter threatening the release of then-presidential candidate Romney's tax returns could have profound legal implications with respect to extortion, money laundering, and market manipulation. Appearance of the cryptocurrency Bitcoin in the ransom letter served to add intrigue and complexity to an already juicy story.

This weekend it was revealed that the Secret Service served a search warrant on the Franklin, Tenn., home of one Michael Mancil Brown on Sept. 14, seizing numerous hard-drives and other property in the process. Interestingly, it has been alleged that this is the same Michael Brown who was known to be in possession of 371,000 bitcoins (about $3.7 million today) as early as May of last year. The fate of Brown's crypto-fortune has been the subject of much speculation and the money may or may not be in the possession of the federal government.

This incident may be the first time in which the U.S. Government has utilized Bitcoin addresses on a search warrant. On page five of the warrant it is revealed that Brown is being investigated for aiding and abetting crime, conspiracy, fraud, and racketeering. The Fourth Amendment to the U.S. Constitution states that "no warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized." Again, the seizure was of evidence relating to violations of 18 U.S.C. §§ 2 (aiding and abetting); 371 (conspiracy); 1030(a)(7)(B)&(b), 1341, and 1343 (fraud); and 1951 and 1952 (racketeering). Although this is an ongoing investigation and charges have yet to be been filed, it is beneficial to consider how Bitcoin may be implicated in the language of several of the aforementioned statutes.

For instance, the use of 18 U.S.C. §§ 371(conspiracy) is interesting because from the documents revealed, it is not apparent that Brown worked closely with anyone else. Conspiracy typically requires 1) an express or implied agreement and 2) an overt act. Is it possible that the entire Bitcoin network can now be implicated as co-conspirators? Miners on the Bitcoin network would all be continually agreeing that the two Bitcoin addresses mentioned in the ransom notes were available to receive coins at in furtherance of the alleged conspiracy, fraud, etc. They will have also overtly acted in deciding to dedicate computing power to mining. (This is an admittedly absurd result of a plain application of the law to the facts.)

The invocation of 18 U.S.C. §§ 1951 (racketeering) is also noteworthy in stating that it applies to "whoever…obstructs, delays, or affects commerce or the movement of any article or commodity in commerce." The definition of commerce in that section is not very helpful, but Black's Law Dictionary (ninth edition) defines it as "The exchange of goods and services, esp. on a large scale involving transportation between cities, states, and nations." If Bitcoin affects commerce, then it is probably subject the Commerce Clause (Article I, Section 8, Clause 3, U.S. Constitution).

These facts also support the market manipulation scenario I described in my last post. Michael Brown may or may not have a large number of bitcoins at his disposal, but clearly anyone holding a large number of bitcoins would have a powerful incentive to create demand in the Bitcoin market in order to drive up the price. The Securities Exchange Act of 1934 prohibits market manipulation in securities markets. Bitcoin is not generally thought of as a security, and is not traded on formal markets. Whether or not entities like the SEC will pursue market manipulators remains to be seen.

Michal Brown has set up a website for the "Michael Brown Legal Defense Fund and Family Expense Fund" where he is accepting donations. As Bitcoin grows in popularity, spectators are left holding their breath, awaiting answers for both Michael Brown and the legal status of Bitcoin.

Matthew Elias is the Director and Founder of the Cryptocurrency Legal Advocacy Group, a nonprofit at the University of Mississippi School of Law that seeks to promote a clear regulatory environment for peer-to-peer currencies.