“Cryptocurrency and related software analytics tools are ‘The wave of the future, Dude. One hundred percent electronic.’”
That’s not a quote from "The Big Lebowski" — at least, not directly. It’s a quote from a Washington, D.C., district court memorandum opinion on the role cryptocurrency analytics tools can play in government investigations. The author is Magistrate Judge Zia Faruqui.
It’s not common for judges to make pop cultural references, nor to have the level of cryptocurrency expertise Faruqui has. His rulings have made smart references to "The Big Lebowski," "Dr. Strangelove," and "SNL" parodies of the McLaughlin Group. They also demonstrate a uniquely detailed understanding of how criminals can use cryptocurrency to their advantage and, more importantly, how they can’t: in a January forfeiture decision, for example, Faruqui noted that “cash poses a greater challenge to law enforcement than cryptocurrency in unhosted wallets.” In another, he called anonymity on the blockchain a “myth,” clarifying that cryptocurrency is an inefficient tool for criminals evading sanctions.
His knowledge isn’t the product of spending time on crypto Twitter. Rather, before taking the judge position Faruqui was one of a group of prosecutors in the U.S. Attorney’s office in Washington, D.C., that called themselves the “Bitcoin Strikeforce,” and worked with agencies like the IRS and FBI in federal investigations. There, Faruqui prosecuted cases that involved terrorism, child pornography, and weapons proliferation. Particularly well known was a case involving a dark-web site called “Welcome to Video,” which had facilitated some 360,000 downloads of sexually exploitative videos of children to 1.28 million members worldwide using bitcoin. Bitcoin’s immutable ledger was used to find the perpetrators.
A magistrate judge doesn’t set precedent in the same way as a Supreme Court justice — stare decisis only must be obeyed by lower courts, and Farqui’s is not the highest. But the ways Faruqui has weighed on cases that have come before him can give lawyers clues as to what legal frameworks will pass muster. Crypto lawyers have drawn on his prior decisions in the context of the Tornado Cash sanctions, for example.
Faruqui spoke with Protocol about the power of his position, and what people in crypto should understand about the law.
This conversation was edited for clarity and brevity.
How did you learn about cryptocurrency?
It’s when I was a prosecutor that I really learned about it. There was another prosecutor, Christopher Brown — you know, the other Chris Brown — and he had taken an interest in this when we were both working on financial crime in the Washington, D.C. U.S. Attorney’s office. He had the sense of “this is getting bigger, and we should start looking into it.”
Our U.S. attorney at the time, Jessie Liu, had this idea of using financial investigations in a way that was not limited to just white collar crime, or even narcotics cases, but also for cyber investigations, to national security investigations, and in civil cases. A lot of what we were investigating was related to following the money and so she wanted us to be this multidisciplinary unit.
That’s how we started out with our “Bitcoin StrikeForce,” or so we called ourselves. But I have to say, we started with the goal of wanting to make T-shirts, and we never did that while I was there. And now I’m gone! So if they have them, I don't know if I’ll get one.
You should get an alumni T-shirt.
Your decisions have also gotten a lot of attention. I mean, you’re quoting "SNL," you’re quoting "The Big Lebowski," you’re quoting "Dr. Strangelove." What are you trying to accomplish with that?
We're public servants! And in order for the public to have faith and trust us, they need to understand what it is that we're doing and what we're saying. Humor is one way, not using a lot of legalese is another way. But I think there are many judges who are trying to make the judiciary more accessible, and so people can see the work that we're doing and understand what we're doing and then make their own opinions about if it's right or wrong. But at least, if it's understandable, then there's still some trust in the framework even if you don't agree with how our decisions are stated.
Are you trying to get through to people who are into crypto in particular?
We are ambassadors for the judiciary to the people in our courtroom — it's a very frightening proposition being in court if you've been federally charged, and people have perceptions of what they think can happen there in terms of fairness or unfairness. Then, there’s other people who might be dealing with it: family members, friends, victims who might be in a courtroom gallery, etc.
But then it goes far beyond that. I do a lot of work with the Administrative Office of the Courts, our central body doing civic education and outreach to high schools, because I want college and high school students and law students to have an experience where they get a chance to talk to a judge. So my goal is certainly not just getting to one segment of the population, but it's making decisions accessible to whoever's interested in reading them.
What has it felt like for you switching from that prosecutor role to magistrate judge?
Lawyers are trying to take different frameworks from one topic and apply them to another, and then convince you that that is or is not appropriate. Being a judge is very different because you're evaluating what the parties present to you as the applicable legal frameworks, and deciding how new, groundbreaking technology fits into legal frameworks that were written 10 or 15 years ago.
And that’s tech generally. Crypto, some argue, evolves even faster.
I think a lot of people would say that’s why they’re pushing for the use of cryptocurrency, because it is fast-moving. But that's not really a place where judges get involved in saying how it ought to be regulated. Judges are just getting around to answering the question of, “do these regulations apply” and “how do they apply?” And different judges make different decisions. There was, famously, a judge in Florida that said cryptocurrency was not money because you couldn't put it underneath your bed, and that's what money is: something that is tangible. So different people are going to have different decisions. And that's not just true for crypto, but also other areas of the law.
Your best-known crypto decisions strongly assert that crypto is traceable. One way people try to make it less traceable is with mixers, and Tornado Cash was sanctioned by OFAC not too long ago. Do you think the legal reasoning was sound enough for similar sanctions to be applied to other mixers, or decentralized exchanges?
I don't know. I think there's been some discussion that people may litigate some of these things, so I can't comment, because those frequently do come to our courthouse. And I think there are certainly people opining on that, yes and no. So much of what judges do is that we rely on the parties that are before us to tell us what's right and what's wrong. And then, you know, obviously, they'll have different views, and we make a decision based on what people say in front of us.
Are you aware that some legal analysis of the Tornado Cash sanctions references your recent decision in a cryptocurrency sanctions case?
There's just so little that’s been written about in the law about crypto, and that means that people are trying to take breadcrumbs from prior decisions and put them together to make something. That's what good lawyers will always do. Even legislators might look at that as they try to think about where the gaps are. As a prosecutor I had a case where we sued three Chinese banks to give us their bank records, and it had never been done before. Afterwards, Congress passed a new law, using the decisions from judges in this court and the D.C. circuit court, the court above us. So I'm sure people look at prior decisions and try to apply them in the ways that they want to. So no, it doesn’t surprise me that people did that.
Are there any misconceptions about how the law applies to crypto, or how your decisions should be interpreted, that you wish you could get across?
One misconception is that the judges can't understand this technology — we can. And that’s not just judges, it's anybody. People have these views in two extremes. It’s either that “crypto is fake, it's not real,” or “it's so technical that you can't understand it.” And my takeaway, as I’ve discussed and as hopefully comes out in my opinions, is just that crypto is understandable. It’s just like money — it has value, it's used, it’s what people think it is.
This idea that “people can't understand it” — that's wrong. The lawyer's fundamental job is to take super complex and technical things and boil them down to very easily digestible arguments for a judge, for a jury, or whoever it might be.