What's Really Behind the Feds' Raid of Bitcoin Trader Morpheus Titania's Home?

A local trader of bitcoins, the popular online cryptocurrency, was a focus of a federal task force raid in Mesa last week.
A local trader of bitcoins, the popular online cryptocurrency, was a focus of a federal task force raid in Mesa last week.
BTC Bitcoin via Flickr

(UPDATE: Costanzo remained in detention after a prosecutor argued at a hearing in federal court on Thursday morning that he might flee court proceedings.

A federal prosecutor argued that Costanzo had a long list of “non-compliance” with government requirements, said a friend of Costanzo’s who was at the hearing.

Hancock added that noted Libertarian activist and bitcoin advocate Adam Kokesh attended the hearing.)

A multi-agency federal task force raided the Mesa apartment of local bitcoin trader Morpheus Titania last week in a case that seems ready-made for one of the suspect's anarchist-leaning blog posts.

Morpheus, whose real name is Thomas Mario Costanzo, is being held at least until Thursday, when his case has a detention hearing scheduled.

Federal court records show he's been charged — so far — only with possession of three boxes of Winchester ammunition, for a total of 60 cartridges "in different calibers." He denied they were his, but admitted they were in his apartment, records state.

Costanzo's not supposed to possess any firearms or ammunition because of a 2015 conviction in Maricopa County for felony marijuana possession.

Yet the April 20 raid, led by Homeland Security Investigations, had nothing to do with Costanzo being a prohibited possessor.

A warrant signed by U.S. Magistrate Judge David Duncan sought evidence that Costanzo may have operated an "unlicensed money transmitting business," engaged in illegal drug sales, and tried to hide any profits.

Agents were authorized to seize illegal drugs, bitcoin records and other financial documents, computers, cellphones, and other items. A separate search warrant asked Costanzo's cellphone company to produce tracking information about his prior whereabouts.

The warrant records were obtained and published on Tuesday by Freedom's Phoenix, an offbeat news-and-conspiracy website run by local Libertarian activist Ernest Hancock. Costanzo works for Freedom's Phoenix as sales and marketing manager and has been Hancock's friend since they met in 2003, Hancock said in a podcast on Friday.

Hancock didn't return an e-mail seeking comment.

The site also published photos from the raid at 417 North Loma Vista Circle in Mesa, showing heavily armed SWAT team members and other officers, and an armored vehicle.

The apartment landlord told agents that Costanzo has lived there by himself for about a year.

In various online articles, Costanzo touts himself as one of the area's most prolific traders of bitcoin, the popular crypto-currency currently trading online for nearly $1,300 per coin. Online records show he's made more than 100 trades in the past four years.

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"Awesome to work with!" one of his customers wrote in a review.

"Because of his rock-solid reputation, he is one of the biggest sellers in the Phoenix area," Costanzo wrote about himself in 2014 on one of his web sites, Titanians.org. "Morpheus is now semi-retired as a bitcoin trader / entrepreneur."

The site has been a venue for writers including "visionary" physicist Bob Podolsky, and features anarchist essays, 9/11 conspiracy rants, advice on business and ethics, and plenty about bitcoin.

Costanzo ran into trouble with Arizona's stiff felony cannabis-possession law with a trio of offenses during April to December 2014. Without a medical-marijuana card, possession of any amount of pot is a felony, but prosecutors usually knock it down to a misdemeanor or offer drug treatment instead of prosecution.

Costanzo has had numerous prior arrests in recent years and served eight months in prison in the mid-1980s for fleeing from police. He wasn't offered any sweet deals. Following guilty pleas in 2015, he received probation after being convicted of misdemeanors in two of the marijuana cases and of a felony in a third, records show.

Still, despite Costanzo's bad luck or bad judgment, the heavy hand of the government that Morpheus writes about shows through in the cannabis cases. Eight states and Washington D.C. have now legalized marijuana for adults 21 and older, and if Arizona had a similar law, Costanzo wouldn't have been charged and convicted of possession three times, nor been stripped of his gun-and-ammo rights.

However, as local Homeland Security spokeswoman Yasmeen Pitts O'Keefe tells New Times, the investigation is "open and active" — meaning it's possible that additional charges could be forthcoming.

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