Financial privacy free of government intrusion and interference is dead.

In what seems to be the government’s latest attack on private transactions between individuals, the Department of Homeland Security has shut down funds transfers operated by mobile processing platform Dwolla, which is responsible for managing transfers for the BitCoin digital currency exchange.

Details are still sparse, but a spokesperson for U.S. Immigration and Customs Enforcement (ICE) confirms that an investigation is in progress and Dwolla is no longer able to accept currency transfers for its customers.

The U.S. Department of Homeland Security confirmed it has initiated legal action that prompted the Dwolla payment service to stop processing bitcoin transactions.

Nicole Navas, a spokesperson for U.S. Immigration and Customs Enforcement, confirmed the legal action to CNET this afternoon.

Dwolla, a Des Moines, Iowa-based startup, which raised $16.5 million in funding two weeks ago, notified users about the move earlier Tuesday. It blamed the decision on “recent court orders” limiting its ability to send money through Mt. Gox, the largest bitcoin exchange.

“In order not to compromise this ongoing investigation being conducted by ICE Homeland Security Investigations Baltimore, we cannot comment beyond the information in the warrant, which was filed in the District of Maryland earlier today,” Navas told CNET.

Dwolla has refused to elaborate, saying through its support account on Twitter only that “we received a court order” and inquirers should follow up with the affected parties.

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Homeland Security declined to elaborate on the warrant or court proceedings.

The court order has yet to be made available for public scrutiny, but sources close to the Bitcoin Ecosystem have suggested that this may be the first of many coming government investigations into the cryptographic digital currency which makes it possible for money transfers to be made without intrusion, verification or a paper trail:

There are certainly more questions than answers at this stage. We are prompted to wonder whether this is this the first of a series of governmental assaults on the exchanges? That’s what they’d target if they want to put the kibosh on bitcoin. Or, is this a case where DHS is investigating some individual or organization who may have used bitcoins, via Dwolla, for some potentially nefarious or terroristic reasons?

Members of the PandoDaily team have spoken to sources close to the bitcoin ecosystem and have been hearing that it’s likely the former.