Topic: BitInstant CEO arrested by FBI (Read 6714 times)

The first source is the complaint filed by the Manhattan US Attorney.

http://www.justice.gov/usao/nys/pressreleases/January14/SchremFaiellaChargesPR/Faiella,%20Robert%20M.%20and%20Charlie%20Shrem%20Complaint.pdf

The official statement by the US Attorney's Office is here.

http://www.justice.gov/usao/nys/pressreleases/January14/SchremFaiellaChargesPR.php

A link to the Reuters article quoted in the OP is the first thing in the OP.

Pardon me for bothering but where can I find a link to read the article or whatever the first source is?

he could not resist poking the stick into the capitalist hornets nest,,,throw in some bath salts & funny money ~ good to go !

:\

~imho the eyebrows is what sealed the case lolllzzz^^

That kinda sums it up.  Fun fact for those playing at home.  You can't discharge govt fines and fees in bankruptcy.  So punitive really is punitive.

Sometimes fines are meant as licensing fees.

Other times they are intended to ruin a company and its principals forever.

Guess which category Wachovia, HSBC and JPMorgan get, and which Charlie Shrem will get.

How can he pay the fines? They've taken control of all his BTC. Personally, I think they will try to hammer him, but it depends very much on who he is serving up to the feds. If he spills all, he might get away with a short term. If not, 20 years.

I would agree.  But I doubt it goes to court.  The prosecutor will threaten 25 years, and settle something on the order of 3 to 5 plus ruinous fines.

No doubt but I guess it comes down to how far is he willing to go.  Knowing HSBC executives for example laundered billions and faced not a day in jail will he still seek the max jail time for the employee of this company in order to prove a (hypcritical) point?  Or will he be satisfied with destroying the company along with probation and a plea?  I guess we'll find out soon enough.

After watching the New York regulatory hearings is there any doubt the prosecutor is looking to prove a point?

Well that is up to a jury.   I think the conspiracy charge might be beatable and the operating an unlicensed money transmission business is likely just garbage to pad the complaint.  Still the charges on willfully failing to file mandatory reports seem pretty hard to beat.  

The civil penalties (which would be against Charlie and the company jointly) are $25,000 per incident.  The complaint never states the number of incidents but if we assume ~$1M /$500 = 20,000 transactions.  Now the other party often exceeded the limits (which Charlie had to clean up) so lets say it was only 10,000 incidences which mandated reporting @ $25,000 penalty each that is $250 million?  Ok say it was only 5,000 and the govt can only prove 2,000 of those.  At $25K a pop that is still $50M likely more than the combined assets of both the company and the man.

The criminal penalties for willful non-compliance are 5 years, 10 years if in connection with another crime.
http://www.law.cornell.edu/cfr/text/31/1010.840

Granted I am not a lawyer and this isn't legal advice but lets assume he beats or has dismissed all the other charges.  The charge for willfully violating the BSA while less tha money laundering still carries some weight.  Then again maybe they let him plead out.  Maybe the prosecutor will accept 5 years probation, and enough fines to force the company into bankruptcy as the "pound of flesh".  If the prosecutor has a strong case and is looking to prove a point, he could go for a lot more.   Reading the complaint the prosecutor appears to be holding a good hand (at least on the lesser charges) so a lot will depends on what the prosecutor wants to do.

ftfy

Literally, at times.

http://www.nydailynews.com/news/national/new-mexico-man-sues-authorities-anally-probed-8-times-article-1.1507651
http://www.youtube.com/watch?feature=player_embedded&v=EQ6xemaR6Og

Nobody said life was fair. In particular, nobody said the legal system was fair. "The law is an ass" sums it up best.

What shitty legal system. The people you want to see rot in prison, like Trendon Shavers, will get off without a scratch and Charlie will rot. Fuck the world.

Essentially you're saying Charlie is fucked. What is the penalty for that then? 20 years and fines? Just fines?

The actual charge is "conspiracy to engage in money laundering" not money laundering.
http://www.justice.gov/usao/nys/pressreleases/January14/SchremFaiellaChargesPR/Faiella,%20Robert%20M.%20and%20Charlie%20Shrem%20Complaint.pdf
(see count #3)

A conspiracy charge (and this applies to any crime) doesn't require all conspirators to be directly engaged in the underlying crime.  If they were, the prosecutor would just charge them with the underlying crime (it is often easier to prove than the conspiracy).  All that is requires for a conspiracy charge is for each person to further the underlying crime by action and intent.  

Of course the fact that BitInstant is/was a MSB, and Charlie was the compliance officer, isn't going to go over well in court.

Pro tip #1: Don't register as a MSB if you intend to violate the obligations of a MSB.
Pro tip #2: Don't accept the role of the company compliance officer if you will feel tempted to break those rules in the future.

Yes, I understand the difference. Please reread what I wrote to begin with. Or follow this...

My naive definition of 'money laundering'* is moving money that was obtained through illegal means in order to conceal its illegal derivation.

The point is that, if this be the definition (again, perhaps naive), then if the money was not obtained illegally, nothing one does with that money is to be considered 'laundering'.

So in my mind, it comes back to whether or not selling XBT for FRN is in and of itself illegal. And if not, does associating through a venue that is also used for illegal purposes make it illegal? My guess is that this is a defensible position.

Though I'll agree with you - the feds usually make whatever they want stick.

Governments and Empire have been the running the silk road drug empire since it was donkeys on gravel road.

Ever heard of the Opium wars.

Actually, he's not being charged with money laundering, but conspiracy to commit money laundering. This means he is not alleged to commit money laundering himself, but helped others do it. He logically cannot have committed money laundering (disguising the illegal origin of money), as the illegal trades on Silk Road happened after BitInstant/Charlie sold Bitcoins to BTCking. What we have here is called "reverse money laundering", when "clean" money is used to commit crimes.

That being said, I regrettably agree with Goat that it does not look good for Charlie. Even though it does not look like he committed money laundering, that's not enough to get him off the hook.

Government says a lot of things, and does a lot of other things.

Selling BTC for fiat will be defined as money laundering by totalitarians if it isn't already.