Topic: CEO OF BITCOIN EXCHANGE ARRESTED - page 3. (Read 23718 times)

In before somebody else: http://www.youtube.com/watch?v=wvJiYrRcfQo

At my bank, I have a $2,000 daily limit, reduced a year ago from $5,000, then to $3,000 a couple months later, currently at setting at two.

Question: Does the IRS read this forum?

You are correct that 18 USC 1956(a)(2)(A) does not have the "proceeds of unlawful activity" limitation.  Instead it is "with the intent to promote the carrying on of specified unlawful activity".

Selling bitcoins in the US would not be illegal under section 1956(a)(2)(A).  The basis of the charge is that dollars were sent to MtGox, which is outside the US.

The question is, did Shrem or Faiella intend to promote the carrying on of specified unlawful activity?

The meaning of "promote" here is not entirely clear, and the Supreme Court seemed divided on the issue in US v Santos.  The justices generally believed that investment in growing the unlawful business is promotion, but there was some dispute over whether this included paying ordinary business expenses.  Pehaps there are other cases that I am unaware of that have addressed this issue, but Shrem and Faiella weren't in the business of selling drugs.  To claim that they were "carrying on" unlawful activity merely because some of their customers did, seems a bit of a stretch.

One interesting case is United States v. Monroe, 943 F.2d 1007 (9th Cir. 1991).  Monroe and McCabe arranged for money to be sent to Hong Kong to buy marijuana, and were charged with violating section 1956(a)(2)(A).  However the money was actually sent by a DEA agent, who gave it to McCabe in Hong Kong.  Apparently the DEA thought this was okay, since the DEA agent didn't intend to buy marijuana.  If it's legal for the DEA to transfer money knowing that the recipient intends to buy drugs, why not for Shrem?

You're right. Let's not think for a second about failing to submit a SAR, that's pretty obvious, he completely failed from that point of you and, if things as they're mentioned in the indictment are true and accurate (which is not always the case), there are pretty no justifications to explain in a lawful manner what he did -or better say- he did not.

I am reasoning now only about the ML part. You said "Yes, but to come under the ambit of the money laundering laws, there generally has to be an actual intent to facilitate illegal activity, or at least "willful blindness."  "Willful blindness" is fairly tough to prove, and that's where they'd have to go on this, because nothing in the evidence (so far) cited shows that Shrem actually knew specifically and intended to effect drug trafficking". I am playing now the prosecutors' role.. taking into account the particular nuance of ML I specified before.. In that case I (as a prosecutor) could argue that he: a) moved money or monetary instrument b) from the US to outside the US -not really sure about this..where Faiella was? In or outside the US?- c) to promote a crime..that's the tricky part, can they prove he KNEW what was going on and what Faiella was doing with those Bitcoin? At that point I (still as a prosecutor) will try and demonstrate that yes, there were some "legal" stuff sold on SR, but, to be honest, just a few (I logged in a few time for a research and I don't recall any, but apparently there was something legal, too).. Moreover, having Shrem himself bought something on SR, he can't say he was not aware of SR main interest...

Not sure if it makes sense, this is just my opinion but I'm looking forward to reading your comments..

Well, in case you want to view Preet Bharara as some kind of monotone villain, here's what he's doing when he isn't doing this current dumb shit.


JPMorgan-Madoff Case Won’t Be Last Big One, Preet Bharara Says

Is it pathetically inadequate that banksters get a fine, however large, while someone like Shrem is facing prison?  Of course.

But frankly, these banksters cover their tracks better, as well as having better political connections.  They would never have left the series of emails that Shrem did.  Even though the internal communications of the banksters often do lead to adverse inferences that they know damn well that they're laundering drug money or Ponzi schemes, they have a whole language of euphemisms unique to themselves that their high priced white shoe lawyers can talk them out of if push comes to shove.

Shrem fucked up, pure and simple.  Banksters being scum has nothing to do with it.

And unfortunately for him, he's on the wrong end of the shotgun barrel here.  Preet Bharara is simply the fastest gun in the East on these issues, whatever you might think of him personally.  My personal opinion is he is a highly talented attorney and rather than being a cynical politician, actually idealistically believes he is doing the right thing.  That makes him more, not less dangerous, because he's fairly often actually doing the wrong thing.

Agree with all of that, and especially the bolded part.  My main point is; can the stupidity be leverages as a 'get out of jail free (minus attorney fees) card'?  I think it just might be.  And if he's willing to play ball I'm certain of it.  If he's got anything better than what the released info shows at least, and the history of Bitcoin is such that I'm sure he's got plenty.

http://en.wikipedia.org/wiki/First_they_came_..., divide and conquer, and all that jazz.

There are legitimate reasons to not want to identify oneself when buying bitcoins.  Aside from the risk of identity theft, some people who buy porn or donate to controvertial organizations don't want to be identified.

There's a right way and a wrong way to approach the legal issues here, and Shrem went about it the wrong way.  The right way is just file the SAR and say someone might be structuring transactions, but we don't know who it is.  If FinCEN says you have to get ID then you find a plaintiff who's adversely affected by that and sue.  If 25% of porn.com subscribers are paying with bitcoin then surely there's someone who could make a case for a chilling effect under the First Amendment.  Or there's a case for lack of equal protection for the homeless guy who can't get an ID because of no permanent address.  There are a lot of potential justifications for BitInstant's business model, but what Shrem did was just stupid.

You've kind of stated the issue as it is for most people.  Nobody around here has much reason to like Preet Bharara.  But in this case, he's going after people nobody likes much.  Good jerb, Preet.

I have been in the Bitcoin ecosystem since 2011 and know a fair amount of the mechanics.  Even so, I have scratched my head about the best way to buy and sell bitcoins.  I value my identity documents and it has nothing to do with trying to hide anything.  It has everything to do with not trusting the operators in the space and considering any data I send them, or even my access patterns, to be at great risk for sale to criminals.

This is key because I myself would not rule out using a 'darkweb' service such as Silk Road simply to obtain BTC in a safe way.  There is nothing illegal about obtaining BTC, and history has proven that it would have been a shrewd economic move at times.

All this is to say that it would be perfectly understandable if Shrem did not assume that the bitcoin he released and knew were going to be sold on Silk Road were going to be used to buy illicit substances or anything else which was illegal.  He clearly failed at his job duties, but 'big whoopee.'  It would be a dangerous precedent to put people in jail for that.  Won't happen.  I have to admit that I've not used Silk Road and don't know it to be the case that BTC bought there could be withdrawn in a normal manner, but I assume so.

If the bar is 'reasonable doubt', and Shrem has good legal council (which I'm sure will be the case), he might flat out win based on the material I read in my skim of the stuff that has been released.  I'll bet that if they bring a case against him at all, they'll need (and have) witnesses that can attest to more egregious behavior.  In this case I'm betting that Shrem's role will be on the other side of the equation.  IOW, he'll be a witness against bigger fish...and I'm hopeful that at least on of the big fish will be Karpeles since he's fucked me personally for $5k.

Yes, but to come under the ambit of the money laundering laws, there generally has to be an actual intent to facilitate illegal activity, or at least "willful blindness."  "Willful blindness" is fairly tough to prove, and that's where they'd have to go on this, because nothing in the evidence (so far) cited shows that Shrem actually knew specifically and intended to effect drug trafficking.

However, he did (if the allegations in the complaint are true) commit a crime most people can't commit.  Most people are in no position to submit a "Suspicious Activity Report" (SAR) or to fail to do so.  Shrem cleverly put himself behind the 8-Ball when he became the AML guy for BitInstant, and became eligible to commit a crime most people will never even be able to commit, that is, the failure to submit an SAR when it is legally required.

That is the exact opposite of a smart move.  If you're going to sign on with the feds to do federal business, expect them to go after you with a vengeance if you fuck them on exactly what you agreed to do when you signed up.

One of the US AML nuances says, not literally: the act of sending money (monetary instrument or funds) outside the US border to promote a crime IS money laundering. I don't agree at all with this, but as you can see, according to the Law, ML is much more than what one usually thinks. And in that case, it's not required for the money to be a proceed of a crime.. nonsense, but that's the way it is.

What they try to demonstrate in the indictment is that he knew the (monetary instrument or funds) was going to be used to promote a crime (buying drugs in SR). Interesting to understand if bitcoins can qualify, according to laws, as monetary instrument or funds.

The only thing this will prove is that some bank employees are more suspicious than others, and some are faster than others.


Yep.

Yeah.  Money laundering is attempting to disguise the unlawful origin of money.  At most, Shrem knew that some of the money would likely be used to buy drugs.  There wasn't evidence that it had an illicit origin.

Still, some of the stuff Shrem allegedly wrote looks really bad for him.  You've got to wonder what he was thinking.

This is why I think the actual money laundering charge is pretty thin.  They have lots of evidence Shrem knew the transactions were suspicious and should have triggered the reporting requirement, especially for someone who was supposedly the AML officer for a corporation, including correspondence with the co-founder. 

The intent to launder money is not at all clear, though.  Money laundering is a specific intent offense.  While that need not necessarily be as specific as, say, intent to launder the proceeds of cocaine sales by Pablo Escobar to fund terrorists, just to pick a glaring example, it certainly has to be more specific than just an intention to collect fees on processing transactions that seem a little fishy.

Federal prosecutors also tend both to overstate and understate their claims in a complaint.  First, they overstate in that they quite often allege dire offenses with incredibly lengthy maximum sentences, but second, they understate in that they only cite enough evidence to establish sufficient probable cause to bring the complaint at all.

We can neither assume they can prove the claims they have made nor that they only have as much evidence as they cite in the complaint. 

I'm pretty suspicious of the 20 year maximum sentence money laundering claims, but if they can prove the factual claims they have made with regard to the failure to report (still a big if), they have him at least on that.  I suspect front-loading the complaint with the charge with a life-ruining potential sentence is to try to force a plea to the well founded but lesser charge.  Or something even less than that.

I cannot educate you unless you care to learn.  You would be mistaken (and likely confused) on your first question and you are ALSO incorrect that the "threshold" is $10,000.
This is the last I will say to you.   If you wish to learn more, go to a casino and see what happens when you win $601...    You do not know what you are speaking of.   You are mixing google searches up and applying them to other things....
If you wish to test your $10,000 theory which you either take from the customs form for the US or from some other google search that you did, it will be simple for you to do.   If you have $9,000 in your bank account.   Go down and withdraw $4,000 (or $2,000 if you have more patience).   Then do it at another branch OR do it again the next day BUT DO NOT take out more than $10k.   If they do not ask someone to come over, do it one more time the next day.    See if you get it as quickly and without a supervisor having to "approve" the teller doing it.     See if they ask if what you want the money for (then they are deciding whether you are suspicious or not).  You might learn something.
Or if you know anyone in vegas or that works at a book or a cage in a casino, ask them.
Enough time wasted on that.

I said that it is likely that Pirateat40 has provided information in exchange for reduced charges.
You went on to protest that, to your knowledge, no one but the SEC was involved.
If no charges were filed in exchange for information, what kind of evidence would you expect?

In case I'm not being explicit enough, an example you might relate to:
A cop stopped you for pissing on a dumpster, told you that he wouldn't write you up if you ratted out your buddy, which you did.  Just what sort of paper trail would that leave, exactly?

What is it that you disagree with in my original statement?

What did I post that was incorrect?  Are you claiming that reporting of gambling income is not subject to the $600 threshold of 26 USC § 6041 ?

The Spitzer case is a separate issue.  Suspicious activity reports can be filed for amounts less than $10000.  There is a $10000 threshold for currency transaction reports. You are mixing up several different things here.

Money laundering requires intent.  Receiving coins that you have no knowledge or reasonable suspicion they are involved in illegal activity is not money laundering.  Criminals have money.  I know it is a shocking fact but they do.  Not just Bitcoins, but also good ole US dollars as well.

There is a big difference between being an innocent counterparty, and actively evading the AML program your own company put in place.

Launder could be receiving and sending coins, any coins.