Topic: LocalBitcoins BTC sellers being taken to court and pleading guilty (Read 2726 times)

The way to avoid trouble is not difficult. You need to register with FinCEN and make a good faith effort to comply. It need not be perfect. You also need to look to your state to see if your activities are considered money transmission.

In addition large deposits into banks on a frequent basis, particularly cash, without having done the above, are just asking for trouble.

Finally declare your income and pay taxes on it.

Generally, in my experience as an attorney, there is much more to each story than the excerpts that we read. It is more likely than not that the individuals charged were trying to avoid paying income taxes and it is also possible that they were dealing with individuals that may not have been model citizens. You have to ask yourself, what is your risk tolerance? The more risks you take, the more likely you are to get stung.

George D. Greenberg, Esq.

www.attorneybitcoin.com

I am sure that there would be similar cases like this one. I am not really familiar with the regulations for selling Bitcoin is USA but I do understand that you really need to have a sort of permit to make the transaction legal and so you won't be bothered by government forces and worse slapped with a case in the court.

Someone mentioned here that the permit is for free or not really expensive. So USA residents have to go with that hassle to be able to do business with Bitcoin as a seller. Hopefully, in the coming months a much better legal framework for cryptocurrency can be worked out...there are now consultations conducted on this regard, I guess.

It is unfortunate that a great country like USA is not anymore a hotbed of innovations...and government is not anymore listening...in the future they would realize their mistake of letting this blockchain revolution get away from their sights.

As a former trader on LBC, I'm disappointed.
Hope they don't turn Into gov't lapdogs like coinbase.

I hope Paxful doesn't end up like this.

I only know US law - having learned it in a baptism of fire.  You are correct.  Things are different elsewhere and I know nothing about that.

I might be wrong, because I simply can't comprehend that they can on one hand say that it's not money but commodity and then say that it can be money for the purpose of a certain case/investigation/prosecution. It's especially hard for me to understand because I live in Europe and here bitcoin is not treated like money. It's just an electronic valuable, like a domain name, and you're not transmitting anything by buying or selling it.
It's good that you managed to get them off your back, but they stole some money and gear from you, so they still got something off that raid.

That is the fee and max sentence for violating 18-1960.

It's Delights how USA tax officers treats to their job. They will find any possible way to claim the taxes. Maybe this country historically have such power because of this strict tax policy.

This is exactly what I was charged with.  I even had the same attorney!  However in my case I did not plead guilty and after $250,000 in attorney fees and payoffs to the government all charges were dropped.

As I have said many times (after I was arrested and learned all about it):  

If you want to advertise on localbitcoins in the US you should get the stupid free license.  If you do not get the license they can claim it is a business, claim you need the license, charge you with 18-1960, seized all your assets for their federal asset forfeiture slush fund, put you in jail, etc.

If you are just a customer on localbitcoins (not running an ad) you may be safe from all this - maybe.  So far I have never heard of a case where they have arrested someone who contacted an ad as a customer.  But, you never know, that may be their next move.  I think they would have a hard time claiming you are running a business if you contact an advertiser as a customer.  BUT, remember it is all about the civil asset seizure.  If you have assets to be seized they will go after you to fund their operations.  NOTE:  if you are a customer using localbitcoins always assume that the person running the ad you contact is a federal agent, cooperating witness, or undercover agent for one of many different agencies.  In other words be very careful what you say.  I never got to see all the evidence against me (all the grand jury testimony was sealed and remains sealed to this day) but I can tell you from the evidence I did get to see that many accounts on localbitcoins are owned and operated by government agents.

Of course I know his attorney very well (he was my attorney) and I consider him one of the "good guys" so I have to assume that the plea deal was in the best interests of the client.  In other words either a) there were other details of the case that we don't know or b) the guy just did not have the $250,000 needed to fight the charge.

I did not take my case to trial because it was going to cost me a minimum of another $75,000 to take it to trial.  Money drives these things on both sides.
You are totally wrong.  You do not know what you are talking about.  When looking at 18-1960 there are three points that can be argued:

1) MONEY
2) TRANSMITTAL
3) BUSINESS

1) Is Bitcoin money?  Already decided in many cases.  All they do is leave the broader question as to what Bitcoin is unanswered and simply say that "for the purposes of this specific prosecution we will consider it money or money-like enough to proceed".  Basically you do not have an argument here.

2) Transmittal?  Is buying and selling on localbitcoins the transmittal of money.  First of all you cannot use the argument that Bitcoin is not money (see #1 above).  Also whether it can be considered "transmittal" for the purposes of 18-1960 has already been decided in many cases and the precedence is basically yes, it can be considered transmittal for the purposes of 18-1960.

3) Business.  This is not a point of law.  According to the FinCEN regulations this is a matter of "fact and circumstance".  What exactly does this mean?  It means that whether what you are doing is a business or not has to be decided by the decider of "fact and circumstance" and in the US that is the jury.  In other words in my case it boiled down to this one point:  was what I was doing a business or not.  They claimed it was a business, I claimed it was not.  After 9 months we agreed to disagree on this and they dropped all the charges.  Since we never went to trail the point was never decided.

Wow that is indeed a huge fine and it is even more than the value of the 98 bitcoins. Pretty crazy they are starting to go after localbitcoin users now in stings like this.

The problem is that this money transmitting thing is borderline or slightly on the side of not being against the law. If bitcoin was called a commodity by the US government and there's nothing in the law that says you are supposed to register when trading it. You would have to register if bitcoin was a currency, but it isn't. According to law it's like trading stocks, and you don't need to register to trade stocks, do you?
The fee is obviously not made to discourage the trader, it's the cost of the operation. He's being forced to pay their wages.

Just saw an article about someone in Arizona who was running scams on localbitcoins with getting caught on a drugs possesion call when they found out he was making millions from localbitcoin when the price was $1300 until he was caught.
All he was doing was selling at the upticked rate the sellers are all allowed to sell at.
So i dunno about that one except for the drug thing but money laundering?
I guess there is a fine line when it comes to bitcoin and the tax laws from each state and how they consider it to be a felony.
http://www.phoenixnewtimes.com/news/feds-raid-home-of-arizona-bitcoin-trader-morpheus-titania-make-arrest-for-bullets-9276771

$250,000 in fines for selling 98 bitcoins. That sounds way too steep for me.
What we need is some clarification from government agencies on what is acceptable and what is not in the Bitcoin world. That is not forthcoming.

All the 3 letter agencies have to finance their operations somehow, so they are going where the money are. Bitcoiners are supposed to be rich, so they're a perfect target.
Just pick one of the traders, charge them with something, like said money transmitting (which is a complete bullshit, since bitcoin is officially not a currency) and confiscate their computers to steal the coins. This is nothing but theft, because there's actually no law that these people are breaking. They don't need a license to transmit money, because they are selling a commodity.

Klein faces as many as five years in prison and $250,000 in fines.
They don't care about prison, it's those 250k they're after.

Some weird transgressions happening in the bitcoin world lately.
This ain't your fathers bitcoin anymore I am afraid to guess what is happening to our coins usage now a days.
 

The phrase is delusional.  The police and governments are much harsher than in most European countries and the brand of "freedom" is forcibly brought to countries all the time as an excuse for war on their side.

It says a lot about the monetary system that the US government is so desperate to appear liberal while undermining Bitcoin users.

Land of the free.

Laughable if it wasnt so sad.

Pretty typical of enforcement to go for the street-level transactors. If they really wanted to do the right thing, then get localbitcoin in US to require some form of KYC or tax diligence on US users. This only pushes away the real "bad guys", making it harder for them to be ferreted out.

I think they'd rather give the illusion of Internet freedom to their citizens.  Regardless, I don't think everyone who does a transaction on there is running an unlicensed money transfer business, just merchants and whales. 

I wouldn't be surprised to see a lot of other governments cracking down on LocalBitcoins transfers.  Transferring with cash is an easy way to avoid taxes and they're going to want to regulate it pretty heavily if Bitcoin keeps growing.

this what happened to burt, i suspect they caught him with an insider that trade with him on localbitcoin, i guess he was moving again a large sum

but still i can't see anything illegal in exchange a big amount to fiat if you are going to claim it later anyway, what's all this thing about money trasmitting?

as far as i know it should happly only to merchants and not to private users, certainly it's different in europe

But you can use Bitcoin to buy $30,000 in merchandise then sell said merchandise for cash.

Strange world we live in.