Topic: Miami arresting people for use of Bitcoin (Read 5839 times)

Thanks for that, such a position goes to my larger supposition that they were probably taken down more so because they chronically ripped people off. 

Just because you have runners doesn't make you big-time, it just makes the runners smaller-time.  In many countries housekeepers have their own housekeepers. 

As for them being able to handle $25K to $30K easily there is no reasonable evidence of that, however there is evidence to suggest the contrary.  Primarily they refused the $30K deal, but more importantly after the arrest they failed to post bail and availed themselves of a public defender.  None, of that is indicative of anyone operating a business of anything larger than nano size business.   The feds caught serous worker-bees.

Let's be reasonable here, you don't spend time in jail when bail is offered to you, similarly you don't accept a public defender if you could afford to get someone who knows you to defend you in court.   

Those guys were nobodies before the transactions and became less after it.

Please provide more evidence of wrong doing to justify the effort going into this matter, the money laundering charge is nonsense; what else is going on here?

Don't kid yourself. Those guys were pretty well known on localbitcoins . They had runners working for them doing local cash trades in some major cities outside of Florida. Even though they kept their public transactions below $10K, they were definitely flying above the radar and I am pretty sure they could easily handle custom $25k - $30k transactions.

After the arrests, a few of the larger localbitcoins dealers went off the platform as a response to all this witch hunting. This might be a good thing, if it forces cash traders to be more cautious and low key.

Bitcoin is a cryptocurrency, cryptocurrencies are virtual currencies, the business of transmitting virtual currencies for a fee are regulated in two ways: 1) money transmitter, and/or 2) Money Services Business.  The above shows you the law and an interpretation of the law by the agency charged with enforcement of the law. 

The Miami arrests are valid if the men in question were not licensed to do the transactions they performed and charged a fee to do.

Hahaha bitcoin has absolutely nothing to do with the story!

Good find though

Here is the law:

) Money transmitter—(i) In general. Money transmitter:

(A) Any person, whether or not licensed or required to be licensed, who engages as a business in accepting currency, or funds denominated in currency, and transmits the currency or funds, or the value of the currency or funds, by any means through a financial agency or institution, a Federal Reserve Bank or other facility of one or more Federal Reserve Banks, the Board of Governors of the Federal Reserve System, or both, or an electronic funds transfer network; or

(B) Any other person engaged as a business in the transfer of funds.

(ii) Facts and circumstances; Limitation. Whether a person “engages as a business” in the activities described in paragraph (uu)(5)(i) of this section is a matter of facts and circumstances. Generally, the acceptance and transmission of funds as an integral part of the execution and settlement of a transaction other than the funds transmission itself (for example, in connection with a bona fide sale of securities or other property), will not cause a person to be a money transmitter within the meaning of paragraph (uu)(5)(i) of this section.



and here is an interpretation of that law by the law enforcement agency charged with upholding that law:




FinCEN Ruling 2003-8 – Definition of Money Transmitter (Merchant Payment Processor)

November 19, 2003

Dear [ ]:

This letter responds to your letter dated February 5, 2003, requesting an administrative ruling with respect to whether [ ] is required to register with FinCEN as a Money Services Business in accordance with 31 CFR 103.41 by virtue of operating [ ]. Based on the representations contained in your letter, FinCEN has determined that [ ] is not a Money Services Business as defined in 31 CFR 103.11(uu), by virtue of the ACH processing services provided by [ ], and is therefore not required to register with FinCEN.

According to your letter, [ ] operates a service called [ ] that provides third-party origination services for Automated Clearing House (“ACH”) transactions on behalf of merchants. Through [ ], merchants can accept customer payments for purchases made through a merchant’s web site, or by telephone, in the form of a checking account debit. [ ]’s merchant customers obtain payment instructions to debit a customer’s checking account and submit these payment instructions to [ ] through [ ]. [ ] batches and submits the debit information to [ ]’s bank for processing through the ACH system. Once [ ]’s bank initiates the ACH, the depository institution at which the merchant’s customer maintains a checking account debits the account of the customer, and sends a credit instruction through ACH to [ ]’s bank, which then credits the amount to an operating account maintained at the bank by [ ]. After a temporary holding period to ensure that the transaction initiated by the merchant is not returned, [ ] remits the funds to the merchant. Through [ ], merchants are also able to initiate credits to provide refunds to customers. You have asked whether [ ] would be deemed a money transmitter in accordance with 31 CFR 103.11(uu)(5) by virtue of providing this service.

The definition of money transmitter for purposes of BSA regulations found at 31 CFR 103.11(uu)(5) includes:

(A) [a]ny person, whether or not licensed or required to be licensed, who engages as a business in accepting currency, or funds denominated in currency, and transmits the currency or funds, or the value of the currency or funds, by any means through a financial agency or institution, a Federal Reserve Bank or other facility of one or more Federal Reserve Banks, the Board of Governors of the Federal Reserve System, or both, or an electronic funds transfer network; or

(B) [a]ny other person engaged as a business in the transfer of funds.

FinCEN does not currently interpret the definition of money transmitter to include the third-party origination service that is described in your letter. The nature of the transactions you describe is the transfer of funds through the ACH system from a customer to a merchant as payment for goods and services. [ ]’s role in the transactions is to provide merchants with a portal to a financial institution that has access to the ACH system. [ ] acts on behalf of merchants receiving payments rather than on behalf of customers making payments. For these reasons, the service that [ ] provides through [ ] more closely resembles payment processing/settlement than money transmission. Therefore, to the extent that the role of [ ] in such transactions is limited to submitting payment instructions obtained from a merchant to a bank for ACH processing, and remitting the funds received through the ACH process to the merchant (or in some cases, refunding money to the merchant’s customer through an ACH transaction), FinCEN would not deem [ ] a money transmitter for purposes of 31 CFR 103.11(uu)(5).

In arriving at our decision in this matter, FinCEN relied upon the accuracy and completeness of the representations made in your February 5, 2003 letter. Nothing precludes FinCEN from seeking further action should any of this information prove inaccurate or incomplete. Finally, we note that you have requested that certain information contained in your letter be held in confidence and exempt from disclosure under the Freedom of Information Act, 5 U.S.C. 552. FinCEN reserves the right to publish this letter as guidance to financial institutions with all identifying information about you, [ ], [ ], and [ ], redacted. You will have 14 days after the date of this letter to identify any other information you believe should be redacted and the legal basis for the redaction. Should you have any questions, please telephone Christine Del Toro of my staff at (703) 905-3590.



Sincerely,


//Signed//


Judith R. Starr
Chief Counsel



cc: David M. Vogt, Executive Associate Director, Office of Regulatory Programs Deborah Silberman, Chief, MSB/Casinos/IRS Programs

That's still ludicrous. People still don't understand cryptos in the mainstream.

After reading through this whole thread, beginning to end, I'm surprised nobody has really emphasized how small of a grasp that the police/investigators/attorneys actually have regarding bitcoin. Everyone is assuming that the level of understand here at bitcointalk is universal.

Let's face it, this arrest didn't need bitcoin involved whatsoever. It was just an angle they were shooting from. Almost smells to me like this guy's friend ratted him out or someone who knows the defendant who literally had to pay a private investigator to explain to the police and state attorney what bitcoin is WAY BEFORE the setup & arrest could have taken place.

I'd be surprised if this guy made a bad business deal with someone heavily knowledgeable about bitcoins, screwed him over, and this was akin to payback. There's virtually no way police and state attorneys would go out on a limb based on self-educating about bitcoin from the wikipedia article & couple youtube videos and think, hey no problem, let's go do this Leeroy Jenkins style!

My gut instinct is someone who knew Michael Hack had to hire a private investigator or hire a retired L.E.O. who had connections in the Dade County state attorney's office to justify the man-hours and excessive court costs that will be drug out due to the complicated nature of bitcoins & why they had to make an ordinary ML honeytrap become 10x more confusing by involving bitcoins with it all.

I'm pretty such there is somebody behind it all who has like 2000 bitcoins or something and cashed 5 btc to throw money into a PI. This is how rich people fund publicly funded investigations against random individuals. They hire a PI who has ties to the relevant law enforcement agency. I'm from Florida and know a FWC (Fish and Wildlife office) who broke into private property (climbed a gate, ignored no-trespassing signs) all to arrest someone hunting too close to a turkey feeder.

The guy's name and mugshot were splashed across the morning newspapers and evening news. The FWC acted perfectly legally after his wife's best friend (a detective/PI) was lobbied to influence a public servant (the fwc officer) into enforcing a law that every private landowner usually breaks. (They sit on top of a deer or turkey feeder and shoot easy targets then lie about it as the hunt of a lifetime!)

The reason? Because one guy didn't donate $10,000 to the other's wife who was running for some state office on influential zoning board or something. The details are fuzzy but it was all political retribution about wounded ego's.

hope they get freed soon 

Not the way I read it... You (individual or business) can act as an intermediary of a transaction (selling something for a friend) as long as the USD amount is less than $300. Between $300 to $10,000 USD you will need a license to act as a third party to facilitate a transaction... The cap of $10,000 is strange to me as it's obviously not the highest amount that a money transmitter can work with. I guess above $10,000 it would require a different license and would follow a different article of the law...

Where do you get this idea? They were arrested for money laundering and they tacked that charge on just to scare the guy...
Being charged with something doesn't make you guilty... It's not even new that LEO will do this, it happens all the time.

To be a money transmitter you must not be involved as a direct party in the transaction... (PayPal is a money transmitter because it is facilitating an exchange between 2 other parties. PayPal isn't a party of the transaction, rather an intermediary.)

Selling something that you own for USD does not make you a money transmitter. FINCEN already addressed this and clarified that a Bitcoin transaction for USD by an individual or business does not require a license so long as the individual or business is a direct party to the transaction...

I'm not trying to make any case, just trying to explain what (in my opinion) the case is all about.. neither judging nor saying right or wrong! Not even know if they could possibly go to prosecution, without reading the indictment and reading about the evidence it's quite difficult.

Amen to that.   You should see the Police where I live.   They are basically ticket writers with guns.   They spend more time sending 5 squad cars to give kids bike helmet tickets, than solving any sort of crime.  Worse than that, they think they are above the law and arrest people and write citations for things that they do themselves...

you are trying to make a case for money laundering and it won't happen, those guys probably fought hard, really hard to get the first order completed ($25K), I'm guessing they borrowed from friends and family and were physically and mentally spent by the time the second big deal came around, THAT proved they were not bigtime anything, they were not even connected wannabeees,

The feds think doing a trade in btc is as easy as doing a drug deal, farrrrrrrr from the case, there are so many scams for buying selling, viruses, hackers, and even "legitimate" exchanges playing with your btc.   This doesn't happen with cash or drugs. 

All of the finCEN officers should own btc and learn about it intimately before assuming it's so easy to handle -- it's fantastically complex, far more complex than stocks, bonds, commodities, or any other financial instrument.   

Them going after the bottom feeders of the market doesn't make sense on it's face, there must be another reason for fed efforts.   Is there any update on this matter?

True.. I wonder if anyone here as a link to the actual indictment, to read the facts properly instead of speculating.. anyone?

Although, wouldn't it actually be easier to just use the USD to buy stolen credit cards? The Bitcoins that he sold were less likely to be used for crime than the USD that was paid for them...

It is sort of like, "I'm buying this used car just in case my existing getaway car breaks down. I might need to use this car in it's place..."

Chasing people with made up cases by investigators is a disputed but sometimes used method.
But even if it is accepted as chasing method for criminals then should be used consequently.
When chasing mass murders which are killing with strangulation their victims why investigators don't go to vendors and say 'I want to buy 10 m of rope to strangulate some people' ?
Or asking for a bottle of whiskey and saying to the vendor that he needs to drink during driving the car.
Then put the vendors in jail if they sell them.
Even if the law would be applicable for selling bitcoins it was used very selectively.

I am sorry, maybe I am not able to explain myself properly: there are certain crimes which are crimes only if a specific intent is proven. In this case, forget about the stolen cards, they don't want or need to prove that he wanted/considered/thought about buying those cards or not.. that's just a trick to let him know what their business is.

Even if his reply was "Hey, are you crazy? I DO NOT want to buy any cards whatsoever, never, ever, period" that's not a problem, they didn't (probably, that's my interpretation) want him to say "yes", they only wanted to make him aware of what they needed the bitcoins for. At that point, if -being aware of their business- he still transact with them, he could be charged with ML, because he's aware he's helping them, with that transaction, committing a crime.

Hope it's clear now

I'm on record (see wayyy above) for saying that I believe the the effort wasn't worth the charges.   Meaning, I think the only thing these guys are guilty of is not having a MSB license, and being to ambitious in trying to serve their customers.   I further speculated that such a grand effort presumable starting out from a localbitcoin ad is unreasonable. 
My speculation is that those arrested probably screwed too many customers which resulted in the sting and subsequent arrests. 

A plea deal might include them not doing any more MSB for 1 year+.  They can't afford bail, or a private esq, so I'm confident this isn't going to trial, it will plea out and be over with.    If this goes to trial, the court will likely be pissed at the DA even if a conviction is gotten for the no license.   If the ADA moves forward with the ML charge, they must have a whole lot more evidence that what we are prevy to.

What made him a money transmitter, and an illegal Money Service Business is the fact that he charged a fee for the professional business service.  

Had they simply used their own money to sell to the officers P2P that would have been a different story, at that point there would be no fee just an inflated sale price.

While I agree; it's going to be up to the interpretation of the jury to determine his guilt...

The Police don't care if he had any intent. They do nothing but write the summons...

I think he'll get off in court because he owned the Bitcoins and wasn't selling them for somebody else. If he even suggests that he was afraid upon learning that the undercover was potentially an armed criminal and that he had no intentions to ever do business with this person again.

The cops could do this with a used car sale... It's going to be up to the court to determine his guilt...