Topic: MtGox Extortion (Read 5467 times)

http://bitcoin-otc.com/  just use this exchange 

From the sound of it, scammers should have no problem providing other people's identity documents since they can obtain such documents simply by extorting them from anyone whose money they manage to get hold of by means of any pretext that they can later relate to "need to know" rules?

The documents exchanges are obtaining might for some exchanges be worth far more than any potential commissions they could make on actual trades, and this makes it sound somewhat unlikely that people who complain about exchanges holding lots of their money for such extortion purposes are scammers since if they were scammers the large sums involved would have already made it well worth their while to have already run precisely such an extortion scheme themselves thus to have ready for use lots and lots of people's identity forms, which they would presumably be well prepared to spend whenever someone else tries the same scam on them over a large sum of money.

Whole thing kind of smells.

Is there at least some standard system that is used in imaging one's identity that watermarks it as being only a copy and specifically as a copy submitted into the safekeeping of a specific blackmailer/extortionist/KYC-excuse-purporter?

-MarkM-

I guess I need to be more blunt. MagicalTux, is it true that you are requesting more ID materials than Dwolla itself requires in the case of OP's frozen $100?


Relevant comment by OP:

If you had not married your trading bots, then you would not have been required to prove their identity. You should have stuck with that honey from your previous photo.

I haven't seen MagicalTux explain why they require more ID (if true) than Dwolla itself for "verification" purposes.

"We didn't tell you to give it to the customer.  As you'll recall in the letter we included with the payment, we specifically said we were sending this to you for safekeeping to ensure we didn't run the risk of being charged for a refund twice.  If you refunded the customer twice after the way we brought this to your attention, that is most certainly outside of our control and well beyond our duty of due diligence.  There is no way this loss is our burden."

..."Will you be refunding the $100 back to our account, or should we involve the Iowa attorney general and issue a press release explaining how you are defrauding us too?  Certainly this can't help your position with TradeHill."

They may be incompetent at Dwolla, but they're not immune from accountability for their actions.  Someone there knows that such a practice isn't compatible with them remaining in business.

"Sorry, but we already gave it to the customer like you told us to. And they already withdrew the dwolla to some random bank account."

At which point MtGox can then contact Dwolla and say "OK, that $100 I sent you?  I'd like it back in my account, since you now just charged it back to me as a chargeback.  This way we're not billed twice for the refund."

Dwolla should reasonably be able to handle that, since there's no chance that the customer could double-dip, assuming the customer might have been able to if MtGox were to have sent the refund to the user's account where they could withdraw it and run.

That still has the problem of not being connected to the original transaction, which can be reversed at any time.

What does Dwolla say to do when asked how to refund money back to someone unable to identify them to the standards Dwolla themselves imposed?  Certainly they should be able to answer this question, in writing I'd hope as well.

If Dwolla really has a policy this dumb, then what Mark should do is send the money straight to Dwolla (e.g. send them a wire or a check, for the aggregate sum of all funds in this situation, not to a Dwolla customer account, but to Dwolla themselves where they have sole control over the funds) and then tell the customer "We sent the money back to Dwolla on (date) via (method) because we cannot accept you as a depositing customer without satisfactory identity.  Here is a reference number to prove we sent it back.  We don't have your money anymore.  Ask them for it."  This would be 100% reasonable in my view as well as likely many others.

They'd also be forced to stop using Dwolla, killing the golden goose. You see the problem, here.

There is literally no way MtGox can issue Dwolla refunds without either eating the loss themselves, screwing the customer, or suing Dwolla into insolvency. And because of how incompetent the "we're not bankers" Dwolla team is, chances are that they'll never get around to allowing refunds.

Mark, with all due respect, I disagree with this one.  This as a policy is nonsense.

Dwolla may indeed not have a "click here to refund" button, but sending them a transfer in an identical amount - or contacting Dwolla and asking them how to refund someone, and then obeying their instructions - has the constructive equivalence of being a refund.  I am certain Dwolla is NOT going to say "We don't support merchants giving refunds, so just keep their money."

If Dwolla were to instruct you to refund by doing another transfer, and then later force upon you a chargeback and then claim that your refund transfer wasn't really a refund, they'd be in shaky legal territory.

Essentially you are saying that Dwolla has a policy of posting refunds against your account twice, if they feel like it.  This would be totally indefensible in a court of law, even if such a policy were deliberately spelled out in their ToS.

If Dwolla ever held you to such a chargeback, you would have an instant public spectacle with their shareholders and client base.  Instead, by claiming that you need to keep people's money to protect yourself from such a policy, you're inviting a spectacle upon MtGox and yourself.

What this statement means is that I am entitled to possess your property and deprive you of it under certain circumstances, for example, if I am renting it from you.  Being told by Dwolla to "keep the money" when that money belongs to neither MtGox nor Dwolla, isn't a legal right.

MtGox doesn't need to have spent or benefited from the OP's funds in order to have converted them, it need merely have deprived the OP of them without taking some action to specifically dispose of them (e.g. refunding them, or forwarding them to an agency of a state to comply with a law).

That isn't what is happening here though.  


MtGox is exercising both a legal right and a legal duty.  Nor is their any evidence that MtGox has appropriated the OP's funds for their own use.

Anybody who expects to be able to deal anonymously with the exchanges at this point is a fool.  AML/KYC requirements are not going to become less stringent and just because new services tend to ignore them when they first start up doesn't mean they'll continue to do so as they grow and their banks require them to be compliant or risk their accounts being frozen.  Expecting anonymity from businesses which are looking to establish themselves as legitimate financial service providers is ridiculous and those who prefer to deal with services which offer anonymity need to find individuals or services willing to provide it.

I would have to agree with this statement. The exchanges make it hard to keep the coin anon. Satoshi is rolling at his desk.

Why do you require so much more ID than dwolla themselves do

Let me clarify a few points:

• We cannot prevent people from sending us funds via Dwolla. Once funds are here, they are here.
• We have announced the AML requirements for everyone as soon as we were informed by Dwolla that we would have to comply with US laws on Dwolla customers and put as much time as we could before actually enabling these
• There is no way to refund Dwolla transfers. We could send a transfer back for the same amount, but then if your bank were to cancel your deposit, you'd end with your initial deposit back on top of getting the same amount back from us. There is nothing protecting us against this kind of cases.

.
Anyway since Dwolla implemented requirement to provide an ID sooner than we did for all our customers, chances are only people who are comfortable providing an ID were still using Dwolla at this point. Anyway we have to comply with US laws on this and require identification for anyone moving money in or out via Dwolla.

From MTGox TOS:

Tort?  You bet.  Just google "tort of conversion".

http://en.wikipedia.org/wiki/Conversion_(law)

Why didn't you just state your first sentence "There is no crime being committed by MtGox and nor are they committing any tort.  Asking you to identify yourself in accordance with AML/KYC requirements is not coercion or extortion." I think that would be sufficient to point out my ignorant use of the word "extortion" and calm my hyperbolic posts that were derived from a simple failure on the part of MtGox to send out a single email to users. Notice after my reply to LoupGaroux's measured and charitable post that my tone change quite a bit. He's a good measuring stick when it comes to informing others in a classy way.

Very few jurisdictions in the world entitle anyone to take indefinite possession of somebody else's property.  That's because, if anything, whenever there exists funds floating around with nobody's name on it, those jurisdictions will want to "escheat" those funds for themselves!  If MtGox is acting on a purported obligation to hold someone's funds "indefinitely" for legal reasons, there's almost certainly a proper procedure that must be followed for turning those funds over to the proper authorities.

Only when MtGox can prove it has done so does it have any excuse to deny a refund.

MtGox is free to refuse to accept anonymous people as its customers, but it may not rightfully confiscate their money for their own benefit.  The only reason MtGox really gets away with it is the person has no recourse - they're probably anonymous for a reason.  MtGox is exploiting their disadvantage, no differently than a mugger exploiting my solitude in a dark alley as he takes my money.  It is not right.

Letting people legally be the judge, jury, and executioner to arbitrarily convert someone else's property on a whim would be a serious moral hazard anywhere, and I'll bet you'll be hard pressed to name a single jurisdiction anywhere in the world that would allow MtGox to just choose to keep the funds "indefinitely", let alone one that has MtGox's offices within its borders.

None of this applies to you because they are requiring you to comply with the law.  There is no crime being committed by MtGox and nor are they committing any tort.  Asking you to identify yourself in accordance with AML/KYC requirements is not coercion or extortion.  Nonetheless, I really hope that you do make a complaint to the A-G and file a civil action.  You'll give the lawyers some free entertainment and likely end up with your financial accounts being investigated for possible tax evasion.


This may or may not be true.  Many jurisdictions have a minimum level of identity verification which must be applied to all accounts no matter how small the balance/transactions and funds can and will be held indefinitely if the customer does not satisfactorily identify on request.  Certain types of transactions trigger ongoing and enhanced due diligence requirements and providers can ask you to re-verify at any time.

Dwolla has put some very onerous KYC requirements on merchants with little or no notice.  In addition to their ToS now stating that neither merchants nor users will use Dwolla in association with any virtual currency without written consent (MtGox is still waiting on written consent and I suspect that you haven't sought it), starting 17 April Dwolla imposed the following conditions on users sending money to the accounts of merchants who've had reversals.

In that case, a sincere thanks for the info.

Dwolla is equally involved in this identity thing, the difference is that they are cloaking their approach in the "isn't it cool that we can now interact with you through Facebook" line of bullshit. Same intrusive back-rape, same demand for access to your privacy without justifiable cause other than to make them a better buyout target, and to provide them with data to whore out to other companies for big paydays.

And no, I don't work for Gox, or Dwolla, or any other entity that has been described in this community. Or consult for them. It's just pure my attitude and experience in the world talking.

I think the problem is that Dwolla won't let them without compliance. The interesting thing is that MtGox states that they have this policy because of Dwolla (they stated this exactly to me in an email) but Dwolla only required a utility bill with a current address on it. So MtGox points to Dwolla as the bad guy but then requires way more than Dwolla and says "dwolla is making us do it".

If you dont want to hand over your ID why cant they just give you back the money ?

This is the ethical thing to do.

One more thing. To the second part of my original post, are there any BTC exchanges that are a decent alternative to MtGox? With Tradehill gone, does MtGox have exchange business all wrapped up to themselves? Like the poster above, I have no intention of keeping a balance with the exchange, only to buy and sell. I am not worried about the security of stored bitcoins but do value my privacy.

Thanks for the excellent info. I appreciate you taking the time to respond. Made me feel a little better but knowing what a big target everything bitcoin related is, seems spooky to send my DL number to a foreign entity that I know nothing about.  You are correct though that my info is plastered on servers across the country so I should relax a little about it. Sure hope you don't work for them or consult for them...I'd hate to have to throw out that second paragraph in the bias bin, it was pretty good.

I will file the complaint with the Attorney General's office though. I think MtGox deserves at least that for being jackasses and not emailing this change to users but rather relying on forums and their website when I don't visit the forums often and only visit their website AFTER transfers are initiated from Dwolla.

I don't think you read my post above when I said:

"I would not have to prove this in a court of law as I am not suing them. But I do intend to file a formal complaint with the Attorney General of my state and with the emails they have sent me repeatedly asking for my personal ID for my $100, that is enough to get the formal complaint to stick with extortion in the record."

Before getting all high and mighty on me like I'm the idiot for suing for $100, please note that I explicitly state above that I am not going to sue them.  Why would I say that I am not suing them? Because that would be an asininely optimistic thing to say. The point was to convince others to file a formal complaint with the state Attorney General that MtGox stole $100 with this same method.

Agreement or agreement, laws or no laws, extortion or coercion, seeing shit like this (unaddressed by MtGox no less) is enough to raise serious questions about MtGox.

People like me read threads like this and make decisions to keep a $0 / 0BTC balance at MtGox.  I speak as someone who has done a decent amount of business with MtGox, shaken their hands and met them face to face, and who has stood up for them and their actions numerous times.

AFAIK, this is inexcusable on its face simply for the amount.  ID or no ID, there is absolutely no good reason an untouched $100 cannot be refunded to the known account from which it originated.  This should be the default action taken if the customer fails to provide ID upon request.

Yes, extortion is a criminal act but "coercion" is a type of extortion. In this case perhaps I should have just stuck with coercion. And you can certainly get civil damages for financial coercion.  Regarding civil damages for a criminal act, you can sue as a victim of a crime and you can get damages. Just google "Civil action for damages for criminal act" and click any of the links on the first page for a variety of state code on the matter.

MtGox publicised the new Dwolla AML/KYC requirements both here and on their website when Dwolla changed their user policy.  There were multiple threads about Dwolla changing their ToS around the same time.

Even prior to Dwolla deciding to make Bitcoin-related transactions difficult, there have been plenty of threads on here over the last 9 months about MtGox enhanced AML/KYC compliance requirements as well as multiple announcements on their website.

It says right in MtGox ToS that they may freeze transactions pending satisfactory identity verification and that you agree to supply them with accurate, up to date and complete information about yourself.  Redacting the number from your driver's licence would definitely make the information you've provided incomplete.  Do you honestly think that the A-G is going to find your refusal to adequately verify your identity in accordance with AML/KYC requirements reasonable?  Do you really believe that they're going to view MtGox enforcing those requirements as "abuse"?

I'm tempted to tell you to read the ToS before you sign up for services, but given how far off the mark your understanding of "extortion" is, it's highly possible that you did read the ToS and somehow convinced yourself that they don't apply to you.

You seriously have no idea of what the terms "extortion" (which isn't a tort, by the way, but a crime) and malfeasance actually mean.

You have no case for your $100 lawsuit because you are required to mitigate your damages and the only thing stopping your from accessing your funds is your refusal to supply MtGox with satisfactory ID.  Not only would MtGox win such an action, you'd likely have costs awarded against you.

Sorry friend, but consumer protection laws do not include extortion clauses. You entered into an agreement with them, and if you read the fine print, that agreement included language that they can and will take whatever actions, and make whatever changes, they feel necessary to run/improve/stay legal with their business.

The chances of your State Attorney General doing anything other than filing your complaint in the round file are exactly zero. It's a company based in Japan, doing business through the internet exchanged hypothetical tokens of value that have no corporeal existence. They are offering at least as secure a protection scheme for your documents as your state driver's license agency, probably safer, they have a stronger vested interest in protecting your data than either your state or federal taxing authorities, and have less than a fraction of a percent of the exposure that your bank, your doctor and dentist, stock broker, credit card company, landlord, school, mortgage lender, selective service bureau, post office automobile dealership where you purchased a car or any police department that has stopped you for a moving violation; yet every one of those entities saw, and probably photocopied your identification documents. And most of them are keeping them in electronic form, on servers that are about as secure as Paris Hilton's virtue.

Send them your id. Add a specific statement that you will hold them liable for any data loss of breach of the security of your information, and demand that they destroy all traces of that document when you stop doing business with them.

Yes, it does. The funny thing is that they said they Dwolla is the company that made them require this new policy. I told them that with Dwolla, I just had to submit a utility bill (and no photo ID) and then MtGox changed their reason. They said since they do international business, they need more information.

Their behavior is really bizarre in this matter and though I'm not one to buy into conspiracies, it's as if they are using this policy as a cover to farm data from users. SS #s and DL numbers could come in handy and could fetch a pretty penny if MtGox would ever to decide to pull a mybitcoin.com, "get hacked" and disappear with everyone's personal info. I know that may sound outlandish but how else to explain such stubborn and bizarre behavior over a simple $100 transfer?

Extortion.   "You keep using that word. I do not think it means what you think it means."

Mt.Gox failure to disclosure their identification policies in advance may be shady, hell it may even be illegal (doubtful) but under no possible interpretation of any law is it extortion. Even if it WAS extortion that is a criminal matter.  You can't seek civil damages for a criminal charge.  Even if a judge ruled that MtGox can't ask for your ID you have suffered no damages (legal sense of the word).  You can't seek redress for damages never suffered.

Under the totally implausible scenario that anyone took your case seriously, and you made it to court, and survived motions to dismiss, and ended up winning at best you would get your $100 back (maybe with some interest and no not that 1% per day interest in the lending forum the 1.5% APR interest you could claim as damages).  So in a year you might get $101.50.  Well no you won't but that is under the most asininely optimistic scenario you could possibly hope for.

Seems weird that they would need AMl documents over the measly sum of $100 doesnt it ?

Just because they aren't in the US does not make them immune. Immune from criminal prosecution, yes. But if a civil suit against them was successful, they could have any funds or assets in the US frozen and companies that do business with them could be sanctioned which would hurt them pretty bad.

Regarding extortion, under US law forcing another to do something against their will or face repercussions is called coercion which is codified under extortion. I would not have to prove this in a court of law as I am not suing them. But I do intend to file a formal complaint with the Attorney General of my state and with the emails they have sent me repeatedly asking for my personal ID for my $100, that is enough to get the formal complaint to stick with extortion in the record.

It is my hope that others will do the same so that in the future, in the event of a more broad act of malfeasance on the part of MtGox, a civil case will be much easier on the side of the consumer.

Whatever it is its not good to tell someone after they have deposited then require them to hand over personal info and hold their money hostage....

Gox is not located in the US and what they are doing is not considered extortion. 

Extortion would be if gox threatened to report you to the authorities if you did not pay them a sum of money or other thing that gave them real benefit.  Verifying  your license does not give them that kind of benefit that would be considered for extortion.

At the end of May I sent a $100 transfer from Dwolla to MtGox and after 5 days of the deposit not showing up, contacted them. I was unaware that MtGox had changed their policy and now require photo ID verification for Dwolla transfers. I was never notified about this by mail or any other method and so my funds were frozen until I verified.

I sent them a utility bill and a driver's license with the DL number edited out and stated that I simply cannot trust them to hold my license on their servers with my DL number exposed like that. I asked for them to cancel the transaction and send the money back to Dwolla. They say they cannot do that until I upload photo ID with no edited of the DL number.

This is plain and simple, extortion...but with a bizarre twist, they are holding my money hostage for personal information. But it is still considered extortion under US consumer law. My next step is to file a former complaint with my State Attorney General's office so if they make a pattern of this abuse, a case can be made for other companies to sever ties with them. If their behavior gets worse than my mere $100 and they steal a hell of a lot more, a civil case will be much easier to pursue with a trail of formal complaints at the state level.

Anyone have any advice for a situation like this other than what I've done? Is there another method to get MtGox to release funds to which they have no right?

Lastly, what are the best exchange alternatives right now?

Thanks for any input!