The question for me is: why US? He is a Russian citizen, the company is based in Bulgaria, servers in Russia, legal HQ in Cyprus and all the services operated from Seychelles - arrested in Greece. The MtGox hack affected a Japanese company. I'm not debating the nature of the crimes, etc - I am just wondering, when does it become a US case?
I can get the "there were US customers" - but why not Europe? Or Japan? Or Russia? Or Australia? I'm sure BTC-e had customers from all over the world (and money laundry is pretty much a crime everywhere).
So, when does it become "you have broken the US law and you are under arrest"?. Does it work the other way around too? If you start a gay social network in US, can Russia come in (the first time you are flying in one of the Russia's partners territories)
and say "you are breaking Russian gay laws, you are under arrest"?
Look at the actual charges in the indictment. All the BTC-e stuff is not what he's charged with. He's charged with transferring stolen Mt Gox Bitcoins to Tradehill, a San Francisco based exchange (now defunct). That's the US connection that will seal his extradition.
They also allege that BTC-e is (at least partially) hosted in the US and does business with many US companies, which is likely true. But that's not what they charged him with. Maybe that will come later after he's extradited and they have a chance to go through the evidence they no doubt collected when they arrested him.
On an unrelated note, it looks like the traceability of Bitcoin transactions played a major role in this. It turns out that Bitcoin is really not a great way to launder money, unless you want a record of your money laundering archived forever, redundantly, on a distributed system of computers around the world! I expect future crypto-locker viruses to switch to Monero instead of Bitcoin now that they can no longer cash out through BTC-e. Subsequently I expect to see Monero delisted from any exchange that follows KYC after some pressure from law enforcement.
For one of charges in the indictment, "Operation of an Unlicensed Money Transmitting Business" (18 USC § 1960), they allege that BTC-e satisfied two conditions, either of which alone would have been sufficient to prove the charge. One of the conditions is knowingly transmitting funds derived from a criminal offense, but the other one is just "fail[ing] to comply with the money transmitting business registration requirements set forth in [31 USC § 5330]". So I'd say the BTC-e stuff is indeed part of "what he's charged with", albeit not the main focus.
This is ridiculous overreach. It sets a dangerous precedent where any online trader must be mindful of all legislation of all possible jurisdictions on the world.
Otherwise, sell porn, have one customer from Saudi Arabia, go for a vacation in Turkey, and here comes your flogging extradition trip.
At the same time, US has a "Hague invasion act" authorizing military action against international prosecution of their officials.
I'm surprised no one here as mentioned Kim Doctcom, who is still trying to fight his extradition from New Zealand. He's a German, who has never set foot in America, was illegally spied on by NZ (which is now retroactively legal thanks to former PM John Key's GCSB law) and for a charge that isn't a crime in NZ.
Kim Dotcom and The Pirate Bay are, essentially, extralegal cases. KD and TPB consistently frustrated interests that are powerful enough to get bureaucrats to supersede the legal system (as long as it's ambiguous and rare enough not to comprise a slam dunk against the bureaucrat). A bit of pressure and the problem gets solved one way or another.
Sweden only moved against TPB after the WTO threatened them with sanctions. It's likely that New Zealand caved in the belief that they'd face similar unpleasantness.
We must understand that underneath the fancy dressings and the formalities that we create to make ourselves feel important, humans are essentially the same; our psychologies are all dictated by the same biological processes. We must not kid ourselves about this. It is always dangerous to upset or frustrate powerful interests. If you taunt someone much more powerful than you, as TPB did, do not expect formalities like law to make a difference.
A lot of starry-eyed entrepreneurs go in thinking that everyone will be pleasant and sportsmanlike, and see their work as a friendly collaborative competition. This is not true! People will skirt and break every rule they can to win, because they see the competition as a matter of survival, not as a fun game.
The copyright cartel is out of control along every axis. Not only do they make use of an artificially-granted, market-destroying monopoly to stifle the creative speech of the public, but in multiple cases now, they've triggered an extralegal override of national sovereignty to persecute a little guy who was frustrating their oppressive business model in ways that were completely legal within his/her jurisdiction.
If our politicians want to get out under these peoples' thumbs, they need to seriously revise copyright law, and tell the fat cats that they're going to have to be productive to make money instead of milking royalties for 100+ years and sending the feds across the world to black bag entrepreneurs.
IANAL but the convention in law seems to be to come out of the gate as aggressively as possible, making an initial land grab for every kind of remote, loose, or tenuous allegation, and see what survives. I guess lawyers expect to get push back, so they overreach out of the gate to give something to quibble over and protect the real basis of their claim.
Yes, the blockchain is a fantastic resource for Feds prosecuting financial crimes. In order to get away with these things you need to have flawless opsec, because the moment they can connect one thing to you everything quickly unravels.
Yeah new research is coming out frequently enough that reveals new and previously unknown weaknesses and patterns in the mixing strategies. The teams do a good job of responding quickly to address new issues, but previous trades that leaked information can't be fixed. The information is out there forever.
If you are trying to stay out of jail, I'd consider Monero a good mid-term strategy. Anything else (including Zcash) of probably not even that great in the short term. (So few people use the anonymous part of Zcash that you have a terrible anonymity set). Dash, pivx , etcetera are just plain insecure.
As an actual cryptographer who has looked into it, I wouldn't put too much faith in Monero's fungibiliry. The story is not as good as the PR would have you believe, and is really not all that different from Bitcoin with CoinJoin.
I don't know why you are being down voted, since you said exactly what I was alluding to. Monero's ring signature traceability is very hard to analyze. Even if the ring signature is not broken in a cryptographic sense, transactions can still be linked by the other fingerprints they leave, or by wide spectrum analysis.
It's a bit like a game of sudoku. A mixin input could have 4 different coins, and technically you can't be certain from the signature which is the real input. But in reality you can do downstream or source analysis and come up with probabilities for whether the prior transactions were authored by the same wallet, or associate with other keys used by other mixin inputs. Every little bit adds to the probability of two addresses being linked, and it really doesn't take many bits of information to confirm or eliminate mixin inputs as being real or fake.
This is notably different from how ZeroCoin operates, where the anonymity set is everyone and it is fully untraceable. However ZeroCoin has problems with respect to performance and deployment :\
You also forget Confidential Transactions. How can you do any kind of useful downstream or source analysis when you don't know the amounts and you have stealth addresses? Also you can have huge amount of mixins which use the total pool of TXs ever done.
It's the same as RSA4096, in theory you could bruteforce eventually crack a key, but in reality it's not a viable attack.
You're just saying abstract things without backing them up with details. Also Zcoin has scaling issues with TXs being 50x of Zcash (another Zerocoin-based implementation)
While I won't say that Monero offers heat privacy, it's clearly much better than CoinJoin or JoinMarket on bitcoin. For one thing they have thousands of users and transactions. The number of people participating in mixing gives you a big shield to hide behind.
For another, they hide balances, and they do actively pay attention to the information leaks, and they employ strategies to fight that. When the drug markets were busted, dash and pivx users were discovered, but Monero users were kept hidden.
It's pretty clear to me that they are at least moderately successful where nobody else really is yet. New strategies may come out tomorrow to unmask everyone, I certainly wouldn't bet my own life on Monero's safety, but they overall are outperforming everyone else in a practical sense.
How are Confidential Transactions in combination with Ring Signatures not way better than Bitcoin+CoinJoin?
If you focus on the transactions after the RingCT merge and not older 0-mixins, it's seems pretty strong to me.
Monero works by ring signatures. When you make a spend, in addition to the coin you are spending you pick a small number of other coins, presumably at random. Validators don't know which coin of the set is being spent, but they do have assurance that any specific coin can't be spent more than once.
The problem is that there are a lot of knobs to tweak here. Which coins do you pick? They're not all random because at least one of the coins is from your wallet. People have specific usage patterns that give a prior on what output is the user's vs a randomly selected one. (E.g. an output that is 2 years old is less likely than one that is 2 weeks old to be the user's, since most outputs being spent are recent.) In addition, details of the transaction such as how many other coins are selected per signature, reveal what client might be used.
It has been our experience with bitcoin that it is incredibly hard to mask what software is used to generate a transaction. It turns out that there are a ton of things that can watermark a transaction and thereby decrease your anonymity set -- from coin selection to serialization choices to the default settings of optional knobs like fee or locktime. And these generally interact very badly with ring signature systems. If your wallet version makes transactions a certain way, and none of the other mixin inputs you included do exactly the same thing, then it is blindingly obvious which input is actually yours -- the one from a transaction that matches yours in these other respects.
Only way to launder BTC - break the history chain, so to speak - is to first pull it out of the network - which requires either an exchange, or like a street deal (cash for BTC). Exchanges require identification so either there's a dodgy one that doesn't ask for that, or you get a mule.
Anyway, then you have cash money, you buy BTC back. Or keep the cash, I mean I wouldn't want to keep BTC if I had stolen it. It's pretty much worthless on its own - as proven by pretty much all media always going about $4 billion instead of 600K+ BTC.
Actually you don't need to get it to cash, change it to another crypto such as LTC or ether on an exchange, send it off exchange to another exchange and buy back btc to have unlinked coins. You could also use a mixer for the alt coin as you move it between exchanges for further obfuscation. Most exchanges that deal in alt coins only require ID/verification if you want to exchange to fiat, so crypto to crypto can be done on anonymous accounts.
And this might be one reason why the US went after this guy - the BTC-e exchange was extremely popular for laundering criminal money. A google research talk showed over 95% of bitcoin ransoms were cashed out via BTC-e.
Once the US have this guy in custody, they can then get their hands on the server transaction records, and chase down the criminals who extorted money from people and companies in the US.
Sure, except that exchange will have a record of the transaction. So as long as they're still in business, the authorities can go to them and request them to provide a record of the transaction, and you have both wallet IDs.
If you think about it, we are one step away from tracking everyone's crypto transactions.
That step is putting pressure on exchanges to blacklist coins that have been through a mixer.
Cash is the ultimate mixer because of lack of technology.
But it's not hard to put pressure on exchanges.
This is why digital money is ultimately traceable. And the most tracdabke money is one that has a global, distributed ledger :)
Far better to have trustlines. You would have to track down friends of friends, and deanonymize people's public keys. Unlike Bitcoin, anyone can start a trustline with anyone else without authorization from the government :)
We don't really know what steps they took to launder the money though, do we? Maybe they were dumb and directly moved the coins from a known hack address to Tradehill.
If you're a bit patient and are willing to get your money only a small amount at a time I don't see why you wouldn't be able to launder even a significant amount of bitcoins. Use coin mixers, convert back and forth with other crypto-currencies (including Monero if you want), split and merge the coins, mix that with actual transactions to 3rd party accounts (gambling sites, donations, whatever)... Eventually people will lose track, or at the very least you'll have plausible deniability that the coins changed hands at some point.
> Subsequently I expect to see Monero delisted from any exchange that follows KYC after some pressure from law enforcement.
This won't happen. KYC will still remain, but privacy is an important feature that many legitimate businesses want in crypto for completely legal and good reasons. Many of the businesses in the EEA are interested in Ethereum gaining privacy features, and Ethereum plans to add zkSNARKS. At that point it's not just Monereo, ZCash, etc that the exchanges would have to ban but Ethereum as well. It'll be a losing battle for law enforcement.
There's no dangerous precedent/slippery slope - in the financial world offering a money transfer service to anonymous customers is already banned, that's what KYC/AML laws are intended to do. There's no right to trade anonymously and for large transactions legitimate businesses are required to identify you and not accept anonymous customers (KYC requirement).
It doesn't necessarily mean prohibiting anonymous instruments like physical cash or Monero, but it means that any non-small use of such instruments is required to be accompanied with documents about the transaction.
E.g. you can legally sell stuff for a briefcase of cash, but you're required to declare the transaction, including the identity of that person (e.g., in USA, IRS form 8300 for cash amounts exceeding $10000; you can legally sell stuff online for Monero or whatever other consideration, but if it's a significant amount, then you are required to identify the person even if the payment instrument is anonymous.
The parent comment gave a prediction of Monero being banned by exchanges. That is the electronic equivalent of banning cash deposits.
>E.g. you can legally sell stuff for a briefcase of cash, but you're required to declare the transaction, including the identity of that person (e.g., in USA, IRS form 8300 for cash amounts exceeding $10000; you can legally sell stuff online for Monero or whatever other consideration, but if it's a significant amount, then you are required to identify the person even if the payment instrument is anonymous.
While unrelated to the topic I was referring to, this is indeed a slippery slope. The minimum amount for reporting to FinCEN started at $10,000 decades ago, and hasn't changed despite inflation reducing the real value of that sum by several fold.
In some countries the minimum amount has even been reduced in nominal terms, despite it already gradually declining in real terms due to inflation. Amidst this gradual criminalisation of ever less substantial anonymous cash transactions, there are a growing number of calls for banning cash altogether. That is a textbook example of a slippery slope.
Bullshit. Every other bank and (non-crypto) exchange in existence requires some form of KYC, and they will want to know the source of larger funds.
And isn't this an admission that Monero is of no real legal use? Otherwise, why would you care about cashing it out at an exchange? You could spend it on goods and services instead.
This is not a bank or cryptoexchange. It's an electronic currency. Your equating of banks/cryptoexchange, which are subject to FinCen regulations on currency conversion, with electronic currency is intellectually dishonest. It's a barely concealed rhetorical sleight of hand. You know very well that the corollary here would be banning cash deposits. A private electronic currency is the electronic equivalent of cash.
>And isn't this an admission that Monero is of no real legal use?
What kind of absurd conclusion is that? There are infinite number of possible non-criminal reasons why one would want to convert one currency to another. In fact, the currency having the property of not leaking private information has no bearing on that.
>Otherwise, why would you care about cashing it out at an exchange? You could spend it on goods and services instead.
This is absolute nonsense. Why do we have USD-YEN exchanges?
The concept involved here is extraterritorial jurisdiction--the US claims the right to enforce its laws on its citizens abroad in some circumstances. The most notorious uses in the US are FATCA (basically forcing foreign banks that do business with US citizen to hand information over to the US) and the FCPA (allowing anyone with pretty much tangential relationship to the US to be sued for bribery). It's telling that the FIFA corruption scandal was brought, not by any EU courts, but by the US federal prosecutors.
In these sort of situations, the main thing that tends to apply is not the ability to get a judgement in court but the ability to get that judgement enforced. So if, say, Fiji were to make up a law and convict, say, Donald Trump under it, no one would care--Fiji would have no practical way to enforce that judgement. But the US can generally get its judgements enforced, even outside the US.
In the specific case of the financial world, the size and importance of the US financial markets gives the US unparalleled power to enforce judgements. The US could not only lock you out of dealing with USD transactions directly, they could also direct banks that do business in the US to not do business with you.
None of that unparalleled power is needed in this case. Greece and the US have an extradition treaty, the crimes alleged by the US are serious, dual criminality exists, they're not political offenses, the guy isn't facing the death penalty, and he's not even a Greek citizen. This is a by-the-book extradition.
Traditionally an extradition treaty would require the crimes to have occurred on US soil. We’re slowly figuring out how this applies to the digital age.
> Traditionally an extradition treaty would require the crimes to have occurred on US soil.
No, they wouldn't have. While each extradition treaty is to an extent sui generis—they are individually negotiated, not boilerplate—extradition under such treaties for non-digital, meatspace offer see where the accused's acts at issue are not charged to take place in the physical territory of the extraditing country are often within their scope. In particular, no territorial restriction on the location of the offense eligible for extradition appears, unless I've overlooked it, in the US-Greece extradition treaty, which long predates the digital age.
TradeHill no longer exists, but I wouldn't want to be their ex-CEO. Their culpability depends on whether or not they knew the money being laundered was dirty, and whether or not their AML and KYC were good enough.
My point was just that TradeHill, being the US entity, is the one in the US jurisdiction and that a criminal doing business with them doesn’t magically fall under US jurisdiction. I’ve no problem with BTC-e or whoever getting arrested, since they were clearly criminals, but I am concerned about US laws becoming a thing that applies to non-US citizens outside of the US (the implication in the comment I replied to being (as I read it) that BTC-e falls under US jurisdiction because they were doing business with a US company, which in my opinion is overreach)
Clearing laundered money through a US bank is more than sufficient for US jurisdiction to apply. You can choose not to like it but this is well established case law.
Case law, where? In the US? That's a circular argument, since it's exactly the validity of US law on foreign soil that's being discussed. To cite Monty Python, "if I went 'round sayin' I was Emperor, just because some
moistened bint lobbed a scimitar at me, they'd put me away!"
Likewise, if some random country made a bunch of case law in its own courts establishing that foreign nationals in other countries were to be punished for making heretical texts available to citizens of that country, we'd laugh at them, not say "well, the case law is well established" and extradite our citizens.
@jcranmer agreed. US financial markets (breadth/depth) / US law influence over multi-jurisdicational banking entities, ensures that US law can/will be enforced by almost all players.
Should the authorities in a particular jurisdiction fail to enforce financial crimes, indicting a bank or sanctioning an individual in that region can effectively block all counter-parties from doing business with them (as they are now doing business with a sanctioned or indicted party).
It's hard to explain in laymens terms without sounding like some kind of "Illuminati-nut" (for lack of a better term) ):
And also requires a better understanding of interbank standards and practices, money/current-markets, SWIFT, etc.
I can get the "there were US customers" - but why not Europe? Or Japan? Or Russia? Or Australia? I'm sure BTC-e had customers from all over the world (and money laundry is pretty much a crime everywhere).
So, when does it become "you have broken the US law and you are under arrest"?. Does it work the other way around too? If you start a gay social network in US, can Russia come in (the first time you are flying in one of the Russia's partners territories) and say "you are breaking Russian gay laws, you are under arrest"?
The best way to think about this is in terms of the laws of the country you are in.
We might be a outraged that Otto Warmbier was treated so harshly (killed really) by North Korea for allegedly stealing a propaganda poster, but at the end of the day we understand that he went to North Korea and in North Korea, North Korean laws apply.
The next step is to ask about actions that took place outside the country you are in but are illegal under that countries laws. So if, for example, Seth Rogen who famously made a movie making fun of Kim Jung-Un were to travel to North Korea we would not at all be surprised if we were arrested and sentenced to a very harsh punishment.
Finally, consider that extradition laws are just like any other domestic laws. The treaty between Greece and the United States means that for the purpose of a lot of criminal laws, physically entering Greece is the same as physically entering the United States.
In this case it was ultimately Greece that decided that what Vinnik did was sufficient to take away his freedom. He subjected himself Greece's judgment by going to Greece. If he had stayed in Russia he probably would not have been extradited.
Going to another country is something many of us take lightly, but it can be a really big deal.
The "why" is just "because the DoJ made a case before Europe or Japan". The "how" is just extradition. Greece was willing to extradite him to the US to face these charges. The US would do the same with Greece, though not with Russia as we lack an extradition treaty with Russia (and probably not to face a charge that would be a clear first amendment violation anyway).
I don't mean to be argumentative but surely no [BTC-e] US customer was a "victim" of any money laundering that may have been going on?
Edit: Since my question wasn't clear, the emphasis was on customer, as in: "customers of a business that also engages in money laundering aren't usually considered victims of that money laundering."
Money laundering statutes do not require a discrete 'victim' with standing. They simply require the illegal manipulation of funds. In particular, disguising the origin of funds or assisting someone in doing so.
Uh, "surely"? It seems extraordinarily unlikely that in a $4 BILLION money laundering effort that none of that money came from sources in the US.
More to the point though: money laundering statutes were written (speaking very broadly) because they don't have to prove the underlying crime. It's criminal to be evading disclosure and tracking requirements even if all the money was obtained legally.
What I meant is I've been to a restaurant which turned out to be a money laundering front but I can't seriously describe myself as a victim. In fact, the food there was cheap and delicious!
But I appreciate your clarification. To rephrase what you are saying: it falls under US jurisdiction because some US persons were victims of a crime and some of that crime money ended up being traded on BTC-e (allegedly).
Yeah my favourite pharmacy just closed - pretty sure it was a money laundering op. Huge warehouse, fully staffed, inventory from pharmacy to electronics, hardware to perishable goods (but just random retail packages). In a couple years I've never seen more than 1 other car in the 50-space parking lot. Amazing service.
And of course there's no victims in money laundering. It's a victimless crime that has the sole purpose of helping prosecutors when they aren't able to find a real crime.
And of course there's no victims in money laundering. It's a victimless crime that has the sole purpose of helping prosecutors when they aren't able to find a real crime.
While the laundry operation is victimless it often directly assists crimes that have very real crimes:
Trafficking
Drug abusers [0]
Illegal weapons trade [1]
[0]: Esp. as since it is currently illegal they suffer a lot as getting their drugs means dealing with people you normally don't want to deal with and doing stuff you rather wouldn't do.
[1]: no, I'm still pro guns. I just don't want them sold illegally.
Right. And cars manufacturers assist kidnappers and bank robbers escapes. And cell phones can be used as remote detonators. And end-to-end cryptography... no, this is an abomination, you shouldn't even think of it unless you willingly submit your private keys to the appropriate government agency for safe escrow to aid lawful investigations!
(I would have put /s here, but all these lines will be used at face value soon enough).
Money laundering is knowingly assisting criminal activities. You're actively hiding where the money comes from, exactly because you know it comes from illegal sources. (If the source were legal but embarrassing, all you'd need is standard bank privacy, not active laundering.)
The car-related analogy isn't a car manufacturer. It isn't even an anonymous, stealth rental car service (although plenty of crimes could benefit from it).
The analogy is a taxi service that advertises itself as willing and able to crash through police barricades.
Actually, no. Money laundering is generally defined as obscuring the source and/or destination of funds whatever the reason. It is a false equivalence to say that because one wants to hide the source or destination of funds that one knowingly is doing so with an illegal activity being the motivating cause. There is no such thing as "standard bank privacy" when nearly anyone in that organisation can look up your data without explicit justification or judicial review. In an era where, for corporations at least, money is speech, it certainly is limited for us mere mortals who can't setup shell corporations to sacrifice themselves for our causes.
Edit: I should be quite clear, I am neither for or against AML regulations. I, however, am for an equal playing field. I would like to see a world where the increasing quantity of money one has doesn't have an increasing effect on how many times one's vote counts at the expense of those who don't have as much. Privacy and the ability to act collectively to support unpopular opinions should not be a commodity that can be bought and sold in the form of a corporate veil.
> Money laundering is knowingly assisting criminal activities. You're actively hiding where the money comes from, exactly because you know it comes from illegal sources. (If the source were legal but embarrassing, all you'd need is standard bank privacy, not active laundering.)
Building an encrypted messaging app is knowingly assisting crimial activities ... all you'd need is standard communication privacy laws, not actual encryption.
Like I said before, not everything that is illegal is wrong. In Germany, homeschooling is illegal. In Russia, telling teenagers that some people are gay and that's OK is illegal. The US law is a hodgepodge of contradicting legal statements which are different in different states, and many things can be counted as legal or illegal based on your wealth, political connections, race, or just luck.
Law is not a bright shiny source of truth from outer heaven, it is a sketchy framework of hacks and patches written in haste to aid people in resolving their conflicts.
"Like I said before, not everything that is illegal is wrong."
But things that are illegal are... illegal.
Nobody in this thread is really debating the morality of illegal actions we're talking about. And while debating morality can be entertaining, it doesn't really change what happened here.
Yes. Two questions are: did the BTC-e founder knew that he is helping to legalize proceeds for MtGox hack? Or some general hack? Or just he didn't make due diligence on the source of money and just agreed to help for a fee? And second — what authority the US government has in running the trial? Why the case is not tried in Japanese or Russian or Cyprus courts?
That might be totally true, but money laundering as a crime itself is just a cover for prosecutors inability to find the real crimes. It's about as morally defensible as asset seizures.
That seems pretty bogus. You're telling me that you think if I operate a front business and help human traffickers launder their money (thereby helping them to cover up their crime), but don't involve myself with human trafficking itself, I've done nothing wrong, and prosecuting me would be morally indefensible?
Yes, the money laundering part should not be prosecutable as long as you weren't involved in any crime. The very concept that not telling the government about everything you do financially is somehow a crime is simply abhorrent.
>[0]: (Actually it is stricter now - borderline hilarious as my bank for the last twn years starts asking for my passport because of the KYC rules)
That's an issue, isn't it? Everyone can easily be in violation.
Anyways yes if you are working with the criminals that's one thing. Running a BTC exchange, if you aren't inquiring about the customers funds (you shouldn't, it's none of your business!) then it should be no issue. If you somehow know the BTC was stolen from Mt Gox, then yeah, you're helping with the hack and should be charged for that (not for money laundering, just for whatever the general charge is as a participant to a crime).
At the bottom of it the regulations create an objective standard for when you "should have known" the provenance of money, so it seems fairer to have them than not.
Yes. The crime in question is the human trafficking. Pursue and prosecute that.
If you go by the economic definitions of money, which generally include uniformity and fungibility, money laundering is really a whinge from law enforcement that police work is difficult, and can't they please go after someone who may be less dangerous and less guilty, but is much easier to catch?
You can't reasonably expect people to investigate the full history of all money they receive as payments. Merchants have the right to presume that their customers are innocent in the absence of blatantly obvious evidence to the contrary.
As they say, gold has no smell. A coin that was obtained by murdering its former owner cannot carry residual guilt from the crime. Once it is used to buy a sack of oranges at market price, it is indistinguishable from a coin that was mined and refined by devout monks, repeatedly donated to charity, sequentially blessed by all the religious figures at that bar where all the jokes happen when they walk into it, and then spent on a sack of grapefruits.
If you buy a house with 50% legit income, and 50% black market contraband profits, you don't seize half the house and claw the other half back from the previous owner. The proceeds of criminal activity attach to the criminal, not to the property. The money has no soul or conscience. It is innocent whenever the person who carries it is.
And money laundering is not a crime, in my opinion, because in order for it to be a crime, certain inaccurate assumptions about money have to be true--namely that money is not uniform and fungible. It artificially makes money from a marijuana dispensary business different from money from a pharmacy. Cash should be cash, agnostic of the sins of its bearer.
You seem to be conflating multiple issues here. As far as I know, nobody considers it money laundering to unwittingly accept money from illegal activities as payment. But I don't buy the idea that if I knowingly set out to conceal the source of ill-gotten funds then I've done nothing wrong. I've colluded with criminals to abet their crime in that scenario.
Know-your-customer laws do just that. Go to a bank with $20000 in cash and no ID, and try to open an anonymous account with it. Take that $20k to a car dealership, and try to buy a car off the lot with it. As you walk away, cops stop you and take your cash via forfeiture. The prevailing assumption seems to be that anyone carrying that much cash is a criminal. The assumption should be that cash is cash, is cash, is cash. The whole point of having it is to dispense with ledgers and accounting books in everyday commerce. They burned the tally sticks and stocks to make us use paper money, and now they want the account history back.
Money with a history is not uniform and fungible.
If you make a dollar that came from a criminal worth less than a dollar that came from a saint, you are attacking one of the foundation concepts of money.
For the sake of argument, let's say I get $1 from my crime boss for intimidating a witness. I put it in my pocket. Then I find $1 lying on the street. I put that in my pocket. Then I help an old lady put groceries in her car, and she tips me $1. I also put that in my pocket. Then I go to the convenience store and buy a pack of gum. I reach into my pocket and pull out $1. What is the source of that money?
My pocket. Most people simply don't care where that dollar came from before that. Most people have no conceivable means of knowing where it came from before that. And if they knew, they wouldn't have the recordkeeping capacity to distinguish which dollar came from which activity. They only really care that I pay for the gum instead of shoplifting or strong-arming the clerk.
But ever since the invention of forensic accounting as a crime-fighting/investigative-reporting tool, it would seem that following the money often remains a valid tactic even when other methods of investigation fail. This is because financial businesses must keep meticulous records, as a consequence of being such juicy targets for fraudsters. So all the cop has to do is pop down to the bank records office with a warrant.
So as a society, we have a choice between having money that is more suitable for open trade, and money that is more suitable for combating crimes. My personal preference is for the former. Those who would like for money laundering to be a crime in and of itself--rather than an inchoate offense dependent on other crimes--prefer the latter.
The root question is whether you believe that criminals should be allowed to participate in white-market commerce, like normal people. I do. With that opinion, their blood lucre spends the same there as all the more righteous bills. They might be discouraged from committing crimes if they are less able to profit from them, but I don't think that's the case. If you make the cost of whitewashing black market money 25% of its face value, the criminal just does more crime, or charges more for their black market stuff. It's just another cost of doing [black market] business.
If you're trying to make crime unprofitable, you really need to seize assets and revenue streams only after a conviction, and in proportion to the magnitude of the crime. Civil forfeitures with inanimate defendants and prosecuting inchoate offenses in the absence of primary offenses is just slapping justice across her blindfolded face.
I think you are still confused about what constitutes money laundering. Accepting money from a criminal in exchange for goods or services is not money laundering, yet your whole post is about that.
Like, let's take the complication of know your customer out for a second. Of course you should not be prosecuted because a bank robber comes to your store and uses the money he stole to buy something. But if you are keeping fraudulent books in a cash-heavy business to conceal the source of tens of thousands of dollars you or your associates made through criminal activity, why shouldn't it be a crime?
Can you explain this? If someone has a bundle of cash from illegally selling drugs, then they give it to their store front to "launder" as retail income, aren't they now paying tax they wouldn't otherwise pay?
Why would there be personal income tax on the criminal activity? Guy sells drugs but obviously can't record the profits as DrugCo's profits, so he records it as RetailCo's income. If DrugCo was legal, the taxes would be on that company instead. His personal income tax is unchanged: whatever he takes out of RetailCo is still taxed, and RetailCo pays whatever corp taxes are applicable.
The only difference is in the details of the corporate taxation. Selling meth legally might be taxed differently than laundromat services. So an ethical money launderer should look to use front businesses that have an equivalent tax rate and not take advantage of any special tax discounts that wouldn't apply to the original source.
> It's criminal to be evading disclosure and tracking requirements even if all the money was obtained legally.
It was criminal to help fuel a nuclear arms race that put everyone at risk of nuclear holocaust. It was criminal to destroy Iraq for bullshit reasons. It's criminal to kill people with drones based on metadata.
But criminalizing money laundering? That's just power tripping.
I've answered this elsewhere but basically money laundering is responsible for keeping the wheels turning in a lot of real criminal activities like human trafficing and illegal weapons trade.
OK, so to play the devil's advocate, let's take the example of btc-e. btc-e did do a lot of business with criminal enterprises, it appears, but they also had a lot of legitimate users.
So how is that different from a restaurant deep in mob territory in some urban area that serves tons of mobsters dinner every evening? Should that restaurant be prosecuted? How about the corner grocery that serves the same mobsters? I mean, food is just as critical to surviving as money is, right?
So how is that different from a restaurant deep in mob territory in some urban area that serves tons of mobsters dinner every evening? Should that restaurant be prosecuted? How about the corner grocery that serves the same mobsters?
No, IMO it should not be prosecuted as long as they are only serving food and getting paid the normal way.
They might very well get in trouble if they for example
start offering the mobsters empty "takeaway food" for 1000 monies,
transfer 900 monies in payment for non-existent ingredients to a shell company run by mobsters.
Warning: IANAL. And I made this example to be simple and clear. I guess you could get in trouble for less than that.
Not to go down the rabbit hole with this line of reasoning, because I would always argue that money laundering is tax evasion, but the fact that criminal activities is incidental to another activity, doesnt make the other one criminal.
As another user said, cars and guns are used for robberies, if you banned them, then you would also be curbing criminal activity.
Buying a car from a guy you know or highly suspect used the car to rob a bank and is selling it to you for the express purpose of hiding what car was used in the bank robbery sounds like a crime (or at least something that would land you in hot water).
Buying a gun from a guy that you know or highly suspect used the gun to kill a guy and is selling you the gun for the express purpose of hiding what gun was used in the murder sounds the same.
In many countries, it is illegal for lawyers to charge a percentage of the obtained damages. But in the US, a lawyer can propose: "I'll help you suing this bastard for free if I get half of the awarded damages." This incentivizes US lawyers to be more confrontational and to seek higher damages than anywhere else.
Edit, found this: "FinCEN today assessed a $110 million civil money penalty against BTC-e for willfully violating U.S. anti-money laundering (AML) laws. Alexander Vinnik was assessed $12 million for his role in the violations." In the US, government agencies can keep such fines for themselves, providing them with a nice incentive to go after such cases.
> But in the US, a lawyer can propose: "I'll help you suing this bastard for free if I get half of the awarded damages." This incentivizes US lawyers to be more confrontational and to seek higher damages than anywhere else.
But it also gives poor people a chance to sue someone big, because their lawyer isnt asking for a fixed fee.
Yes. My friend is a Canadian lawyer who does class action lawsuits. When it's a big corp screwing over thousands or millions of customers, usually none of the customers can afford or are willing to front the money to fight Big Corp in court. So they take a cut of the winnings instead. (There are special loans and insurance they can get for this sort of thing.)
It's not clear what exactly the outcome is in this case, but in many civil cases the US Treasury uses the penalties to repay the original injured parties. It generally doesn't cover all their losses.
The US has this "thinking" that the world is just their backyard. It is not really in the law, strictly speaking. But if you have been watching the news, they strongly interfere with countries for their own (or their politicians) benefit.
For example, they hit Libya with missiles right when Al-Gaddafi sent troupes to defend from future-ISIS militants.
So yes, the US will get involved in stuff that matters to it.
> The question for me is: why US?
Because if you know the US is coming and dropping bombs, who the hell wants to fight it? Even Russia is abstaining hard to prevent the nuclear war possibility though the US have been doing all it can to start it.
You're not wrong, but also dismiss some tough moral choices. I'd argue that attacking Libya was against U.S. strategic interests. Since 9/11 Gaddafi had substantially improved relations with the west. He gave up his nuclear program and was basically acting as Europe's bouncer. Since he fell the migrant crisis has exploded. North Korea and Iran learned that despite all promises otherwise, the only way to ensure regime survival is nukes.
So why did the U.S. intervene? Gaddafi was going to ruthlessly slaughter everyone in Benghazi. He said so, and had the tanks to do it rolling across the desert. It turns out that the U.S. military is really good at killing tanks in the desert (esp in a low air defense threat environment), so the White House and DoD knew that they would have blood on their hands if they stood by and watched. Also, unlike Syria, Gaddafi had no strategic allies to complicate things. That is, other than us.
And now we get to suffer the long term consequences of preventing that genocide by stabbing a new friend in the back. We saved lives in Benghazi and toppled a ruthless dictator. We also fueled the rise of ISIS, and helped pave the way for nuclear confrontations in Korea and the Middle East.
This strikes me as your regular U.S. citizen who has been fed with American Media. As someone who is living in the "region" and was affected by the chain of events that happened since the starting of the Tunisian revolution let me tell you that you are quite misinformed about what happened in reality.
Gaddafi was not toppled because he was going to kill civilians. In fact, it is the other way around. Gaddafi has been killing his opposing politicians for decades. This happened with the best knowledge of his US, EU friends at the time and at really a ridiculous and holocaustic level.
The time the US intervened was when he was going to "truly" protect his country or power from real armed extremists.
If you think the US intervene for the sake of "humans" then you are gullible to your media. The US has been actively intervening in the middle east which resulted in countless (hundreds of thousands) of people and children dying directly from US fire.
There are thousands of people dying from hunger every day. The cost to feed them is certainly much less than the cost of wars the US has engaged. But the US will not help these "black" guys despite having the food, infrastructure and money.
The US only intervenes in countries where there are strategic resources; or to help its allies ( israel / south korea ).
It's not clear that you can really cast it as a successful effort to save lives either, given that it's plunged Libya into violent, sectarian civil war.
Would the humanitarian cost be less if NATO hadn't intervened? There was already a civil war in progress in Libya, after all. NATO didn't and hasn't gotten involved in Syria (with the exception of a limited air strike this year in response to the Syrian government's use of chemical weapons on civilians, a strike of limited strategic value) and the situation there is one of the worst humanitarian crises today.
I think people are too quick to pass judgment on US or NATO intervention in matters and aren't acknowledging the extreme complexity involved in making the right decision. When dealing with some of these international conflicts, sometimes it's less a matter of making the right choice but rather making the least awful choice, and it's often impossible to determine the true consequences of decisions in advance.
> If you start a gay social network in US, can Russia come in (the first time you are flying in one of the Russia's partners territories) and say "you are breaking Russian gay laws, you are under arrest"?
People often don't realize that if you fly through US airspace after violating certain US laws as non-citizens, you will be apprehended through an emergency layover coordinated with the carrier. That's a contributor to why US federal three letter agencies constantly ingest passenger manifests.
After which terror charges were never filed and the gov't began seeking deportation on extraordinarily pedestrian grounds, with his lawyer speaking publicly about the case:
Can't find anything after that, but he's not listed in the USCIS's Online Detainee Locator System and AFAIK could not have been legally deported to Somalia.
WikiLeaks documents on him, combined with other sources, paint a picture that he's either a) a somewhat prolific terrorist/human trafficker; or b) a politically active Muslim immigrant in the USA who might be kinda sorta guilty of some clerical crimes and may've acted a teensy bit dodgy when returning to the USA. (b) is probably way more likely given that DHS was apparently OK releasing him on parole.
That's not confusing, what's confusing is his lack of direct association with the USA. There are a handful of other countries that would appear to be more responsibility for his actions.
Given that Greece is willing to extradite him and we haven't heard anything from the numerous countries where this guy has a business presence, I suppose most of the other countries involved are happy to have the USA deal with this guy.
Not every country has the resources to track down billions of dollars' worth of BTC transactions and use them to build a bulletproof case against a specific person. So if someone else offers to do it for free, why say no?
Ah, but the fact that there are a handful of other countries doesn't change anything - he can be prosecuted in all and each of these countries for various parts of that scheme.
USA prosecuting him doesn't mean that other countries can't, it simply means that USA was a bit quicker to do so. For example, it's technically possible that he's acquitted in USA for the AML part, but immediately after that gets extradited to Japan for some charges regarding the MtGox hack.
You're right, despite being downvoted, although such an arrest would almost certainly become a major diplomatic incident.
OTOH someone who broke a Russian law we don't find objectionable (and who isn't connected or famous) would be unlikely to get much assistance from the embassy beyond basic legal advice and help hiring a lawyer.
I have a few deep biases against the Russian govt for reasons I won't delve into here. Despite this I believe in extradition laws as a tool of enforcement beyond borders and a means of political outreach/goodwill building.
If Russia made unreasonable demands then we would be right to turn them down. If they need assistance with something truly heinous and actionable then it feels like our duty to act upon it. These international interactions are just as important as education & commerce to building lasting diplomatic relations.
Russia mostly prefers to block websites instead of prosecuting their creators. E.g. btc-e.com (but not btc-e.nz) was blocked in Russia but they didn't care about its owners.
He used the US banking system to launder money. That's exactly the same reason why European FIFA executives and Brazilian Odebretch executives were arrested as well.
Why is it always assumed that the "company" was based in Bulgaria? Which "company" is it? As a Bulgarian myself I've seen that mentioned several times in the past, even on reputable sites, but never seen any actual evidence.
I mean seriously. These ponzi schemes all involve american buys propping up the money and it is an absolute miracle that the US government is willing to invest time and money in creating a system of justice that at the very minimum punishes clear breaches of trust in this system. The only alternative is that any money invested in this technology at all is wasted on Russian fraudsters. I mean honestly is everything just pure bullshit in this world or what?
BTC-E has been seen by the Bitcoin community as "shady" for years. People have always recommend others to avoid using it. It was rumored to be an easy place to sell stolen Bitcoins. It has always offered strangely convoluted pathways to transfer fiat to financial institutions (see http://bitcoinworldwide.net/how-to-deposit-money-into-btc-e). I'm glad BTC-E finally got taken down. I am not surprised it was involved in illegal activities. One less shady Bitcoin company.
Now the top 12 or so volume-ranked Bitcoin exchanges listed at https://cryptowat.ch are perfectly legitimate trustworthy companies. The ones I'm not sure about are CEX.IO and Luno (not saying they aren't trustworthy, I just don't know them that well) and, well, Bitsquare which as a decentralized exchange is bound to have some shady participants.
> It has always offered strangely convoluted pathways to transfer fiat to financial institutions
Your link is not evidence of "strange convolution." The reason there are so many steps/screenshots is because the payment service is in Russian, and the guide is designed for non-Russian speakers.
Most people never dealt with fiat on BTC-e, and would use someone like Coinbase to fund the purchase of coins, and trade exclusively in crypto on BTC-e.
> Now the top 12 or so volume-ranked Bitcoin exchanges listed at https://cryptowat.ch are perfectly legitimate trustworthy companies.
Any cryptocoin exchanger is involved in criminal activity, because criminals have to sell their stolen coins as fast as possible. And you find out that you were a part of criminal activity only afterwards...
I still don't understand, the U.S. is charging a Russian with a white collar crime?
The crime was committed outside the U.S., he didn't come to the U.S., the servers weren't in the U.S., Mt.Gox was based out of Japan, and Greek police arrested him.
I've seen this enough to know this is common, but what is going on with this world?
As others have noted, the US didn't just make up jurisdiction here or declare that they can prosecute anything anywhere -- the charges include an allegation that he transferred stolen BTC to a US-based company. That creates a crime the US has jurisdiction to prosecute.
It really is time for people to stop being gobsmacked at the idea that once you get entangled with an entity in a particular country, anything you do to or with that entity which violates the country's laws is fair game for them to extradite and prosecute you over. Shouting, "But I didn't do it in your country, I did it on the internet!" does not get people out of that.
Also, given just how much global network infrastructure passes through the US, and the near-impossibility of productively cashing out of most criminal schemes without involving a US institution, people should stop being surprised that their clever attempts to commit the perfect stateless crime are neither clever nor stateless.
You haven't really explained or justified anything. "Them's the rules!!!"
What if Thailand wanted to extradite you because you joked about their king on HN?
You would just laugh, not make a point about "well, what do you expect when you challenge a nation's royal sovereignty? Have some respect on the internet! Thailand takes this very seriously."
People always act like being able to extradite and prosecute for a crime with a connection to your country is some sort of completely unprecedented, made-up-on-the-spot assertion of ownership of the entire world.
But it isn't. If the guy were in the US and had done something illegal and involved Greek citizens or a Greek company, the US would almost certainly extradite to Greece to let them prosecute him. Extradition treaties, and jurisdiction over crimes that involve a country's citizens or other entities of that country's laws (such as corporations it's chartered) are incredibly normal bog-standard boring well-established concepts in law. Nobody should be surprised that this guy is getting extradited.
So: can Thailand extradite you if you happen to say something about the king? Nope. And that's not even close as an analogy. What if you printed a bunch of insulting leaflets and mailed them to your colleagues in Thailand to distribute, and also wired money into a Thai bank to support the campaign, and also hacked some Thai-hosted websites to put up disparaging messages, though? Would you be willing to admit that at least some of that creates a crime under Thai law that you committed, and that elements of what you did took place at least partly in Thailand, thus giving them jurisdiction and a reason to extradite (though extradition often requires both countries to view the act as illegal under their own laws, so the extradition is unlikely to succeed)? I'd hope you would.
But this is HN, where we clutch our pearls and gasp any time the real world teaches us that "But I did it on the internet! There can't be jurisdiction for the internet!" isn't an argument accepted by courts of just about any country.
You would laugh because they have no power to enforce their laws globally, and possibly also because the country you live in has free speech laws that make them unlikely to extradite someone for lese-majeste. The US does have that power and the cooperation of foreign governments.
If someone in Greece had, while sitting in their bedroom in front of a laptop, hacked into a US bank and stolen money, would you be surprised if the US wanted to extradite and prosecute?
The idea that "on the internet" is a magical stateless realm has only ever been an idea in the minds of naïve geeks. It has never been reality.
>> If someone in Greece had, while sitting in their bedroom in front of a laptop, hacked into a US bank and stolen money, would you be surprised if the US wanted to extradite and prosecute?
I'm certainly not surprised the US wants to prosecute, as it seems to want to apply US law to the whole planet.
But I am surprised the in some ways that the system allows it - that person never left Greece. What if the action was something illegal in the US but perfectly legal in the place they are sitting? I don't see that the crime necessarily takes place overseas when what they are really doing is sitting in a room, sending electronic signals from a machine.
>> The idea that "on the internet" is a magical stateless realm has only ever been an idea in the minds of naïve geeks. It has never been reality.
That's not what I'm saying, it's not a stateless realm, but actions taken were not taken in the USA.
I would hope that if you engage in an action illegal in the US but legal in Greece, the Greek government would choose not to extradite, tell the US government to fuck off, and warn you to be careful when travelling abroad.
When one country chooses to extradite someone to another, it's more often because their government doesn't approve of the actions they are accused of either and was presented with sufficient evidence.
> As for defendant BTC-e, the indictment alleges that, despite doing substantial business in the United States, BTC-e was not registered as a money services business with the U.S. Department of the Treasury, had no anti-money laundering process, no system for appropriate “know your customer” or “KYC” verification, and no anti-money laundering program as required by federal law.
BTC-E didn't specifically bar US customer from trading there, so the indictment is on the grounds that their services were offered to US citizens, therefore liable to US Law.
International stateless crime needs to be prosecuted somewhere. He was indicted in the US because the US decided to go after him for crimes against US citizens, and other jurisdictions like Greece that have extradition warrants with the US decided to participate.
MLATs (mutual legal assistance treaties), extradition agreements, and powerful people with powerful relationships willing to go the extra distance to fuck someone's shit up.
> The crime was committed outside the U.S., he didn't come to the U.S., the servers weren't in the U.S., Mt.Gox was based out of Japan, and Greek police arrested him.
No, but he either robbed, or laundered money for people who robbed US citizens (MTGOX customers.)
> If you run online exchanger and have a single US customer, then you have to register your operation in USA. I find it ridiculously stupid.
When you don't know much about something, it can often look stupid.
This isn't new or complex, though. If you do business across a border, governments on either sides of the border may take an interest in the transaction. If you don't like that, don't do business across a border. "Online" isn't a special magic transdimensional place. It's just a web of connections between existing places.
> When you don't know much about something,
> it can often look stupid.
This is just a rude remark. Do you think it's appropriate if I said "Heh, cute, wpietri, but many things are only defensible when you don't understand them."
Also, "if you don't like it, don't do it!" is not a commentary on the issue.
It gets better: while criminal charges for illegal banking practices are part of United States Code (title 18 covers crimes), the banking REGULATIONS that one must adhere to are codified at the State level. This means you must apply for 50 or so different licenses in order to legally do business as a Money Transfer Agent and Money Services Busimess in the United States. Although it seems overly burdensome and deliberately conceived to hinder practicing this line of business, the truth is that it creates an environment where consumers of the products and services offered by these businesses are better protected from fraud, as well as fostering an ecosystem of diverse business practices which leads to an advanced rate of innovation. It's a strange system, but it works very well. The downside is that it takes about $30M in cash to start one of these businesses just to fulfill regulatory requirements vis-à-vis the licensing, deposit, and audit requirements.
You can cover >25% of the US population in just the top 3 states (CA, TX, NY).
The system isn't that strange, almost every business in the US is primarily regulated by the states. What's strange is that most Americans don't realize this.
what even more strange is that whole world should follow quirky us system rules. put usa citizens in jail for not following usa rules, not foreign companies.
You don't have to follow USA rules unless you do business within USA.
The key point is that doing fully digital business online (as opposed to selling physical goods online to people within your country) doesn't mean that no jurisdiction applies, it means that all of them do - if you do international trade with USA, then you have to be mindful of USA laws.
When I (located in USA) buy physical product from other country - it is my responsibility to import it properly. But somehow digital services put burden for following USA countries on foreign entities.
> 1) Arresting btc-e admin made all US customers to lose their balances on btc-e exchange. I highly doubt btc-e will come back online.
I wouldn't be too sure about the US having control over the BTC-e wallets. Their Ethereum hot wallet[1] (with around $100M funds in it) has been untouched since the website has gone down. I'd assume that there's more than one person at BTC-e having access to those funds. Assuming the US government has access to the keys - why didn't they move the funds somewhere else in order to secure them?
Why would they lose their balances? Any decent company holds customer funds in a separate account from their own. I'm sure BTC-e cared enough about their customers that they did this! :)
Do you have to declare your gold or silver in foreign banks? If not, then I don't see why you would for eCurrency/eAssets. Assets are just assets no matter the form.
Exchanging BTC for cash, gold or diamonds is much more difficult ( and there's a higher perceived danger ). How would you go about trading your BTC for diamonds?
Btc-to-diamonds.website ? If it's online, it's tracked by 5 eyes
Tor? 5-eyes is even more interested
Craigslist? Great, go meet a stranger in a parking lot and gamble that you don't get robbed.
The comment is general but it's right. As it & other posters in this thread have pointed out - existing power structures control the world. The internet does not exist in an imaginary "stateless" vacuum.
I wonder how much BTC-e knew about these money sources. Were they a general "don't ask, don't tell" laundering operation that just so happened to be used by these people because it was their best laundering option, or were they directly involved in some of the hacks?
What are the odds that whoever was running BTC-e also happened to be involved in any of those hacks? It's definitely a case of "don't ask, don't tell" and perhaps, making that policy known.
I always thought this was possible, btce was set up by a group of crypto currency hackers, they are in a perfect position to know how exchanges work and the possible security issues they may have, they also have an easy way to launder the stolen coins. Further, bad publicity for their competitors is good publicity for them.
I would like to know how he was arrested in Greece. Was there an Interpol warrant or something or they just made a phonecall and the Greek authorities promptly put the guy on a ship to US?
This illustrates how the DOJ is years behind when it comes to understanding cryptocurrency technology and markets.
It won't take long for one of the cryptocurrencies with private transactions to rise in dominance, since this sort of crackdown imposes costs and uncertainty on all participants.
If the goal of the DOJ was to fight crime, the most effective approach would have been simply to infiltrate mixers and trace money flows relevant to investigations, something BTC is perfect for.
Instead, this move sends a strong signal to the cryptocurrency community that hardening measures are needed.
Pretty sure that won't matter. Monero will hinder blockchain analysis, but if you're wiring out millions they can just demand you prove the legitimacy. "I got untraceable coins" is on the level of excuse as "I got this sack full of cash".
So long they prevent people from cashing out big time, then they're on the same level as cash (see, needing to deposit boxes of cash with HSBC).
Good point. I think it will take a fairly significant transition away from fiat currencies before that situation is eliminated...
But one of the incentives of getting rid of cash is to transform the money into something that can be efficiently sent over a large distance, which is something cryptocurrencies already do.
> I think it will take a fairly significant transition away from fiat currencies before that situation is eliminated...
Not really, so long as the IRS and taxes remain a thing. And someone notices the guy who hasn't had a job in the last five years is driving around in a brand new Tesla and living it up in a mansion.
Perhaps, but I think you assume a much greater level of enforcement than actually exists.
Most tax evasion enforcement is on relatively small subset of taxpayers and is for fairly easy-to-detect fudges. There has been a lot of work between the IRS and banks to set up heuristics and flag suspicious activity, but that all ends up pretty worthless with an anonymous cryptocurrency.
You're assuming that in a world with only anonymous cryptocurrency there won't be banks and credit cards and the like. Keeping cryptocurrency saved on your personal hard drive with backups or something is equivalent to keeping your money under your mattress today. Banks provide you with interest on your savings and security.
I suspect in a world with only cryptocurrency instead of fiat, trying to make a direct peer-to-peer transaction to purchase an expensive item like a house or car will be met with the same reaction as trying to do that today with a duffel bag full of cash.
There's no need to suspect - looking at the regulations, it seems that the standard AML/KYC laws everywhere in the first world already require anyone selling anything large with an untraceable payment instrument (i.e. anything other than through a financial institution; which commonly means cash, but not exclusively so, bags of diamonds or Monero count as well) is required to report the transaction and the identity of the customer.
It doesn't mean that everyone reports that, quite the contrary, but all legitimate businesses do and will.
Interesting, I have been using BTC-E for a while, I had no idea this sort of thing happened. Was it knowingly assisted by someone at BTC-E, or did BTC-E just act as a dumb machine?
BTC-E was one of the eastiest ways for me to change BTC and LTC in day trading. Are there comparable websites with small fees? I'm not interested in buying with fiat money.
> Was it knowingly assisted by someone at BTC-E, or did BTC-E just act as a dumb machine?
The defendant is who run/ran BTC-E, so it's alleged to have come from the very top. The reasons why you found it so easy are probably related to why the US sees it as a criminal enterprise:
> According to the indictment, since its inception, Vinnik and others developed a customer base for BTC-e that was heavily reliant on criminals, including by not requiring users to validate their identity, obscuring and anonymizing transactions and source of funds, and by lacking any anti-money laundering processes.
It continues:
> The indictment alleges BTC-e was operated to facilitate transactions for cybercriminals worldwide and received the criminal proceeds of numerous computer intrusions and hacking incidents, ransomware scams, identity theft schemes, corrupt public officials, and narcotics distribution rings. Thus, the indictment alleges, BTC-e was used to facilitate crimes ranging from computer hacking, to fraud, identity theft, tax refund fraud schemes, public corruption, and drug trafficking. The investigation has revealed that BTC-e received more than $4 billion worth of bitcoin over the course of its operation.
If you're "not interested in buying with fiat money" there's no reason to use an exchange that supports it. You can just use e.g. https://shapeshift.io
Page 6 article 20 says they operated their servers in the United States. If that's true then I'm pretty sure they've already been seized. They were probably on aws
When they say that "Bitcoin Exchange Alleged to Have Received Deposits Valued at Over $4 Billion", does that really mean $4 Billion USD? How is that exchange value established?
As I remember, all exchange transactions on btc-e were public, so anyone could sum/verify the amount of money going through exchange. I've used btc-e actively in 2013, earning good money on trading BTC to USD and back during the period of rapid price growth.
They are boasting about how they caught the guy who robbed Mt. Gox but they just did the same - a lot of people just lost access to their money on BTC-e. They are not all criminals, BTC-e was a convenient way to exchange bitcoins to/from rubles and was used by many people in Russia who were interested in cryptocurrencies.
So, does that mean I can't get the BTC I deposited in BTC-e ages ago? I somehow didn't even know any of this was going down. (I have no idea how much it was...maybe a quarter of a coin, which is a reasonable amount of money today.)
You may get it back in the future, if they open again… or not. Sorry for your loss
It is reasonably well-known that it is dangerous to leave money on exchanges. BTC is only yours when it's in a wallet with a private key that is known to you, and no third party.
I've lost more in my own local wallets due to losing both of the USB flash drives that contained the keys (as ridiculous as it sounds, I think my girlfriend's cat stole one of them).
Realistically, I've come to think cryptocurrency just isn't for me; it's too damned easy to lose. I also forgot my passphrase for some other BTC (I think I remember it, but it doesn't work, so, there those went). It's not huge sums; 1 BTC here (which was only worth about $300 when I "lost" it), a half BTC there, but the only BTC I still have access to is the half of one I have at Coinbase.
I may yet find one of those flash drives, or figure out what my passphrase actually is for the others. But, what I have found for sure is that BTC is too hard to keep safe (mostly from myself).
> Realistically, I've come to think cryptocurrency just isn't for me; it's too damned easy to lose.
I think this is one of the reasons that Bitcoin has never taken off in any real-world sense. (Yes, criminals and speculators love it. But aside from that, its use is trivial.) The math is very cool, but the anthropology was incredibly weak.
People who build real consumer products spend a lot of time studying users and solving small problems for them. As you see even in this thread, early adopters always deride the dumbness, weakness, and laziness of mainstream users. But derision doesn't cause adoption. Indeed, it often blocks the humility and hard work needed to make something competitive in the real world.
I've got 1 btc there that I convertes to Etherium just hours before they went down. Was waiting for my wallet to sync before transferring out. So even a few hours in an exchange is dangerous. Used btc for years so trusted them but got unlucky.
Some rumors that the admin of the servers was not arrested, but took the site down, to reconsider security and relocate servers, before starting up again.
That's why BTC-e does not show a giant FBI logo with a notice.
"Defendant Alexander Vinnik Was Arrested in Greece to Face Charges in the United States; Bitcoin Exchange Alleged to Have Received Deposits Valued at Over $4 Billion" - article subtitle
Even though you were mistaken in this case, it's only because Vinnik stepped out of Russia. If he had stayed, he'd have been mostly untouchable. No extradition treaty exists between Russia and the US; not so for Greece.
Where is the FBI in this? It was a FBI black op against silk road -> follow the money! Who was silk road's bank < Mt Gox - Who bankrupt Mt Gox < FBI Who had access to Trademill database < FBI Who authorized the attack on BitCoin after saying don't use it's not safe < FBI Today the seizure of all BitCoin in BTC-e is done by the FBI - Hopefully the number of FBI SA's going to jail over this Black Op will be limited. But, their greed is transnational to hide their seizure of overseas assets.. that is, What was seized and who accounted for it! Think DrugWar - we will be looking for SA's living beyond their means as with silk road
Although I don't understand the US's involvement in this -- a man breaking the rules is being put to justice, and I'm very glad. I'm also impressed by the feds work in the cryptocurrency space. In recent years the fed has really started to reverse the trope of the government not being technologically adept. There are too many that become wealthy through illicit means and it's good news that something effective is being done about it.
I suppose you're not very familiar with BTC-e. It had a reputation of taking funds from users -- there was nothing effectively stopping them (until now) from locking users out of their accounts randomly, or disappearing user's funds.
There's probably 5 or less people more familiar with BTC-e than I am.
>It had a reputation of taking funds from users
Compared to the other big exchanges they've mostly had a reputation of not doing that.
Essentially all the people I can find complaining about suspended BTC-e accounts got shut down due to inconsistencies in their incoming wires.
I'm looking at BTC-e user database right now, only 0.2857% of the users are banned. Much fewer than you'd see at any other exchange, but I suppose that's not a very meaningful metric given the ease of registrations.
I can get the "there were US customers" - but why not Europe? Or Japan? Or Russia? Or Australia? I'm sure BTC-e had customers from all over the world (and money laundry is pretty much a crime everywhere).
So, when does it become "you have broken the US law and you are under arrest"?. Does it work the other way around too? If you start a gay social network in US, can Russia come in (the first time you are flying in one of the Russia's partners territories) and say "you are breaking Russian gay laws, you are under arrest"?