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First Bitcoin “mixer” penalized for violating anti-money laundering laws
- propter_hoc 6y agoThis is a $60 million civil penalty and finding of fact from FinCEN, the money laundering & terrorist financing authority. Harmon appears to still be facing up to 17.5 years of prison on federal criminal charges as well. https://www.cincinnati.com/story/news/2020/02/13/bitcoin-larry-dean-harmon-indicted-cryptocurrency-money-laundering-scheme/4746978002/ https://www.cincinnati.com/story/news/2020/02/13/bitcoin-lar...
- firloop 6y agoIf you want to launder money with impunity, don't do it in crypto. Just be a megabank. See: https://www.icij.org/investigations/fincen-files/ https://www.icij.org/investigations/fincen-files/, or Matt Taibbi's writeup of it: https://taibbi.substack.com/p/revenge-of-the-money-launderers https://taibbi.substack.com/p/revenge-of-the-money-launderer...
- fogihujy 6y agoOr just use slot machines like everyone else.
- bootcampwhere 6y agoWait. What. Why not just buy chips, wait then cash then in. Won't you lose 30-50 percent with slots?
- gruez 6y agoIs this effective anymore? AFAIK nowadays chips can be tracked on an individual basis, so it'd be very hard to pull off (assuming the casino isn't in on it). random search: https://www.protiviti.com/US-en/insights/higher-stakes-casino-aml-compliance https://www.protiviti.com/US-en/insights/higher-stakes-casin... >Examples of red flags include: >• Customer transfers chips to other individuals to cash out >• Customer redeems chips for casino checks that amount to significantly more than the amount of funds deposited with no apparent winnings to account for the additional amount >• Customer departs casino without cashing out chips, an activity referred to as “chip walking.”
- notJim 6y agoI feel like similar to the bank case, the key is to be a big enough high-roller that the casino helps you skirt the regulations. Tough times for the small time, mom-and-pop money launderer these days I suppose.
- fogihujy 6y agoNot really. It's not like gambling and friends in high places are the only options when it comes to laundering. All you need is something that allows you to funnel small and untraceable revenue streams, while spending as few money as possible, through a business that looks legitimate from the outside. Now, obviously the tax authorities around the Globe are probably far more experienced than I am when it comes to things like this, and I don't think it's a coincidence that there's governmental resistance to cryptocurrencies; they authorities are busy trying to get rid of cash already, and cryptocurrencies are additional vectors allowing anonymous transactions.
- joosters 6y agoWhy do chips come into it? Isn’t the process just: 1) Insert cash into slot machine. Play through the cash for a while, losing x% 2) Cash out (machine gives you a printed ticket to take to the casino desk). Now you have a paper trail showing that you won $ from a casino, giving the money a legitimate source.
- pas 6y agoUnless you hit jackpot/777/3lemons the question will be how did you come up with the initial amount to put into the machine. The way to launder money is to have a casino, and then give the illicit cash to random folks and have them lose at the casino.
- dboreham 6y agoBased on a recent trip to Vegas, machines that accept cash are now rare.
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- wnevets 6y agoThe easiest way to be above the law is to have a lot of money and give some of it to the right people.
- saiya-jin 6y agoThat would probably mean politicians that would push for laws making your life easier. Like lower taxation / easier avoidance, support for complex blurry ownership structures etc. Those on top are the best bet. Its interesting that neither US nor Europe does see anything wrong with direct monetary sponsorship of politicians before elections (on top of lobbyists which are seem to be proper legal bribing middlemen)
- akerro 6y agoSo Bitcoin is officially money now?
- jayd16 6y agoPretty sure you could be "laundering money" with any sort of asset.
- wmf 6y agoIt's whatever they want it to be. To FinCEN it's money. To IRS it's property.
- gamblor956 6y agoNo, it's still money to the IRS as well, just like any currency that isn't USD. However, the tax code treats all non-USD currencies as assets for the purposes of determining when taxable events occur (as a result of differences in the exchange rate between the time the currency was acquired and when it was transacted away). For example, you acquire 100 GBP for $100 or 10 Bitcoin for $100. Then sometime later, you buy a car for $100 but pay for it with 90 GBP or 8 Bitcoin. There are two transactions: the non-taxable acquisition of the car, and the deemed exchange of the GBP or Bitcoin into USD. Because the GBP and Bitcoin are worth more now than when you first acquired them, you have foreign exchange income and get taxed on that.
- jcranmer 6y ago> However, the tax code treats all non-USD currencies as assets for the purposes of determining when taxable events occur (as a result of differences in the exchange rate between the time the currency was acquired and when it was transacted away). There actually is one key difference. For most currencies, you can basically use a single exchange rate for all transactions. For bitcoin, you can't do that. Although note that one of the criteria that kicks you out of this rule is that currencies with high inflation (defined as roughly 10% annual inflation)... which would include bitcoin anyways.
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- BitwiseFool 6y agoThis makes me very nervous about the Monero I own. It is understandable that the government would eventually use AML against Bitcoin mixing services. But how will the government go after cryptocurrencies that have mixing and transaction obfuscation built into their protocols? I've heard the argument that it is impossible for the US Government to regulate decentralized cryptocurrencies. FinCEN cannot force a change in the Bitcoin or Monero protocols. However it is entirely within the government's authority to regulate the users of said currencies. So I imagine the government would add onerous reporting requirements for any citizen or corporation holding privacy based coins in order to circumvent their privacy features.
- giancarlostoro 6y agoIf you report your earnings when you sell I don't know if there's an issue. I think the government is going to be losing if they want to go after people before they cash out. Technology will always be miles ahead of bureaucracy.
- blibble 6y agonot sure what use your cashed out earnings will be once they confiscate them after they lock you up governments have years to come after you (and in many countries: the rest of your life)
- droffel 6y agoLock you up for what? Using Monero doesn't mean you're a criminal. Am I misunderstanding, or are you implying that caring about my privacy is a criminal act, and that paying taxes on perfectly legitimate income is (or would become) illegal?
- blibble 6y agoengaging in money laundering? who knows that's the point: even if you're not doing anything shady you don't really know what sort of long term risk you're taking on if you're using something that looks to governments as if it's tailor made for money laundering
- cosmojg 6y agoI wonder what this means for mixers which themselves run on blockchains (specifically thinking of Ethereum's Tornado.cash). Would they go after the developers who wrote the code and published it on the blockchain? Or would they go after the miners who run the code (knowingly or not) and process the transactions involved in laundering?
- m_a_g 6y agoProbably the miners. This is one of the unfortunate side effects of fully decentralized networks.
- tudorconstantin 6y agoThat sounds to me as if going after the maker of a knife that was used in a murder if they can't find the killer.
- reaperducer 6y agoWhen your only tool is a hammer, you aim for the nails.
- tyre 6y agoIn this case the maker of the knife is the person who wrote the code. The person who did the illegal action (processed the transaction) is the miner. Or miners for multiple confirmations?
- bduerst 6y agoMore like going after the shop owner who intentionally turns a blind eye to ongoing illegal activity on their property.
- ardy42 6y ago> That sounds to me as if going after the maker of a knife that was used in a murder if they can't find the killer. ...or the maker of a pipe bomb if they can't find the bomber (or even if they can, since there aren't a lot of legitimate uses for pipe bombs). I can't really think of any use for for a cryptocurrency mixer than as part of a scheme for obscuring the true source of some funds. I don't think it would make sense to go after individual miners for processing transaction initiated by a mixer, just like it wouldn't make sense to go after a bank for processing a legitimate-looking transaction that was part of some kind of fraud scheme that had no awareness of.
- bootcampwhere 6y agoI bet you hn idiots are just loving this story!!!
- nojito 6y agoMixers don’t even work.
- loourr 6y agoGood luck FinCEN, you've now just forced mixers to go dark. There's no killing them.
- bufferoverflow 6y agoThey don't even have to go dark. There are fully autonomous decentralized mixers like CashFusion running on Bitcoin Cash.
- stevespang 6y agoAgreed. Offshore even.
- gamblor956 6y agoThey don't need to kill the mixers. In fact, forcing them to go dark makes it much easier to accomplish FinCEN's end goal. Once mixers are go dark "dark," the presumption is that anyone using their services is doing so with the intent of avoiding money laundering laws, which will drive away the few legitimate users they had, reducing their usefulness as mixers because tainted coins will simply be mixed with other tainted coins.
- colinmhayes 6y agoThere were never legitimate users of mixers.
- gamblor956 6y agoI generally agree, as all of the legitimate uses I could think of would be more easily accomplished without the use of mixers (or even cryptocurrency), but their may be use cases I hadn't thought of.
- akimball 6y agoLike avoiding extortion, kidnapping, robbery.
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- doggosphere 6y agoWhy do "mixers" still exist if we have trustless coinjoins? https://wasabiwallet.io/ https://wasabiwallet.io/
- moeadham 6y agoHelix shut down years ago. The tech that enables wasabi is pretty recent (segwit, etc).
- hackinthebochs 6y agoJust wait until an enterprising DA decides to charge everyone in the coinjoin as a criminal conspiracy.
- colinmhayes 6y agoIS this not a mixer?
- doggosphere 6y agoI suppose it is a mixer, but with more modernized protocols. In earlier days AFAIK, a central coordinator was required to take custody of coins. Now its mostly trustless.
- _-___________-_ 6y agoThe key thing that enabled the action in OP was the custodial nature of the mixer. CoinJoin (which Wasabi implements) is non-custodial. There is no central party who could be targeted as in the action in OP.
- cordite 6y agoI heard about people justifying these. Something about privacy. Everything just feels so twisted in perceptions tied to cryptocurrency.
- schoen 6y agoOne way you could think about this is that there are (at least) two very opposed intuitions about the status of cash vs. electronic funds transfers. One intuition is that cash is a really unfortunate technology that had to exist in the past as a compromise due to technological limitations [because strongly authenticating value transfers is hard in an offline world], but now that we have better technology, we can try to get rid of it or de-emphasize it, and make money the way it's supposed to be — like EFTs that are transparent (at least to states), traceable, seizeable, reversible. Another intuition is that custodial/intermediated EFT payments are a really unfortunate technology that had to exist in the past due to technological limitations as a compromise due to technological limitations [because making digital bearer instruments, especially fully or partly decentralized ones, work well is technologically difficult and fraught with subtle trade-offs], but now that we have better technology, we can try to get rid of them or de-emphasize them, and make money the way it's supposed to be — like cash that's really owned outright by its bearers and provides privacy about who spent what where. The former view is for example Kenneth Rogoff's view in The Curse of Cash or maybe the view of the Indian government in demonetizing some large-denomination notes in 2016, while the second is the traditional view of cypherpunks and some libertarians. The disagreements are pretty fundamental. :-)
- perl4ever 6y ago>One intuition is that cash is a really unfortunate technology that had to exist in the past as a compromise due to technological limitations I can't vouch for the accuracy of the historical perspective, but I came across an intriguing and new-to-me assertion/idea that credit is the oldest financial tech, and cash/coinage was originally a niche tech used perhaps for mercenaries and/or other people who were outsiders relative to a money-using (i.e. credit using) community. Hence, it might be that what bitcoin aspires to be never was mainstream or primary in the widest context of all of human history. It reminds me of the general pattern of fundamentalists looking back to an original state of something that never really existed.
- asdfasgasdgasdg 6y agoNote that the civil forfeiture penalty is only part of it. He's also probably going to jail for some number of years: https://www.justice.gov/opa/press-release/file/1249026/download https://www.justice.gov/opa/press-release/file/1249026/downl...
- kilo_bravo_3 6y agoWhat is the overlap between cryptocurrency aficionados who rail against the "corrupt banksters who launder money for cartels and need to be replaced" and people who don't like this?
- qwerty456127 6y agoThis is ridiculous. Mixing is a foundation of cryptocirrency, cryptocirrencies don't make any sense without mixing. Who wants their entire transactions history to be public? That would make them an easy target for many kinds of fraud and other kinds of attacks.
- droffel 6y ago> Mixing is a foundation of cryptocirrency, cryptocirrencies don't make any sense without mixing. I'm going to need a citation on this one. Many people who are still stuck on Bitcoin maximalism these days seem to have gone the "nothing to hide" route, and actively denigrate the idea that privacy tech should be implemented at all. > Who wants their entire transactions history to be public? Use Monero.
- optimuspaul 6y agoWait, I thought the foundation of cryptocurrency was about trust not privacy.
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- qwerty456127 6y agoBut privacy is essential to make it possible. Seriously, would you choose a bank which would post details for every payment you make online, available for everybody to read? Try imagine what can bad people do with that information.
- optimuspaul 6y agoessential for it to gain users but by no means a technical requirement. Besides getting actual privacy with cryptocurrency requires jumping through a lot of hoops, covering a lot of tracks, and trusting a lot of people. I think privacy is the killer feature that we will never actually have. edit: you are of course right and I am splitting hairs, but I do think real privacy is impossible.
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- skim_milk 6y agoI love lawyerspeak. > As such, they have an obligation to register with FinCEN; to develop, implement, and maintain an anti-money laundering compliance program Hmm yes, this business which existed to launder money did not implement anti-money-laundering measures, therefore it will be fined.
- lucasnortj 6y agoGood, cryptos are for cranks and criminals and should be illegal
- joemazerino 6y agoWhat does this mean for coinjoin groups like samurai wallet and wasabi?
- slickrick216 6y agoREN is the best mixer. If you know you know.
- mathiasrw 6y agoThis is exactly what the people behind the initiative to preserve the original bitcoin protocol has been saying: You need to be able to prove where you money came from.
- Havoc 6y ago>You need to be able to prove where you money came from. If only we had a way to capture this. A chain of transactions of sorts...
- olefoo 6y agoSo what are the KPI's for a mission focused enterprise? What does the protocol do to hold orgs accountable?