8 ms·

They bought a lot of bitcoin early, then made a profit off regularly selling it to the public in exchange for US dollars. They didn't register with FinCEN, any

They bought a lot of bitcoin early, then made a profit off regularly selling it to the public in exchange for US dollars. They didn't register with FinCEN, any state agency, or do any KYC. The thing about the sting operation is that the undercover agent blatantly told them that he was buying bitcoin using money he made from selling cocaine. So it isn't just a charge for operating an unlicensed money exchange service, but also laundering drug money.

Simulacra 5y ago
That just seems like entrapment... Bitcoin to me has always been an intangible asset. If someone is willing to exchange cash for it then that does not mean Bitcoin is suddenly cash. I wonder what the government's argument would be if bitcoin were tangible, say bottle caps.
- arcticbull 5y ago
  I mean the whitepaper is titled a peer-to-peer electronic cash system. [edit] It feels like Scrodinger's asset class. It's a commodity when it's being attacked for being a security. It's a currency when it's attacked for being a commodity. At the end of the day I don't care, if it's good at being laundered then you can call it whatever you want, AML/KYC is going to have to apply. [edit] Further, entrapment is a specific legal construct wherein the government tricks you into committing a crime. If the government comes up and says "hello, do you want to do a crime?" and you say "damn right I do" that's not entrapment, that's just crime.
  - salawat 5y ago
    An affirmative defense in which a defendant alleges that police officers acquired the evidence necessary to commence a criminal prosecution of the defendant by inducing the defendant to engage in a criminal act which the defendant would not otherwise have committed. see, e.g. Jacobson v. United States, 503 U.S. 540(1992). https://www.law.cornell.edu/wex/entrapment https://www.law.cornell.edu/wex/entrapment I'm no lawyer, but I'm having trouble from a reading comprehension point of view seeing how this wasn't a to the textbook definition of entrapment.
    - arcticbull 5y ago
      Entrapment generally requires coercion. The term you mentioned, inducement, is key. > The key aspect of entrapment is this: Government agents do not entrap defendants simply by offering them an opportunity to commit a crime. Judges expect people to resist any ordinary temptation to violate the law. An entrapment defense arises when government agents resort to repugnant behavior such as the use of threats, harassment, fraud, or even flattery to induce defendants to commit crimes. [1] [1] https://www.nolo.com/legal-encyclopedia/entrapment-basics-33987.html https://www.nolo.com/legal-encyclopedia/entrapment-basics-33...
      - salawat 5y ago
        That implies the impact of the law has been understood by the perpetrator. I don't universally buy that ignorance of the law is not an excuse. It took me a very long time to come to understand the full impact of financial services regulations, BSA/AML/KYC. The financial sector is not exactly the most trivial thing to understand. Edit: Also, Inducement: a motive or consideration that leads one to action or to additional or more effective actions In this case, a "simulated drug transactions" proceeds was presented by the Government, thereby bringing all the factors into place for a crime that wouldn't have happened except for the Government having facilitated it. A LICENSED financial institution has the additional burden of being bound by BSA/KYC/AML/registering with FINRA/FINcen. They were not that. You can expect people to shy away from doing anything illegal, yet we have a special caste of people that are hyper specialized in making the determination whether something is conclusively illegal or not. I find this legal axiom to be I'll informed by common sense and life experience, but that's just me.
        arcticbull 5y ago
        Inducement has a specific legal definition in this context that may not align with the dictionary definition (one of the many reasons nobody should represent themselves). Regardless of opinion here, the US legal system is based on common law, meaning that courts are bound by precedent. The precedent is that the state would have to coerce someone, bribe someone, threaten someone or otherwise compel them to commit a crime they otherwise wouldn't in order to mount this affirmative defense. > In this case, a "simulated drug transactions" proceeds was presented by the Government, thereby bringing all the factors into place for a crime that wouldn't have happened except for the Government having facilitated it. The idea is that the government didn't force you to engage in this activity, you chose to - they merely provided a venue. Therefore you would have chosen to engage in the same way had the government not been that one that afforded you the opportunity. It was your propensity to criminality. Similarly, if the government hands me a gun and asks if I want to shoot someone, then I do, I'm very much still guilty of murder. It's no different in these cases just because the action was more 'white collar.' I would encourage you to check out the comic @papercrane linked: https://lawcomic.net/guide/?p=633 https://lawcomic.net/guide/?p=633 I'm not a lawyer and I am 100% confident this is not entrapment. > ... yet we have a special caste of people that are hyper specialized in making the determination whether something is conclusively illegal or not. Indeed which is why if I ever start a money services business, I'll be hiring an attorney.
  - Animats 5y ago
    It feels like Schrodinger's asset class. It's a commodity when it's being attacked for being a security. It's a currency when it's attacked for being a commodity. That kind of reasoning is seen in crypto forums, but it hasn't gone very far in court.
- JumpCrisscross 5y ago
  > wonder what the government's argument would be if bitcoin were tangible, say bottle caps Imagine someone tells you "I am a drug dealer, I have bottle caps I got for selling drugs and would like to launder them through you. Could you help me?" And you respond "Sure." And she comes back saying "it's me again, the drug dealer. Here are my bottle caps. That I got for selling drugs. I need to launder them. Because I got them from selling drugs. Because I'm a drug dealer." [1]. And you give them money for their bottle caps. What do you think will happen? Do you think "but your honor, bottle caps aren't money" will help? [1] Inspired by https://www.bloomberg.com/news/newsletters/2021-06-21/money-stuff-lordstown-executives-had-good-timing https://www.bloomberg.com/news/newsletters/2021-06-21/money-...
- CRConrad 5y ago
  > If someone is willing to exchange cash for it then that does not mean Bitcoin is suddenly cash. So then A) All the fanbois should stop calling these scams cryptocurrencies; and B) Bit"coin" should change its name to something that doesn't sound like it's money.
rantwasp 5y ago
hmm. so if we swap out bitcoin with lumber. and I accumulate a lot of lumber and after that sell it do I need to register with FinCEN? or do lumber KYC? this is part of the FUD campaign against Bitcoin. If they committed other crimes, etc, sure charge them if you have proof. If not this is literally a waste of taxpayers money.
- quickthrower2 5y ago
  It is going to depend inagine. Very expensive and easy to transport lumber, purchased for cash with the same people buying a million a week. Maybe should raise some flags.
- bb88 5y ago
  Money laundering is all about turning money from illegal operations into money that looks like it came from legal sources. Yes you can buy lumber (e.g.) but for it be really useful, you're going to need to convert that back to cash, and the only real way to store large amounts of money safely is in the banking system. Some people may speak bitcoin, but everyone speaks US greenbacks. KYC is about companies depositing large sums of money from questionable sources. You start depositing 10M a week without any reported business income, and you're going to set off red flags.
  - CodeWriter23 5y ago
    > the only real way to store large amounts of money safely is in the banking system Pretty sure everyone in the Cannabis Space would disagree with that.
    - jdavis703 5y ago
      Folks in the cannabis space have been complaining about the lack of banking options for years. This suggests that there are many who don’t feel safe under the current system. Further, the dispensaries near me have more security than the banks and drug store chains… Again, probably because they’re cash-only businesses.
AnimalMuppet 5y ago
If it's being used to launder drug money, I'm pretty sure "but it's not money" isn't going to fly in court. Can you launder drug money using gold bars, and you're good because gold bars aren't "money"? I'm pretty sure you can't. It may fall under a slightly different part of the statute, but that kind of loophole has almost certainly already been plugged.
- wsc981 5y ago
  Real estate is often used to launder illegally gained money[0], so likely drug money as well. > Real estate has long been a preferred vehicle for money laundering. All too often, the proceeds of crime and corruption is used to purchase homes. Once the real estate is re-sold, the capital involved becomes legally acquired. The trick is to mask where the money comes from: Criminal networks do this by setting up anonymous companies to hide their connection to the purchase of the property. This briefing reveals the scope and seriousness of this problem and makes recommendations for what must be done to fix it. --- [0]: https://www.globalwitness.org/en/campaigns/corruption-and-money-laundering/anonymous-companies-used-to-launder-money-in-us-real-estate/ https://www.globalwitness.org/en/campaigns/corruption-and-mo...
  - arcticbull 5y ago
    Which is why we have AML/KYC at most steps of a real-estate transaction. Further, saying you can do crime with something else so let's look the other way is nihilist and pretty backwards to me. In that case let's go after both.
  - vkou 5y ago
    > Real estate is often used to launder illegally gained money[0], so likely drug money as well. And if you tell your realtor that you're using drug money to finance your downpayment, and they let you go through with the transaction, they are going to be sharing your cell when the law catches up to you. If they facilitate the transaction unknowingly, they are in the clear. Unfortunately for the defendant in this case, they were knowingly engaged in money laundering.
luma 5y ago
The defendant is pretty well known around these parts and the initial arrest wasn't terribly surprising to those who had run-ins with him. Here's a particularly egregious example: https://old.reddit.com/r/grandrapids/comments/lvqr6k/geek_group_leaders_charged_with_illegal_bitcoin/h1b0pbl/ https://old.reddit.com/r/grandrapids/comments/lvqr6k/geek_gr...
- rantwasp 5y ago
  slept with all the female board members. jfc. this looks really really bad, even without context
  - exporectomy 5y ago
    What exactly is bad about that? Who's doing the bad thing? The females or the man? Do you not approve of consensual sex?
    - southerntofu 5y ago
      I am totally in favor of consented sex. However, when the head of an organization has sex with all "consenting" female members of the org, one can legit raise the question whether this consent is true or not. When your boss asks for sexual favors, you are usually not in a position to refuse, and according to most sexual consent laws across the planet, a person is not considered to be able to give consent to a figure of authority such as their teacher, boss, a police officer, etc... And for good reason, cops all around the planet are very well known to abuse and rape who they wish to because they're the psychopaths holding the guns and the shackles, so we need laws against that. So even from the outside and without knowing the details, it looks pretty bad. Pretty bad as in cult guru bad. When you read the article, actual sex trafficking is mentioned where people give ""consent"" based on being poor and being offered a roof on their heads in exchange for sexual favors, which is arguably also not good consent. To be clear, i'm not against sex work. One makes a living the way they wish, and many people i know (including myself) would rather sell sexual favors than work for Mac Donald's or an evil tech startup/multinational. However, being pro sex-workers means considering the level of personal autonomy sex workers enjoy. When you materially depend on a single "client" who recruited you for your "weakness" (lack of economic privilege) and is actually your pimp, we may consider basic concepts of sex-work consent are being neglected.
ipsin 5y ago
This reminds me of the story of the man who put hidden compartments in cars [1], or the man who trained people to beat polygraph tests [2]. Whenever someone tells you about All the Crime They Are Doing, I think you should assume that you are dealing with an actual cop, stop doing business with them, and cut off all contact. [1] https://www.wired.com/2013/03/alfred-anaya/ https://www.wired.com/2013/03/alfred-anaya/ [2] https://www.washingtonpost.com/local/indiana-man-accused-of-teaching-people-to-beat-lie-detector-tests-faces-prison-time/2013/08/31/a7cbe74a-08ea-11e3-9941-6711ed662e71_story.html https://www.washingtonpost.com/local/indiana-man-accused-of-...
- ComputerGuru 5y ago
  That first story you linked to of insane.
  - trhway 5y ago
    "when Anaya had glimpsed more than $800,000 in cash. The prosecutor contended that seeing such a large sum was tantamount to seeing drugs, since Anaya surely must have deduced the source of the money." like back in USSR - honest people can't possess such money.
    - ComputerGuru 5y ago
      He got a sentence twice the length of the actual drug runners!
      - quickthrower2 5y ago
        Unlike the dealers, he didn’t make a deal
- nroets 5y ago
  Except true criminals also like to talk. For example, before Covid I did at lot of Couch Surfing and related stuff. [1] One of my hosts illegally sold MJ for extra cash. He was very careful how he communicated with his supplier and not to flaunt this income. But he basically told me all these things on the first day I met him. https://www.cycleblaze.com/profile/nicroets/ https://www.cycleblaze.com/profile/nicroets/
jl2718 5y ago
Is there any more specific guidance on what normal citizens conducting normal business must do for AML compliance? Somewhat related: https://georgetownlawtechreview.org/the-bona-fide-acquisition-rule-applied-to-cryptocurrency/GLTR-05-2019/ https://georgetownlawtechreview.org/the-bona-fide-acquisitio...
jjk166 5y ago
So if I buy a bunch of candybars and sell them for a profit, and someone buys some of my candybars with money he made selling cocaine, have I laundered his drug money? He still needs to sell those candybars to get clean money. Using illicitly obtained money to buy something that can then be resold for clean money is a very common money laundering technique. But it's the person buying and reselling assets who is committing the crime, not the entity initially selling goods. Otherwise Walmart would be the biggest "money launderer" in the country.

Simulacra 5y ago

That just seems like entrapment... Bitcoin to me has always been an intangible asset. If someone is willing to exchange cash for it then that does not mean Bitcoin is suddenly cash. I wonder what the government's argument would be if bitcoin were tangible, say bottle caps.

arcticbull 5y ago
I mean the whitepaper is titled a peer-to-peer electronic cash system. [edit] It feels like Scrodinger's asset class. It's a commodity when it's being attacked for being a security. It's a currency when it's attacked for being a commodity. At the end of the day I don't care, if it's good at being laundered then you can call it whatever you want, AML/KYC is going to have to apply. [edit] Further, entrapment is a specific legal construct wherein the government tricks you into committing a crime. If the government comes up and says "hello, do you want to do a crime?" and you say "damn right I do" that's not entrapment, that's just crime.
- salawat 5y ago
  An affirmative defense in which a defendant alleges that police officers acquired the evidence necessary to commence a criminal prosecution of the defendant by inducing the defendant to engage in a criminal act which the defendant would not otherwise have committed. see, e.g. Jacobson v. United States, 503 U.S. 540(1992). https://www.law.cornell.edu/wex/entrapment https://www.law.cornell.edu/wex/entrapment I'm no lawyer, but I'm having trouble from a reading comprehension point of view seeing how this wasn't a to the textbook definition of entrapment.
  - arcticbull 5y ago
    Entrapment generally requires coercion. The term you mentioned, inducement, is key. > The key aspect of entrapment is this: Government agents do not entrap defendants simply by offering them an opportunity to commit a crime. Judges expect people to resist any ordinary temptation to violate the law. An entrapment defense arises when government agents resort to repugnant behavior such as the use of threats, harassment, fraud, or even flattery to induce defendants to commit crimes. [1] [1] https://www.nolo.com/legal-encyclopedia/entrapment-basics-33987.html https://www.nolo.com/legal-encyclopedia/entrapment-basics-33...
    - salawat 5y ago
      That implies the impact of the law has been understood by the perpetrator. I don't universally buy that ignorance of the law is not an excuse. It took me a very long time to come to understand the full impact of financial services regulations, BSA/AML/KYC. The financial sector is not exactly the most trivial thing to understand. Edit: Also, Inducement: a motive or consideration that leads one to action or to additional or more effective actions In this case, a "simulated drug transactions" proceeds was presented by the Government, thereby bringing all the factors into place for a crime that wouldn't have happened except for the Government having facilitated it. A LICENSED financial institution has the additional burden of being bound by BSA/KYC/AML/registering with FINRA/FINcen. They were not that. You can expect people to shy away from doing anything illegal, yet we have a special caste of people that are hyper specialized in making the determination whether something is conclusively illegal or not. I find this legal axiom to be I'll informed by common sense and life experience, but that's just me.
      - arcticbull 5y ago
        Inducement has a specific legal definition in this context that may not align with the dictionary definition (one of the many reasons nobody should represent themselves). Regardless of opinion here, the US legal system is based on common law, meaning that courts are bound by precedent. The precedent is that the state would have to coerce someone, bribe someone, threaten someone or otherwise compel them to commit a crime they otherwise wouldn't in order to mount this affirmative defense. > In this case, a "simulated drug transactions" proceeds was presented by the Government, thereby bringing all the factors into place for a crime that wouldn't have happened except for the Government having facilitated it. The idea is that the government didn't force you to engage in this activity, you chose to - they merely provided a venue. Therefore you would have chosen to engage in the same way had the government not been that one that afforded you the opportunity. It was your propensity to criminality. Similarly, if the government hands me a gun and asks if I want to shoot someone, then I do, I'm very much still guilty of murder. It's no different in these cases just because the action was more 'white collar.' I would encourage you to check out the comic @papercrane linked: https://lawcomic.net/guide/?p=633 https://lawcomic.net/guide/?p=633 I'm not a lawyer and I am 100% confident this is not entrapment. > ... yet we have a special caste of people that are hyper specialized in making the determination whether something is conclusively illegal or not. Indeed which is why if I ever start a money services business, I'll be hiring an attorney.
- Animats 5y ago
  It feels like Schrodinger's asset class. It's a commodity when it's being attacked for being a security. It's a currency when it's attacked for being a commodity. That kind of reasoning is seen in crypto forums, but it hasn't gone very far in court.
JumpCrisscross 5y ago
> wonder what the government's argument would be if bitcoin were tangible, say bottle caps Imagine someone tells you "I am a drug dealer, I have bottle caps I got for selling drugs and would like to launder them through you. Could you help me?" And you respond "Sure." And she comes back saying "it's me again, the drug dealer. Here are my bottle caps. That I got for selling drugs. I need to launder them. Because I got them from selling drugs. Because I'm a drug dealer." [1]. And you give them money for their bottle caps. What do you think will happen? Do you think "but your honor, bottle caps aren't money" will help? [1] Inspired by https://www.bloomberg.com/news/newsletters/2021-06-21/money-stuff-lordstown-executives-had-good-timing https://www.bloomberg.com/news/newsletters/2021-06-21/money-...
CRConrad 5y ago
> If someone is willing to exchange cash for it then that does not mean Bitcoin is suddenly cash. So then A) All the fanbois should stop calling these scams cryptocurrencies; and B) Bit"coin" should change its name to something that doesn't sound like it's money.

rantwasp 5y ago

hmm. so if we swap out bitcoin with lumber. and I accumulate a lot of lumber and after that sell it do I need to register with FinCEN? or do lumber KYC? this is part of the FUD campaign against Bitcoin. If they committed other crimes, etc, sure charge them if you have proof. If not this is literally a waste of taxpayers money.

quickthrower2 5y ago
It is going to depend inagine. Very expensive and easy to transport lumber, purchased for cash with the same people buying a million a week. Maybe should raise some flags.
bb88 5y ago
Money laundering is all about turning money from illegal operations into money that looks like it came from legal sources. Yes you can buy lumber (e.g.) but for it be really useful, you're going to need to convert that back to cash, and the only real way to store large amounts of money safely is in the banking system. Some people may speak bitcoin, but everyone speaks US greenbacks. KYC is about companies depositing large sums of money from questionable sources. You start depositing 10M a week without any reported business income, and you're going to set off red flags.
- CodeWriter23 5y ago
  > the only real way to store large amounts of money safely is in the banking system Pretty sure everyone in the Cannabis Space would disagree with that.
  - jdavis703 5y ago
    Folks in the cannabis space have been complaining about the lack of banking options for years. This suggests that there are many who don’t feel safe under the current system. Further, the dispensaries near me have more security than the banks and drug store chains… Again, probably because they’re cash-only businesses.

AnimalMuppet 5y ago

If it's being used to launder drug money, I'm pretty sure "but it's not money" isn't going to fly in court. Can you launder drug money using gold bars, and you're good because gold bars aren't "money"? I'm pretty sure you can't. It may fall under a slightly different part of the statute, but that kind of loophole has almost certainly already been plugged.

wsc981 5y ago
Real estate is often used to launder illegally gained money[0], so likely drug money as well. > Real estate has long been a preferred vehicle for money laundering. All too often, the proceeds of crime and corruption is used to purchase homes. Once the real estate is re-sold, the capital involved becomes legally acquired. The trick is to mask where the money comes from: Criminal networks do this by setting up anonymous companies to hide their connection to the purchase of the property. This briefing reveals the scope and seriousness of this problem and makes recommendations for what must be done to fix it. --- [0]: https://www.globalwitness.org/en/campaigns/corruption-and-money-laundering/anonymous-companies-used-to-launder-money-in-us-real-estate/ https://www.globalwitness.org/en/campaigns/corruption-and-mo...
- arcticbull 5y ago
  Which is why we have AML/KYC at most steps of a real-estate transaction. Further, saying you can do crime with something else so let's look the other way is nihilist and pretty backwards to me. In that case let's go after both.
- vkou 5y ago
  > Real estate is often used to launder illegally gained money[0], so likely drug money as well. And if you tell your realtor that you're using drug money to finance your downpayment, and they let you go through with the transaction, they are going to be sharing your cell when the law catches up to you. If they facilitate the transaction unknowingly, they are in the clear. Unfortunately for the defendant in this case, they were knowingly engaged in money laundering.

luma 5y ago

The defendant is pretty well known around these parts and the initial arrest wasn't terribly surprising to those who had run-ins with him. Here's a particularly egregious example: https://old.reddit.com/r/grandrapids/comments/lvqr6k/geek_group_leaders_charged_with_illegal_bitcoin/h1b0pbl/ https://old.reddit.com/r/grandrapids/comments/lvqr6k/geek_gr...

rantwasp 5y ago
slept with all the female board members. jfc. this looks really really bad, even without context
- exporectomy 5y ago
  What exactly is bad about that? Who's doing the bad thing? The females or the man? Do you not approve of consensual sex?
  - southerntofu 5y ago
    I am totally in favor of consented sex. However, when the head of an organization has sex with all "consenting" female members of the org, one can legit raise the question whether this consent is true or not. When your boss asks for sexual favors, you are usually not in a position to refuse, and according to most sexual consent laws across the planet, a person is not considered to be able to give consent to a figure of authority such as their teacher, boss, a police officer, etc... And for good reason, cops all around the planet are very well known to abuse and rape who they wish to because they're the psychopaths holding the guns and the shackles, so we need laws against that. So even from the outside and without knowing the details, it looks pretty bad. Pretty bad as in cult guru bad. When you read the article, actual sex trafficking is mentioned where people give ""consent"" based on being poor and being offered a roof on their heads in exchange for sexual favors, which is arguably also not good consent. To be clear, i'm not against sex work. One makes a living the way they wish, and many people i know (including myself) would rather sell sexual favors than work for Mac Donald's or an evil tech startup/multinational. However, being pro sex-workers means considering the level of personal autonomy sex workers enjoy. When you materially depend on a single "client" who recruited you for your "weakness" (lack of economic privilege) and is actually your pimp, we may consider basic concepts of sex-work consent are being neglected.

ipsin 5y ago

This reminds me of the story of the man who put hidden compartments in cars [1], or the man who trained people to beat polygraph tests [2]. Whenever someone tells you about All the Crime They Are Doing, I think you should assume that you are dealing with an actual cop, stop doing business with them, and cut off all contact. [1] https://www.wired.com/2013/03/alfred-anaya/ https://www.wired.com/2013/03/alfred-anaya/ [2] https://www.washingtonpost.com/local/indiana-man-accused-of-teaching-people-to-beat-lie-detector-tests-faces-prison-time/2013/08/31/a7cbe74a-08ea-11e3-9941-6711ed662e71_story.html https://www.washingtonpost.com/local/indiana-man-accused-of-...

ComputerGuru 5y ago
That first story you linked to of insane.
- trhway 5y ago
  "when Anaya had glimpsed more than $800,000 in cash. The prosecutor contended that seeing such a large sum was tantamount to seeing drugs, since Anaya surely must have deduced the source of the money." like back in USSR - honest people can't possess such money.
  - ComputerGuru 5y ago
    He got a sentence twice the length of the actual drug runners!
    - quickthrower2 5y ago
      Unlike the dealers, he didn’t make a deal
nroets 5y ago
Except true criminals also like to talk. For example, before Covid I did at lot of Couch Surfing and related stuff. [1] One of my hosts illegally sold MJ for extra cash. He was very careful how he communicated with his supplier and not to flaunt this income. But he basically told me all these things on the first day I met him. https://www.cycleblaze.com/profile/nicroets/ https://www.cycleblaze.com/profile/nicroets/

jl2718 5y ago

Is there any more specific guidance on what normal citizens conducting normal business must do for AML compliance? Somewhat related: https://georgetownlawtechreview.org/the-bona-fide-acquisition-rule-applied-to-cryptocurrency/GLTR-05-2019/ https://georgetownlawtechreview.org/the-bona-fide-acquisitio...

jjk166 5y ago

So if I buy a bunch of candybars and sell them for a profit, and someone buys some of my candybars with money he made selling cocaine, have I laundered his drug money? He still needs to sell those candybars to get clean money. Using illicitly obtained money to buy something that can then be resold for clean money is a very common money laundering technique. But it's the person buying and reselling assets who is committing the crime, not the entity initially selling goods. Otherwise Walmart would be the biggest "money launderer" in the country.