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It's worth noting that at least a couple of exchanges have gone through the appropriate hoops with the US Federal government. I think the Mt. Gox thought that t

• ChuckMcM 14y ago
  Perhaps, except the questions they answered 'no' to are pretty much exactly what they do. I'm not sure what Mark was thinking they actually did when he answered those questions. Its interesting to me that typically this would be a simple "hey you filled out the forms wrong" kind of thing and the officers would go down and change their paperwork and correct any missing licenses, pay whatever penalties etc. This however is blown up as a 'big deal' which suggests that at least some folks would rather have you believe that the concept of bitcoin is illegal.
  • vxxzy 14y ago
    As I understand it, didn't Mt. Gox start as a place to buy and sell "Magic the Gathering" game cards? This would explain the "no" answers...
    • discountgenius 14y ago
      By May 2011 when the form was filled out, Mt. Gox had already pivoted to bitcoin.
    • ChuckMcM 14y ago
      That is certainly a credible line of reasoning, assuming of course that the account was established while they were still doing that.
    • killnine 14y ago
      As I understand it, you have just less than 180 days to file fincen after your establishment. according to the article The entity established an MSB in may 2011 and signs of Dwolla dont start until Dec 2011... SO you may be onto something
  • PeterisP 14y ago
    Why do you think that 'typically this would be a simple "hey you filled out the forms wrong" kind of thing' ? I'd guess that every single such violation is prosecuted if detected - money laundering is not that rare, and in accounting/financial/company tax matters pretty much all mistakes (unless detected in pre-signing validation) are treated as punishable/fineable violations, not "correct your paperwork" matters. And as a company officer, there quite a few papers that you are required to sign where you may face jail if they're not true. Also, seizing/freezing any money-laundering or tax-evasion related funds is common practice - first ensure that the money isn't going away, and then release it when/if all the violations are cleared.
    • killnine 14y ago
      This is what I don't understand. Bitcoin/crypto currency is almost not even a factor for these exchanges that deal with both crypto currency and regular dollars. See, if you were only dealing in crypto currency, then yes, you could argue this is a grey area where there are still a lot of regulations to be laid out, which as a currency you may or may not land on the wrong side of the law. But when you are dealing with dollars and crypto currency, the crypto currency doesnt matter. there are already PLENTY of laws for being a currency exchange and money services business and the like. So there is no grey area here. It just so happens that in addition to your dollars currency exchange you also deal with crypto currency.
    • fnordfnordfnord 14y ago
      >And as a company officer, there quite a few papers that you are required to sign where you may face jail if they're not true. That sounds nice, but really, look at what you have to do before you actually go to jail as a "company officer"
    • oijaf888 14y ago
      HSBC wasn't really prosecuted nor were the hundreds of billions of cash that they laundered seized, I think its very selective enforcement in many cases.
  • axus 14y ago
    Back in May 2011, was Bitcoin really a currency? How should a dealer of World of Warcraft gold answer these questions?
    • dtparr 14y ago
      IANAL, but from a practical standponit, I imagine if a WoW dealer both buys and sells WoW gold for a fiat currency, the government would want them to be equally as liable since that would also be an excellent way to launder or otherwise transfer money without oversight. The same would be true for any bi-directional virtual curency, really. Since Blizzard does this in Diablo 3, I wonder if they've gone through this process.
      • venomsnake 14y ago
        They use paypal for the outgoing transfers. Otherwise it is one directional. So I suppose paypal does the heavy legal lifting here.
      • deleted 14y ago
        [deleted]
  • celticninja 14y ago
    The response of No only became incorrect after the release of the FinCen document, these forms were completed before the FinCen report was released.
    • waterlesscloud 14y ago
      The United States Dollar, which the company in question accepted and transmitted based on customer instructions, was a currency at the time the forms were filled out.
      • axus 14y ago
        Is there a person or business that does not exchange US Dollars for goods/services? Any reasonable person would understand it to mean exchanging for foreign currency. Mt.Gox does not transmit dollars (or euros, etc) from one person to another. Every transaction involves a trade of bitcoin for a currency, or returning the currency (of the original type) to the original account holder.
        • michaelt 14y ago
          If we rearrange the quote from the article: "Does your business accept funds from customers and send the funds based on customers' instructions (Money Transmitter)?" Most businesses accept funds from customers, but few outside the financial services industry transmit the funds based on customers' instructions (assuming refunds and gift cards do not count).
      • celticninja 14y ago
        yes but you only become a money transmitter when they confirm that bitcoin is money, prior to that it could easily be considered a commodity the same as any other good, thus people were sending $ to buy a commodity. After FinCen changed the playing field they should then have required businesses dealign with BTC to update forms or resubmit, not go crazy shutting things down. but that is how the US govt works, without sense, just blunders in. Much like the DefenceDistributed issue, they come blundering in and make things more difficult for themselves in the long run.
  • thrownaway2424 14y ago
    I'll tell you what they were thinking. They were thinking "OMG LIBERTARIAN PARADISE CYBERFUTURE I AM JOHN GALT."
  • wmf 14y ago
    What he was thinking was probably that answering "yes" would cost tens of millions of dollars that he doesn't have, and thus would effectively put MtGox out of business immediately. This goes back to the FaceCash case; you can either ask to be regulated (in which case you go out of business immediately) or fly under the radar until you make enough money to become compliant.
  • jeremyjh 14y ago
    >Its interesting to me that typically this would be a simple "hey you filled out the forms wrong" kind of thing Why do you think that? A currency exchange is a business for grownups. Grownups with lawyers and accountants who can fill in forms correctly.
    • ChuckMcM 14y ago
      I've got family members who work in the Justice system, my grandfather was a the US Attorney. It costs a lot of money to try and prosecute a case, the various enforcement agencies have budgets and there is incentive to not waste money on prosecutions that can be dealt with inexpensively. So when something comes up, you see if you can "resolve" it simply. So in this case the forms get updated, the Mt. Gox guys become registered as an MSB and go through the paperwork to meet the necessary standards, and if they can't they shut down. The enforcement interests of the state are served. Similarly if you are accused of violating a law the prosecutor will often offer you a plea deal of some form. This is effectively saying "Ok, let's assume I can prove all of this and your guilty and you will be fined and possibly go to prison. I'm willing to forego that lengthy process if you simply admit wrongdoing to this set of charges and accept this sentence for it." Of course sometimes the prosecutor has a different agenda and they want to "send a message" to people who might consider a similar path. This ranges from the small, police officers citing seatbelt violations, to the absurd like telling Aaron Schwartz he would spend 30 years in prison. A friend of mine who was registering his business as a consultant in Santa Clara county screwed up and put down his business as "consulate." He signed the document that said that was what he was trying to do, and not surprisingly it is illegal to represent yourself as a diplomat when you aren't one. But he didn't get a DHS agent throwing him down in the street, he got a call from the County clerk when the State Department returned the application saying essentially "wtf?" They had a laugh, he updated and amended the form and didn't serve any prison time. :-) Generally, its been my experience that "the man" isn't really out to get you. And maximizing compliance with the existing laws of the land trumps prosecuting every single violation. So skipping the first step [1] of just calling up and getting clarification seems unusual to me, given my experience with folks who prosecute people for a living. [1] This is an assumption on my part, for all I know they may have called and said "Did you really mean to say 'no' here? Looks like you should have said 'yes'." And he may said "I said 'no' and I meant it."
• 300bps 14y ago
  >I think the Mt. Gox thought that they were immune Well, as we stand in May of 2013 perhaps it's obvious that Mt. Gox should have identified themselves as a Money Transmitter and Money Service Business. Let's agree on two things though: 1. There's a fuzzy line as to who should have to get a license for this. For instance, the person that sold me Roman denarii for U.S. dollars on EBay might have to get a Money Service Business license with a strict interpretation of the law. 2. Literally two years ago in May of 2011 when Mt Gox filled out the forms, Bitcoin was not considered by most people to be a "currency". When most people think of currency exchange, they're thinking of U.S. dollars, Euros, Swiss Francs, British Pounds, etc. Is Parker Brothers responsible for registering as a Money Service Bureau because they exchange U.S. Dollars for Monopoly Money?
  • richcollins 14y ago
    Does your business accept funds from customers and send the funds based on customers' instructions (Money Transmitter) Seems like this is more applicable (although still a stretch) as they receive USD and then forward them on to BTC sellers.
    • reeses 14y ago
      Don't forget the vouchers for traditional currencies that could be exchanged without any conversion into bitcoin. Those were often leveraged to get around the banking latency, but would just as easily been used as a (slow) way of paying for illicit goods or for obfuscating layering in an ML scheme.
  • dragonwriter 14y ago
    > Literally two years ago in May of 2011 when Mt Gox filled out the forms, Bitcoin was not considered by most people to be a "currency". But the US dollar has been considered a currency for a long time (longer, in fact, that the "Money Transmitter" rules at issue in the warrant have been in place), and certainly before May 2011. And that's the currency whose transmission is at issue in the warrant. Further, the issue is not incorrect forms filled out in 2011, but unlicensed money transmission business continuing to be conducted into 2013.