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A good excerpt from page 13. "Shrem email accounts reflect that "BTCKing" not only obtained his supply of Bitcoins through the Company, but did so with extensi
by eterm 13y ago
A good excerpt from page 13.
"Shrem email accounts reflect that "BTCKing" not only obtained his supply of Bitcoins through the Company, but did so with extensive support from SHREM. Even though SHREM quickly realized that "BTCKing" was reselling Bitcoins on Silk Road, which SHREM knew to be a marketplace for illicit drugs, SHREM went out of his way to facilitate "BTCKing's" business. Among other things, SHREM: permitted "BTCKing" to continue doing business with the Company, despite initially threatening to "ban" him based on his illegal activity; personally ensured that "BTCKing's" orders with the Company were filled everyday; gave "BTCKing" discounts based on his large order volume; sought to conceal "BTCKing's" activity from the Co-founder and the Cash Processor to prevent "BTCKing's" orders from being blocked; advised "BTCKing" how to evade the transaction limits imposed by the Company's own AML policy; let "BTCKing" conduct large transactions without ever verifying his identity, in violation of federal AML laws; and failed to file a single Suspicious Activity Report about "BTCKing," [sic] despite the obvious "red flags" raised by "BTCKing's" dealings with the Company."
If all that is alledged is true, that's pretty damning and this isn't just a general bitcoin crackdown.
- synctext 13y agoThe US Attorney Press release puts it nice: "SHREM, who personally bought drugs on Silk Road, was fully aware that Silk Road was a drug-trafficking website, and through his communications with FAIELLA, SHREM also knew that FAIELLA was operating a Bitcoin exchange service for Silk Road users." http://www.justice.gov/usao/nys/pressreleases/January14/SchremFaiellaChargesPR.php http://www.justice.gov/usao/nys/pressreleases/January14/Schr... (note the 14 Jan in URL and 27Jan release date; first draft Press release, then make arrests)
- gedrap 13y ago>>> note the 14 Jan in URL and 27Jan release date; first draft Press release, then make arrests 2014 January?
- basseq 13y agoDefinitely. There are other January press releases with the same base URL.
- GrinningFool 13y agoEVerything released in January has a url of "January14" which leads me to believe it just means "January 2014": http://www.justice.gov/usao/nys/pressreleases/ http://www.justice.gov/usao/nys/pressreleases/
- downandout 13y agoIt's not surprising at all that the press releases are written in advance of arrests. Preet Bharara, the US Attorney responsible for this, is a symbol of everything that is wrong with the US justice system. His every action is designed to maximize his PR and advance his political career. If on occasion he happens to perform his actual job in the process, that is only incidental. If you look closely you'll see that he actually has professionally applied makeup during his press conferences - these are manufactured dog and pony shows. He was looking for a case that would allow him to ride the PR coattails of Bitcoin, and he found one. In my opinion, prosecutors like this are as despicable as many of the people they prosecute.
- tptacek 13y agoI am shocked, shocked to learn that someone had makeup applied professionally before a televised press conference.
- downandout 13y agoI'm not sure why he needs to be on TV in the first place. His job is to prosecute whatever crimes happen to be occurring in his district. Instead, he cherry picks those that will make headlines in order to further his career. He is in the news vastly more often than any of his counterparts in other jurisdictions have ever been in the history of the DOJ. In short, he is abusing his office for personal gain.
- tptacek 13y agoProsecutors are expected to look like zombies on TV? (The comment I replied to was edited heavily after I replied to it)
- polymatter 13y agoI think its more that the application of professional makeup is indicative of a prosecutor overly concerned with appearance. Its not the touch up here and there to avoid looking like an overworked zombie, its the going to the extreme to look like a hero. The suggestion is that such vanity can get in the way of facts, truth and justice. I don't agree with this perspective, but I sympathise with it.
- panarky 13y agoPage 11 of the complaint shows that 'safe-mail.net' isn't as safe as it sounds. http://www.scribd.com/doc/202555785/United-States-vs-Charles-Shrem-and-Robert-M-Faiella http://www.scribd.com/doc/202555785/United-States-vs-Charles...
- asperous 13y agoThey could have gotten the mail mid-transit, nsa-style.
- leobelle 13y agoGiven that everyone involved was an American citizen, the NSA would not have been authorized to use their database to look up this information. Based what we know of the 1,000 or so instances of illegal access by NSA employees of their database, there is no evidence that the NSA has ever been involved giving database information to an IRS Special Agent investigating American citizens. There is no evidence that the IRS or FBI has NSA style capabilities to circumvent internet encryption. So your rampant and incredulous speculation has no standing and borders on conspiratorial. It is however likely the IRS or FBI simply used a subpoena to get their information through a court and a judge, which is entirely in accordance with the law.
- nobody_nowhere 13y agoNSA policy is very explicit in stating that if they come across evidence of domestic criminal activity in the pursuit of foreign intel, they are free to share that with law enforcement. Given that tracking money laundering is a key approach to attacking terrorism, it's certainly possible that information related to this arrest could arise from that activity. So while its most likely that this went through a subpoena, it's absolutely not conspiratorial to suggest NSA involvement.
- drjesusphd 13y agoActually, it is conspiratorial. It's also true.
- ChuckMcM 13y agoThis came out in the Forbes article as well. Now to hear what Shrem's defense will be ...
- Lambent_Cactus 13y ago"If all that is alledged is true, that's pretty damning and this isn't just a general bitcoin crackdown." This could easily be the open move in a general crackdown, a sympathetic test case to establish that operating a bitcoin exchange == money laundering, with broader applications of that precedent to follow.
- narrator 13y agoI predicted how they would take down bitcoin a while ago. Anyone transmitting bitcoin to another party through anything but a KYC compliant licensed money transmitter will be considered a de-facto money launderer. https://news.ycombinator.com/item?id=6680062 https://news.ycombinator.com/item?id=6680062
- dragonwriter 13y ago> a sympathetic test case to establish that operating a bitcoin exchange == money laundering If this was a test case of that principle, you'd think it would allege "operating a bitcoin exchange" as the basis of the money laundering prosecution, rather than a whole bunch of things that would be money laundering if you replaced bitcoins with anything else, including US dollars. After all, if there is no unique principle asserted in the case, it can't establish precedent for any new principle. And all that is being alleged here is bog-standard money laundering by actively, intentionally structuring transactions to avoid $ limits and obscure account identities to avoid transactions being identified as violating anti-money-laundering policies, with knowledge that this was being done to further illegal transactions, particularly, narcotics purchases. The only principle this stands for is "money laundering is still money laundering when bitcoins are used in the process."
- downandout 13y agoThis arrest is much more about Charlie Shrem than Bitcoin itself. While no one had any idea that this specific activity was happening, Charlie and Bitinstant were incredibly reckless and cash hungry for quite a while. About a year ago BitInstant became more Ponzi scheme than Bitcoin brokerage - see the last few hundred pages of complaints here: https://bitcointalk.org/index.php?topic=128314.7380 https://bitcointalk.org/index.php?topic=128314.7380 . There is also a pending lawsuit against Bitinstant itself awaiting class action certification, essentially alleging the cherry picking of transactions in order to maximize profits and eliminate market risk for them. http://www.scribd.com/doc/160406193/Bitinstant-Class-Action-Lawsuit http://www.scribd.com/doc/160406193/Bitinstant-Class-Action-... This case sheds new light on the reasons that they were unable/unwilling to deliver Bitcoins that they took money for. Charlie may have privately sold all of the Bitcoins in Bitinstant's possession at various times to this individual rather than deliver orders to normal customers in a timely manner. It would also be interesting to know whether the Winlklevoss twins - investors in Bitinstant and major Bitcoin holders - ever loaned Bitcoins to Bitinstant that ultimately wound up in the drug dealer's hands.
- yapcguy 13y agoThe Winklevoss twins say: “We were passive investors in BitInstant and will do everything we can to help law enforcement officials. We fully support any and all governmental efforts to ensure that money laundering requirements are enforced, and look forward to clearer regulation being implemented on the purchase and sale of Bitcoins.” http://dealbook.nytimes.com/2014/01/27/two-executives-of-bitcoin-businesses-are-arrested/ http://dealbook.nytimes.com/2014/01/27/two-executives-of-bit... We don't know all the details of this case but I guess we can all agree that if justice is to be done, and more importantly perhaps, seen to be done, nobody should be given preferential treatment. This means bankers should be sent to prison instead of being allowed to buy their way out: "HSBC's $1.9 billion agreement with the U.S. to resolve charges it enabled Latin American drug cartels to launder billions of dollars was approved by a federal judge." http://www.bloomberg.com/news/2013-07-02/hsbc-judge-approves-1-9b-drug-money-laundering-accord.html http://www.bloomberg.com/news/2013-07-02/hsbc-judge-approves...
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- muyuu 13y agoI don't see why selling BTC in SilkRoad is illegal. How so? by association with other things that happen there? By that standard working for the government would make you a criminal.
- nazgulnarsil 13y ago+1, and anything the DEA does should be presumed bullshit until proven otherwise.
- sirsar 13y agoMoney laundering is illegal, not necessarily selling BTC on the silk road.
- muyuu 13y agoFrom all the reports I've seen, they seem to be equating the selling of BTC with money laundering. No other activity related to money laundering is being reported.
- dragonwriter 13y ago> From all the reports I've seen, they seem to be equating the selling of BTC with money laundering. You've seen poor reports, then; specifically, you haven't seen either the actual Justice department press release or the criminal complain, both of which have been both linked and excerpted in this thread. > No other activity related to money laundering is being reported. Actually, the money laundering activity being reported is the official of the exchange responsible for AML compliance advising a user who -- by that officials own description -- he had reason to suspect was engaging in criminal activity on how to structure transactions to avoid anti-money-laundering flagging, and that user actually so structuring transactions. Selling bitcoins wasn't money laundering -- it was the basis of the separate charge of operating an unlicensed money transmission business.
- bashcoder 13y agoIt's illegal operate an unlicensed currency exchange, and it's illegal for a licensed exchange to knowingly facilitate illicit transactions. If a licensed exchange even suspects illicit activity, it must report it. Using financial transactions such as these in order to obfuscate and conceal illegal activity is money laundering. In this case, the guy whose job it was to report the activity as Chief Compliance Officer was materially involved in the illicit activity itself. According to the complaint, he was even a SR drug customer, so there's no way he can feign ignorance as to what was going on at SR.