7 ms·

Judge Shoots Down ‘Bitcoin Isn’t Money’ Argument in Silk Road Trial

52 points by pat2man 12y ago

mikeyouse 12y ago
This was always an idiotic premise. The Federal money laundering statute refers to 'monetary instruments' which it then defines: (i) coin or currency of the United States or of any other country, travelers’ checks, personal checks, bank checks, and money orders, or (ii) investment securities or negotiable instruments, in bearer form or otherwise in such form that title thereto passes upon delivery; If you could convince a judge that Bitcoin wasn't currency, it would still qualify as an investment security / negotiable instrument by just about any definition.
- natrius 12y ago
  If Bitcoin is a security, is it debt? Is it equity? Is it a derivative of those? If Bitcoin is a negotiable interest, who is the counterparty? Bitcoin is neither of those things. It's currency, but not the currency of any country.
  - jrockway 12y ago
    It doesn't matter. If I give you a piece of paper with a picture of a spider on it in exchange for something, as far as the court is concerned the piece of paper with the picture of the spider on it is money. (The underlying reason is that barter transactions are as taxable as cash transactions. Doesn't matter what you're bartering for what.)
    - natrius 12y ago
      I agree that it's money. I agree that Silk Road facilitated money laundering. The plain text of the law in question doesn't cover Bitcoin, though. That doesn't mean the ruling was wrong.
      - jrockway 12y ago
        The other thing to keep in mind, especially for programmer types, is that the law is not a computer program. There is certainly argument around wording in law, no doubt, but the courts do try to consider the intent when making a ruling. ("Well, this is currency, but not the currency of Another Country, so... case dismissed." That might happen, but it also might not, because it's pretty clear that the author of the law wasn't imagining cryptocurrency when drafting it.)
      - enraged_camel 12y ago
        >>The plain text of the law in question doesn't cover Bitcoin, though. You mean the lawmakers did not predict the future and write the law to cover crypto-currencies? Mind-boggling. Totally.
        icebraining 12y ago
        The EU had had a law (well, directive) covering electronic money for almost a decade when Bitcoin appeared.
  - gamblor956 12y ago
    Bitcoin is a "negotiable instrument[]...in such form that title thereto passes upon delivery." A negotiable instrument can be but is not limited to debt instruments; the counterparty is simply whoever you transact with. Private municipal currency, for example, is not currency under the statute but is a monetary instrument because it is a negotiable instrument.
  - Terr_ 12y ago
    It's a security. It's equity in a consensus mathematical construct.
- Drakim 12y ago
  I'm pretty confused over that even an idiot would try to argue this case. It's something that has "coins" in it's name, and is touted as "the internet money of the future" and that is being used in substitute for regular money when buying wares all over the world. If that isn't money, is ANYTHING money? Could one not just as well argue that dollars are just ink on paper, and therefore not money?
  - jdong 12y ago
    Still worth arguing. Much more to gain than to lose here.
  - kaonashi 12y ago
    Money is a loosely-defined word that ends up being a huge sticking point in economic conversations because people end up using different definitions. One thing Bitcoin is not is a unit of account; it is nobodies liability the way that dollars, treasuries or reserves are a liability of the issuer. When I think money, I think balance sheet; and by that criterion, Bitcoin is not money. It's a currency and an asset.
    - late2part 12y ago
      This is a very concise point. Modern Federal Reserve Notes are debt instruments.
    - ahomescu1 12y ago
      Germany seems to disagree with your point: http://www.spiegel.de/international/business/germany-declares-bitcoins-to-be-a-unit-of-account-a-917525.html http://www.spiegel.de/international/business/germany-declare... Edit: Wikipedia gives the following requirements for "unit of account": To function as a 'unit of account', whatever is being used as money must be: Divisible into smaller units without loss of value; precious metals can be coined from bars, or melted down into bars again. Fungible: that is, one unit or piece must be perceived as equivalent to any other, which is why diamonds, works of art or real estate are not suitable as money. A specific weight, or measure, or size to be verifiably countable. For instance, coins are often milled with a reeded edge, so that any removal of material from the coin (lowering its commodity value) will be easy to detect. Except for having a specific weight, Bitcoin has these: 1 Bitcoin is the same as any other, and it can be broken into 0.5, 0.1 and even 0.0001 Bitcoins.
sashanna 12y ago
Breaking news: judge exercises common sense.
ChuckMcM 12y ago
This wasn't particularly surprising, either in putting it out there or shooting it down. Every trial starts with a whole bunch of motions which the judge evaluates. If your lawyer isn't throwing up every possible angle they aren't earning their pay.
- absherwin 12y ago
  -Bad: Do nothing -Better: Object to everything and you might win the lottery -Best: Object reasonably that they may be taken seriously -Beyond amazing: Admit everything in such a sympathetic way to minimize guilt* *Gerry Spence
  - dlss 12y ago
    Source? I can't find your last quote online, and want to read more about it
- pat2man 12y ago
  One interesting bit is that to a judge Bitcoin is obviously money. This shoes precedent for future cases.
BeyondTime 12y ago
Bitcoin is based of cryptography which is completely broken before implementation so, this would have to be a discussion about before time. No one has experienced security.
canjobear 12y ago
The article says this was a motion to dismiss all charges, on grounds that bitcoin isn't money and that Ulbricht wasn't responsible for website users' actions. What happened to the murder-for-hire charges? Those seemed pretty damning...
- herendin 12y ago
  All dropped, except the Maryland case, which isn't being tried yet and could also be dropped when the time comes
svedlin 12y ago
The claim is that the term "funds" included in the definition of "financial transaction" [1] covers bitcoins. "Funds" typically denotes cash or an asset that is highly liquid, not just anything which can be purchased or sold. Black's Law Dictionary defines "fund" as a "sum of money or other liquid assets established for a specific purpose." Bitcoins, at this stage, are accepted almost nowhere, recognized by few people as currency, and represent a tiny, highly volatile and risky niche compared to other markets. It's much easier to convert a used iPhone (the top search on eBay) into cash, sell concert tickets on craigslist, or trade collectibles, than it is to convert bitcoins into legal tender, but no one would mistake those goods for "funds." The law isn't intended to cover anything which can be exchanged for cash. In fact, it specifically enumerates the following types of property separately when defining the scope of "financial transaction": "real property, vehicle, vessel, or aircraft." [1] Because currency is accepted nearly everywhere as payment, the government considers it difficult to police and subject to special penalties when used for criminal ends. Goods like collectibles or bitcoins don't operate at that scale, since they're accepted by relatively few businesses and specialized experts as payment. If a tiny (in comparison to the economy at large) experiment like bitcoin is "funds", then almost any object bought or sold in a zillion stores and marketplaces can be construed as "funds". Any quid-pro-quo could be considered laundering, which broadens the law beyond its intended scope. The ruling says: "Ulbricht's alleged conduct is more akin to a builder who designs a house complete with secret entrances and exits and specially designed traps to stash drugs and money; this is not an ordinary dwelling, but a drug dealer's 'dream house.'" [2] It's not illegal to build a house with secret entrances and compartments. Such a house could be used by anyone who wanted to hide their own possessions on their own property. The fact that someone might use it for illicit purposes doesn't implicate the owner or builder. It must be proved separately that the owner or builder knowingly entered into some kind of agreement with another conspirator to facilitate a crime [3]. Merely hosting a chat room isn't a conspiracy. Unfortunately, this is just a perpetuation of the same pointless drug war. The prosecution's position is wildly overblown. The alleged activities are akin to operating a motel where a victimless offense might have been committed by a third party. Drug prohibition is ineffective and is on the way out in favor of treatment and social programs that are more effective. [1] http://www.law.cornell.edu/uscode/text/18/1956 http://www.law.cornell.edu/uscode/text/18/1956 (4) the term “financial transaction” means (A) a transaction which in any way or degree affects interstate or foreign commerce (i) involving the movement of funds by wire or other means or (ii) involving one or more monetary instruments, or (iii) involving the transfer of title to any real property, vehicle, vessel, or aircraft, or (B) a transaction involving the use of a financial institution which is engaged in, or the activities of which affect, interstate or foreign commerce in any way or degree; [...] [2] http://www.scribd.com/doc/233234104/Forrest-Denial-of-Defense-Motion-in-Silk-Road-Case http://www.scribd.com/doc/233234104/Forrest-Denial-of-Defens... [3] http://conspiracy.uslegal.com/elements-of-the-crime/intent/ http://conspiracy.uslegal.com/elements-of-the-crime/intent/

52 points by pat2man 12y ago

This was always an idiotic premise. The Federal money laundering statute refers to 'monetary instruments' which it then defines: (i) coin or currency of the United States or of any other country, travelers’ checks, personal checks, bank checks, and money orders, or (ii) investment securities or negotiable instruments, in bearer form or otherwise in such form that title thereto passes upon delivery; If you could convince a judge that Bitcoin wasn't currency, it would still qualify as an investment security / negotiable instrument by just about any definition.

natrius 12y ago
If Bitcoin is a security, is it debt? Is it equity? Is it a derivative of those? If Bitcoin is a negotiable interest, who is the counterparty? Bitcoin is neither of those things. It's currency, but not the currency of any country.
- jrockway 12y ago
  It doesn't matter. If I give you a piece of paper with a picture of a spider on it in exchange for something, as far as the court is concerned the piece of paper with the picture of the spider on it is money. (The underlying reason is that barter transactions are as taxable as cash transactions. Doesn't matter what you're bartering for what.)
  - natrius 12y ago
    I agree that it's money. I agree that Silk Road facilitated money laundering. The plain text of the law in question doesn't cover Bitcoin, though. That doesn't mean the ruling was wrong.
    - jrockway 12y ago
      The other thing to keep in mind, especially for programmer types, is that the law is not a computer program. There is certainly argument around wording in law, no doubt, but the courts do try to consider the intent when making a ruling. ("Well, this is currency, but not the currency of Another Country, so... case dismissed." That might happen, but it also might not, because it's pretty clear that the author of the law wasn't imagining cryptocurrency when drafting it.)
    - enraged_camel 12y ago
      >>The plain text of the law in question doesn't cover Bitcoin, though. You mean the lawmakers did not predict the future and write the law to cover crypto-currencies? Mind-boggling. Totally.
      - icebraining 12y ago
        The EU had had a law (well, directive) covering electronic money for almost a decade when Bitcoin appeared.
- gamblor956 12y ago
  Bitcoin is a "negotiable instrument[]...in such form that title thereto passes upon delivery." A negotiable instrument can be but is not limited to debt instruments; the counterparty is simply whoever you transact with. Private municipal currency, for example, is not currency under the statute but is a monetary instrument because it is a negotiable instrument.
- Terr_ 12y ago
  It's a security. It's equity in a consensus mathematical construct.
Drakim 12y ago
I'm pretty confused over that even an idiot would try to argue this case. It's something that has "coins" in it's name, and is touted as "the internet money of the future" and that is being used in substitute for regular money when buying wares all over the world. If that isn't money, is ANYTHING money? Could one not just as well argue that dollars are just ink on paper, and therefore not money?
- jdong 12y ago
  Still worth arguing. Much more to gain than to lose here.
- kaonashi 12y ago
  Money is a loosely-defined word that ends up being a huge sticking point in economic conversations because people end up using different definitions. One thing Bitcoin is not is a unit of account; it is nobodies liability the way that dollars, treasuries or reserves are a liability of the issuer. When I think money, I think balance sheet; and by that criterion, Bitcoin is not money. It's a currency and an asset.
  - late2part 12y ago
    This is a very concise point. Modern Federal Reserve Notes are debt instruments.
  - ahomescu1 12y ago
    Germany seems to disagree with your point: http://www.spiegel.de/international/business/germany-declares-bitcoins-to-be-a-unit-of-account-a-917525.html http://www.spiegel.de/international/business/germany-declare... Edit: Wikipedia gives the following requirements for "unit of account": To function as a 'unit of account', whatever is being used as money must be: Divisible into smaller units without loss of value; precious metals can be coined from bars, or melted down into bars again. Fungible: that is, one unit or piece must be perceived as equivalent to any other, which is why diamonds, works of art or real estate are not suitable as money. A specific weight, or measure, or size to be verifiably countable. For instance, coins are often milled with a reeded edge, so that any removal of material from the coin (lowering its commodity value) will be easy to detect. Except for having a specific weight, Bitcoin has these: 1 Bitcoin is the same as any other, and it can be broken into 0.5, 0.1 and even 0.0001 Bitcoins.

sashanna 12y ago

Breaking news: judge exercises common sense.

ChuckMcM 12y ago

This wasn't particularly surprising, either in putting it out there or shooting it down. Every trial starts with a whole bunch of motions which the judge evaluates. If your lawyer isn't throwing up every possible angle they aren't earning their pay.

absherwin 12y ago
-Bad: Do nothing -Better: Object to everything and you might win the lottery -Best: Object reasonably that they may be taken seriously -Beyond amazing: Admit everything in such a sympathetic way to minimize guilt* *Gerry Spence
- dlss 12y ago
  Source? I can't find your last quote online, and want to read more about it
pat2man 12y ago
One interesting bit is that to a judge Bitcoin is obviously money. This shoes precedent for future cases.

BeyondTime 12y ago

Bitcoin is based of cryptography which is completely broken before implementation so, this would have to be a discussion about before time. No one has experienced security.

canjobear 12y ago

The article says this was a motion to dismiss all charges, on grounds that bitcoin isn't money and that Ulbricht wasn't responsible for website users' actions. What happened to the murder-for-hire charges? Those seemed pretty damning...

herendin 12y ago
All dropped, except the Maryland case, which isn't being tried yet and could also be dropped when the time comes

svedlin 12y ago

The claim is that the term "funds" included in the definition of "financial transaction" [1] covers bitcoins. "Funds" typically denotes cash or an asset that is highly liquid, not just anything which can be purchased or sold. Black's Law Dictionary defines "fund" as a "sum of money or other liquid assets established for a specific purpose." Bitcoins, at this stage, are accepted almost nowhere, recognized by few people as currency, and represent a tiny, highly volatile and risky niche compared to other markets. It's much easier to convert a used iPhone (the top search on eBay) into cash, sell concert tickets on craigslist, or trade collectibles, than it is to convert bitcoins into legal tender, but no one would mistake those goods for "funds." The law isn't intended to cover anything which can be exchanged for cash. In fact, it specifically enumerates the following types of property separately when defining the scope of "financial transaction": "real property, vehicle, vessel, or aircraft." [1] Because currency is accepted nearly everywhere as payment, the government considers it difficult to police and subject to special penalties when used for criminal ends. Goods like collectibles or bitcoins don't operate at that scale, since they're accepted by relatively few businesses and specialized experts as payment. If a tiny (in comparison to the economy at large) experiment like bitcoin is "funds", then almost any object bought or sold in a zillion stores and marketplaces can be construed as "funds". Any quid-pro-quo could be considered laundering, which broadens the law beyond its intended scope. The ruling says: "Ulbricht's alleged conduct is more akin to a builder who designs a house complete with secret entrances and exits and specially designed traps to stash drugs and money; this is not an ordinary dwelling, but a drug dealer's 'dream house.'" [2] It's not illegal to build a house with secret entrances and compartments. Such a house could be used by anyone who wanted to hide their own possessions on their own property. The fact that someone might use it for illicit purposes doesn't implicate the owner or builder. It must be proved separately that the owner or builder knowingly entered into some kind of agreement with another conspirator to facilitate a crime [3]. Merely hosting a chat room isn't a conspiracy. Unfortunately, this is just a perpetuation of the same pointless drug war. The prosecution's position is wildly overblown. The alleged activities are akin to operating a motel where a victimless offense might have been committed by a third party. Drug prohibition is ineffective and is on the way out in favor of treatment and social programs that are more effective. [1] http://www.law.cornell.edu/uscode/text/18/1956 http://www.law.cornell.edu/uscode/text/18/1956 (4) the term “financial transaction” means (A) a transaction which in any way or degree affects interstate or foreign commerce (i) involving the movement of funds by wire or other means or (ii) involving one or more monetary instruments, or (iii) involving the transfer of title to any real property, vehicle, vessel, or aircraft, or (B) a transaction involving the use of a financial institution which is engaged in, or the activities of which affect, interstate or foreign commerce in any way or degree; [...] [2] http://www.scribd.com/doc/233234104/Forrest-Denial-of-Defense-Motion-in-Silk-Road-Case http://www.scribd.com/doc/233234104/Forrest-Denial-of-Defens... [3] http://conspiracy.uslegal.com/elements-of-the-crime/intent/ http://conspiracy.uslegal.com/elements-of-the-crime/intent/