Bitcoin Forum

If you buy or sell Bitcoins in your local city via a service like localbitcoins.com it's worth remembering that you are not under any obligation to complete the trade. You can abort it for any reason, or no reason at all, and for the health of the Bitcoin community you should do so if your counterparty comes across as problematic.

It's worth asking your counterparty a few questions about what they're planning on doing with the Bitcoins (if buying) or how they got them (if selling). Of course they are under no obligation to tell you, but I've found most legitimate people are quite happy to discuss their new hobby, get new ideas, discuss places to use their new Bitcoins etc.

Today I met up for an in person trade and I aborted it. The reason is that the guy almost immediately told me he was a drug dealer and used Bitcoin to sell drugs into the USA from Europe. This was based on almost no prompting at all, he just came out with it. In fact he was very talkative for a self-confessed criminal who just met a total stranger and said many things that simply did not add up, or which contradicted each other. Even if I was the type to do currency trades with drug dealers (I'm not), I was left with the distinct impression that he might not be a real dealer at all but rather some kind of investigator.

After he finished talking, I politely told him I couldn't really trade with him after hearing all that. He was quite nice about it and then simply got up and left.

I wouldn't really ask any questions, it's their business what they want them for or where they got them from..

But I'd definitely abort once info like that or something actually bad(like I want to buy a bomb to blow up a bank) has been voluntarily provided if only because there's a real chance I just walked into a LEO trap trying to get me implicated with a "crime" and then attack me.

It sounds sketchy and I'm sorry you had that experience. It would be better if local bitcoins had some sort of feedback system.
I think it is more likely that he behaved erratically because he was intoxicated than that he was an investigator.

I am curious, did he mention whether he received the drugs directly, or did he have them 'drop-shipped' to customers?

MH, someone like you, with such high visibility and so much to lose, should probably confine your trading to exchanges.

I've studied financial regulations in a lot of depth. I think in person trading is quite safe as long as you don't do large trades and apply basic common sense, like refusing to trade with people who tell you they are planning to break the law.

AML regulations, at least in sane countries, have thresholds on them. For trading 50 CHF here, 100 CHF there the volumes are too low to be of any utility to actual criminals and are thus excluded. I do this only to help bring the Bitcoin community in Switzerland together, it's not a real business (makes no profit for me). So there's no reason to ever go anywhere near those thresholds. If the amount of trading people wanted to do were to step up I'd just point them to Mt Gox. I trust the Swiss government to be reasonable about this stuff. If I see any signs they aren't going to be then I'd stop.

I don't think he was intoxicated.  We didn't discuss the details of what he did. I just let him talk, he didn't need any encouragement. He asked me what the largest cash-out trade I knew of was, which struck me as an odd question, so I told him to ask Mt Gox.

Frankly I got the impression he had memorized a list of buzzwords. At one point he referred to IR codes, which seems like a pretty odd mistake for somebody who claimed to have a long technical career and a "business" that used Bitcoin.

You are way too visible and important to the community to be doing this sort of thing in my opinion.

I definitely agree - if you exchange money or any kind of goods/services, and the customer mentions illegal activity, it is wisest to withdraw from the business right away. For your own protection.

Did he know your identity ahead of time?

I'm not going to interrogate whoever is selling me bitcoins but if they came right out and said it was from drugs I'd walk away too that screams fed entrapment.

So, you met with a cop who was trying to entrap you...
I guess Switzerland is not the free country they try to make us believe they are ;D

Even if there's not a legal liability, there'd definitely be a liability in the court of public opinion.

Selling duct tape is not illegal, but if someone went to Home Depot and made a covert video of a clerk cheerfully selling duct tape to a guy who is asking what's the best brand to bind and gag children, or asking to cut a pipe into six-inch segments "for some pipe bombs" or something, it's going to look bad on the six o'clock news and in a courtroom no matter what, even if the clerk has no authority or discretion to refuse to sell the product.  And that's without assuming that something bad happens later in the public eye (abduction/murder/bombing/whatever).

Needless to say, "here's your bitcoins, hope your transaction goes well" (after learning it's for drugs) would make for a sound bite that wouldn't reflect well on us.

If not government entrapment, it could just as easily be a member of the press looking for some salacious content for their story.  Look around, the cameraman may be in the bushes, or that thick pen in their shirt pocket may be a hidden cam.

Selling bitcoins is no problem, but buying them could be.

The OP was trying to buy bitcoins from someone who had earned them from the drug trade. Buying those bitcoins for USD, EUR etc, is technically "laundering" the proceeds of crime.

When you're the press trying to make a show, the more egregious the question you can get your mark to bite on, the better the show!  Have a look at this: http://www.youtube.com/watch?v=yVRv5u36Huw

Interviewer Q. "We have chosen your baby to be dressed as a Nazi officer, pushing a wheelbarrow with another baby playing a Jew, into an oven.  How do you feel?"

Mother A. "If he got the part, well, then, that's great!" (paraphrased)

No, I was going to sell coins for CHF, not buy them. The amount in question was 100 CHF, which is about the same in dollars. It's not enough to do much of anything.

The fact that a supposed drug seller was wanting to acquire Bitcoins is one of the inconsistencies I mentioned. Presumably the problem people like that would have is selling Bitcoins for fiat.

Mike: ever thought of buying a video camera to record your transaction?

He's prob buying product from NL with coins and shipping to his US partner for cash in mail through switzerland a non known drug exporting country for bypassing customs flags

As I said before, currency exchange can be a regulated business, in which case the answer is a qualified yes. However, you don't become a regulated entity just by swapping some bank notes. There are thresholds that have to be met.

For instance, here's the docs on the UK:

http://www.pwc.com/gx/en/financial-services/assets/know-your-customer-quick-reference-guide.pdf

Most countries have similar sized thresholds. In Switzerland there are a bunch of them. This guide seems to be a good reference (https://docs.google.com/viewer?a=v&q=cache:6ZGIHoz7YLAJ:www.nkf.ch/wAssets-nkf2/docs/publikationen/adrian_w_kammerer/AML2012-Switzerland.pdf+&hl=en&pid=bl&srcid=ADGEESh12xvuQl7cAact7CGKTbHJyyfKOrP8RVoRERAjTuuABCvjNlLu_Ll78b9AWMUG5qd1WKgfKZyPiLITGtzxVnlTVx5f_w4moXCtH3om5zAdGlcce_VNmtYPnUPHZXyUZVUfuBur&sig=AHIEtbRK50G89hT9Q9kb-Q0bzF5QKS576A).

Rule of thumb, if you're doing currency exchange "a lot", like at the level of an actual business or with huge transactions, then you need to research the relevant laws. I doubt anyone listing on localbitcoins can possibly meet the thresholds unless those thresholds are unexpectedly lowered, or they live in a country with no thresholds at all.

It does have a feedback system.  In addition to that it can be linked to an OTC identity if you have a Bitcoin address linked to the handle.  A Local Bitcoins profile page will list the feedback from the trades arranged there and the feedback submitted through the OTC system.

It very well might be a trap. Or the other person might be high on coke or some other "look Mom I'm Chuck Norris" drug. Or he just wanted to look tough and in reality he is going to spend the coins on bittit.info

Don't ask don't tell is best approach. Personally for me it is not a problem to deal with such persons even if I know what he is going to do with the coins or I know from where the other person got his coins.

It is illegal to aid and abet a criminal. Selling bitcoins claims to a known drug dealer would be a form of aiding and hence criminal. I sincerely doubt that the person was a true drug dealer, and I highly suspect that this was a law enforcement officer. They will have significant difficulty in going after silk Road directly, however, they can take out the secondary market for bitcoins by prosecuting relatively innocent people under this obscure law... And no one will object to this method of trying to stop bitcoin because it just sounds so bad when an otherwise law-abiding citizen does something like help drug dealers.

I predict within the next year we will see the first bitcoin related criminal prosecution, and I doubt it's going to be anyone who did something really all that wrong.

The government is going to want people to think that it is illegal to sell bitcoins just like it's illegal to sell drugs. It's no different than giving the panhandler money, however, the truth will be difficult for most people to tell apart.

Money is a technological information tool for deferring the exchange of goods ... medium of exchange, store of value, unit of account (all of that). It leads to all kinds of wondrous benefits for humanity, such as efficient market pricing, division of labour and etc, etc too numerous to mention. It was never designed to be a tool for "catching the bad guys". What is so difficult to understand about this simple concept?

Trying to shoehorn into the design of money hooks to turn into a tool of law enforcement will inevitably creating a deficient, inferior, compromised product that sucks at being good money (as defined above).

People on park benches talking about using meager sums to traffic drugs from USA to EU probably shouldn't be taken at all seriously, or no more seriously than some whacked out zombie from needle-park. People on the streets say all kinds of thing that have absolutely zero standing in any decent court of law, or public opinion. Good for a laugh, but really how do you know what anyone says in your presence is factual unless you have some independent knowledge of the proof of their claims??

Dragging KYC 'concerns' into local bitcoin exchanges seems like a stretch. I just trust no-one, money talks, BS walks.

I disagree with my bud ~cypherdoc that anyone should stay away from person-2-person transactions no matter what their position.  This largely because I feel it important to 'work out the bugs' of doing such transactions absent functional exchanges.  Just in case.

That said, it would obviously make sense to be as careful as possible, particularly since BTC is useful for criminals and (possibly) of increasing interest to law enforcement.  Since my BTC and other assets tend to be pretty static I've not done any person-2-person BTC transactions but I intend to if/when I wish to liquidate some BTC (but will likely buy on an exchange if I buy more BTC and the exchanges remain viable.)  Thus, I've put some thought into how I would do things and it is along the lines as follows:

 - outline and document in detail with the other party how things should go ahead of time.  Including:

   - we meet in place which has good video surveillance, security staff, and other people around.  A large corporate campus would be swell, particularly if it is near a bank.
   - I send x-BTC to an address of other's choice (likely something like Instawallet so transactions are reliable without waiting for confirmations.)
   - other gives me {x} $$$  (likely a function of Mt. Gox spot price.)
   - I send another {x} BTC
   - other hands over some more fiat.
   - etc, etc, until transaction is complete.
   - say goodbye.

The step-wise nature of the transaction limites losses should one party run.  Now due to this note, add one more bullet point to the outline.

 - neither party says a peep about anything not necessary for the transaction.  If we want to meet up for a beer several hours later and talk about politics, drugs, guns, etc, fine and good.  My USD will be tucked into bed well before that.  And if the transaction goes the other way, my BTC will similarly be squirreled away in cold storage.

Question:  What if on your website or an email signature you say something like...'I do not sell bitcoins to people participating in illegal activities.'

That hopefully should filter out people when you meet them.

Also you could add 'I sell up to $100 in bitcoins.'  Thoughts?

This assertion is very poorly thought-out, and frankly wrong.  Selling groceries, for instance, to a "known drug dealer" is not a crime, even though groceries might be considered a form of "aid".

Selling Bitcoins, or anything really, with the knowledge that they would be used in the commission of a crime could be illegal.  But it depends largely on the circumstances.

Oh sure ... law enforcement trying to entrap someone?   Like what you see on TV?  That doesn't really happen, does it?

- http://www.ktvb.com/news/134150428.html

Ofcourse it never really happens. Rumours, just rumours ::)

I haven't done any in person trade, so how does it work? does the person hand you the cash first? or do you send them the BTC first?

If it is just an over-the-counter (OTC) transaction, like from an offer to buy on Craigslist, then you'll want to make sure to meet in a public place.

LocalBitcoins suggests:


With LocalBitcoins, they have this "Transactions" feature which works as an EWallet with additional useful features for doing face-to-face trades (e.g., after releasing the bitcoins to your account, the seller is sent an SMS text message with the release code that was previously known only to you.)

As far as cash first or BTC first, it probably works best when the buyer presents the cash  and counts it.  The terms of the trade are verified, and then the bitcoins are sent.  Upon receipt of the coins the buyer then hands over the cash and the trade is complete.

Of course, this gives the opportunity for the buyer to run off without handing over the cash.  If that is a concern you as the seller may wish to ask for someone to witness the sale, or perhaps even have an intermediary hold onto the buyer's cash before sending the coins.

The recommendations from the wiki are still valid:

(now a face-to-face trade doesn't have to be GPG signed, but an invoice reviewed in advance would be the equivalent)
 - http://en.bitcoin.it/wiki/Secure_Trading

As a buyer in a face-to-face trade that is not being done through LocalBitcoins.com, you might want to consider the risk of a double spend from a 0/unconfirmed transaction -- especially for any transactions that are for larger amounts.    These are relatively rare and hard to successfully pull off, but if a $500 wad of cash is at stake, you might want to wait until there is at least one confirmation first before completing the trade.

my recommendation only applies to guys like MH; a dev, high visibility, excellent job at Google -> an excellent target to take down by law enforcement to damage Bitcoin.

everyone else is ok and i actually like your method of conducting a p2p exchange.  i'll have to sticky this method.

Generally speaking ... yes.  If you are aware your actions are in furtherance of a crime your "plausible deniability" is gone.  You "could" be charged with everything from receipt of stolen goods, laundering money, or even engaging in conspiracy for the furtherance of a criminal enterprise".  Now you not be prosecuted but you have crossed the line and now are merely hoping for the mercy of the state to keep you out of trouble.  The details of the scenario(s) will play a large part in the likelihood of an arrest.

TL/DR:
It is the difference between your friend giving you a good "deal" on an HDTV we doesn't want anymore and your buddy saying "dude I got this HDTV I just stole from the house down the street, want it for $300".   While you may be out $300 in either scenario, agreeing to the later is a crime (even if your "buddy" is an undercover cop).

Note the above post is just informational, always consult legal counsel for specific advice about your situation.

You can also bring a weapon to the trade in legal jurisdictions.

My feelings about guns generally are that they mostly just cause more problems than they are worth.  Even though I have them and some training with them, I would go a long way not to use them in any circumstance.  Guns are not my first line of protection for anything, and I would not even consider bringing them to a BTC transaction.  I see almost no scenario where they would be useful (in part because I would only perform a transaction under well controlled conditions.)  I don't even concealed carry at this time because I feel that it limits the types of responses to certain types of events that I could legitimately undertake.  But that's a personal choice, and I can accept other people making a different one.  Fortunately (in my opinion) many people in most states in the US have the option.

Now perhaps you are talking about bringing weapons other than firearms to a Bitcoin transaction?  I'd probably avoid that as well, and for similar reasons.  It would be worthwhile to have a trusted observer hanging out in the same general area though, but this goes for any transaction which is similar.