Bitcoin Forum

http://arstechnica.com/tech-policy/2013/05/feds-reveal-the-search-warrant-that-seized-mt-gox-account/

They better damn well have the license already, or hurry up on getting one.

The real panic sells haven't even started.

Bullshit

The fact that you have to be licensed in order to transmit money, just makes bitcoin seem even more valuable IMO.

Not gonna happen. If their USD accounts get frozen, nobody wants to hold USD. Expect buy-ins and transfer to other exchanges instead.

How does Gox need a US license to transfer money when they are in Japan.

How does anybody need a license to transfer money period. At this point you basically can't do business without transferring money.

Well lets pretend mtgox have to shut down - ppl who have bought btc will most likely experience a huge crash - meaning most will want to get USD out of there asap. Or perhaps they buy btc and act all "rational" assuming that a crash will not occur if this situation escalates.

I think it's fair to say the terrorists have won

Mutum Sigillum LLC is in the US and apparently lied on an MSB form that they weren't a money services company.

Mt. Gox is so incompetent it is mind boggling.

I don't know what this means, but I'm fucking scared right now.


Winter is coming...

just so:

• mtgox doing business in Japan
• is Bitcoin curency or commodity???

These are just only questions for lawyers

for a real problem to occur you'd need to see CampBx, Coinbase, Gyft, Bitinstant, and the myriad other worldwide exchanges being shuttered.

ain't gonna happen.

Just another american bankster-backed economic terrorist organisation under guise of a licensing authority

Land of freedom my ass (my opinions are not directed at honest americans, merely the terrorist 'leaders' of said country who pull the puppet strings)

It's YOUR US Dollars, yours to do with what you wish. If you want to hand it over to a company based in Japan in exchange for something of REAL value...thats none of their concern

They can just say they report to Eric Holder and this will all blow over in a few days.

"Tracing that money, HSI was able to see that the money passed through a Wells Fargo account, number 7657841313, which was created by a single authorized singer: Mark Karpeles, the president and CEO of Mt. Gox. The Dwolla account shows transfers to Dwolla going back to at least December 2011, according to the warrant.

The special agent then explains what appears to be the smoking gun: Karpeles specifically denied he was going to get into the currency exchange business. The warrant reads:"

He probably was too naive to understand his middleman role as a currency exchange. They seem to have a solid case against Mark.

Strange how it's taken this long to discover Mt.Gox wasn't doing things by the books (according to local laws), as I am fully aware they operate out of Japan, However they do apparently have a US company, with connected US accounts.
Which also the US operations were suppose to been taken over by another company by now, which didn't happen, so they in trouble with that as well.

Their stack of cards seems to be falling apart. Ouch.

There has been a decent number of other exchanges doing the same things shutting every year, obviously not lasting very long, yet they only looked at one of the biggest out there now? Talk about odd. How expensive are the US money service licences anyway, surely Mt.Gox could of afforded them, as one of the largest exchanges out there, right?

Hey now! Don't smear terrorists like that. They'd hate to be associated with banksters.

http://cdn.arstechnica.net/wp-content/uploads/2013/05/Mt-Gox-Dwolla-Warrant-5-14-13.pdf

You don't know what this all means, but you're scared and think winter is coming... Don't let irrational fears control you and limit your understanding and personal freedom, it's a lesson the US still has to learn.

It isn't about "affording" anything. Its about the regulations that are imposed and the requirements one must meet to get a license which essentially prevent many businesses from operating.

People keep saying this. I don't know about that. Bank runs happen for a reason. Most people have not picked up on the possible ramifications of this yet. But many understand what happens to the price of bitcoin it something serious happens to Gox.

Man, I had just recently been going over my fears about this... but I thought it was a ways away.

Off-topic: look how far we have fallen since 9/11. I think it's fair to say the terrorists have won.

FYI:

You can use https://bitpay.com (http://bit.ly/1806cv4) to cash out coins and have the USD sent you your bank account the next day for 0.99%.

According to the documents Mark could face up to 5 years in prison + fine (worst case).

They need an American license when doing business with Americans in America.

So in prosecuting MtGox for not having a money changing license, is there a legal precedent being set here that Bitcoin fits the government's definition of "money" ?

It has nothing to do with Bitcoin. He was exchanging SOMETHING for USD. CampBX by all reports is properly licensed. Their Dwolla is working just fine.

As usual, MtGox is incompetent. It could have been easily avoided, and this is yet another example why people should focus on moving to a different exchange that's actually run by people with a clue.

Babysitter government. You need a license for everything. Just GTFO and let the customers decide if they want to do business with a company.

Of course it has to do with Bitcoins.

Amazon accepts USD for DVD.  They also pay USD for DVDs.  Is amazon (and every retail business in the world) a MSB?  I mean commerce by very definition is the acceptance of money for goods & services.

However FinCEN provided guidance in March, 2013 indicating that virtual currencies* are subject to MSB regulation:
http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html

Thus it isn't that MtGox exchange "something" for real currency but that they exchanged "something which is regulated by FinCEN" for real currency.

Prior to March, 2013 there was no real reason for MtGox to register, post March, 2013 I am not sure how/why (as the worlds largest Bitcoin exchange) they thought they would remain under the radar.



* Only entities which buy/sell/trade/exchange virtual currencies for real currencies fall under MSB regulation.  FinCEN does indicate that buying or selling goods & services for virtual currency is not a MSB.

As far as I can see the money exchanging takes place in Japan, this is merely a funding method.

Oh you are soooo right.

Compared to Gox the other exchanges have such small volume. When people flock to sell on the other exchanges single digits will occur.

Just one twitchy finger is all it takes.

Think about that for a moment.

One twitchy finger.

Keep dreaming bro

http://www.fincen.gov/financial_institutions/msb/msbstateselector.html

Are ANY exchanges registered with FinCEN? Mt. Gox might be the first of many targets.

I thought Bitfloor was... look what that got us... lol

You are right. Bitfloor was registered.

I can't find CampBX...

I did find Coinbase and Coinlab.

I've studied what is needed in the UK and apparently we are well known for being strict in this area. However since I have no intentions of operating in the USA, I don't know it's requirements or costs.

Mt.Gox when I used it (last year) was annoying with all the verification of your details, so it easily did all of what was necessary for the requirements. So does it really all come down to the fact it wasn't declaring that account was being used to move money around?

Exactly -- it looks to me like they were generally acting in good faith in terms of the regulations. They were quite strict, and just for a minority of payment flows at that. As it's not that easy for a foreign company to open a bank account in the US, it looks like they just did what they could for Dwolla.

I wouldn't be surprised if Coinbase were behind this.

Except the government didn't, and still doesn't consider Bitcoin to be a "currency". It's digital property, and MtGox lets you buy and sell it. MtGox broke no laws here.

"The Department of Homeland Security (DHS) executed a seizure warrant to shut down the world’s largest bitcoin exchange for operating an unlicensed money transmitting service, according to documents filed in a Maryland court on Tuesday."

http://thehill.com/blogs/hillicon-valley/technology/299921-feds-crack-down-on-bitcoin-exchange

That seems incorrect according to what the warrant actually says - but I guess the next logical step. The tentacles of the US goverment reach around the world. Volumes are near zero @ gox atm.

i hope they get a really good lawyer rather than think "bah we know the law, we can do this without hiring a lawyer"

That's some shithouse journalism to say the least. The warrant doesn't shut down Gox. It just seizes their US Dwolla account.

Or hopefully this weekend all of these problems with exchanges will be at the forefront of the conference.  We are in desperate need of exchanges that are professional and can handle the large load of new incoming traffic as well as the ability to be compliant with the laws of all nations to truly succeed long term.  Seems obvious, but with small companies there are growing pains and Mt. Gox is really a small company trying to act bigger than they are. 

I agree... DHS has a solid case against MtGox.

There is no way around it. If you guys didnt pay attention re-read this :

Also check Paypal Acceptable Use Policy, buying a selling checks are also considered as money service business. This is nothing special, its clear as night and day.

This also help Coinlab to have a solid case against Mt.Gox.

I would withdraw all the cash out b4 the case proceed any further. Bank wiring still works and its gonna be for a little while.

502 Bad Gateway - I get this on and off from mtgox.com atm.

I also think, that Bitcoin is a digital commodity, not currency.


it is too much of bad news about MtGox, since Coinbase wants to run this business in the USA ...

50$ goes into bank account from person A
50$ goes out bank account to person B

= money transmitter = need license

doesn't really matter if something happens with play money in between.

Don't quote me, but I'm pretty sure if you operate in the US as a whole, you'd need a MSB license from every single state (unless the particular state doesn't regulate it). The logistical, legal, and straight-up cash requirements are probably upward of $5m and probably in excess of $300k annually after all the lawyer and accountant fees... just to do business in the US.

Seems convenient that mtgox is down atm - no transfering of btc out or selling. Other exchanges are going down.

This is good, we want the biggest bitcoin exchanges to have the proper MSB licenses.

One would wonder why the other longest operating major exchanges (in order of volume) operate outside of the land of the free - like Russia, Slovenia and China.

Sarcasm aside - moving the money through a US Wells Fargo account registered to himself, seriously? So amateur of Mr Karpeles. Hope this serves him a lesson if he still needs one. There's a guy who did the same in Germany (bitcoin-24) and got both his funds frozen and a court case pretty fast.
Correction: the note says "HSI was able to see that the money passed through a Wells Fargo account, number 7657841313, which was created by a single authorized signer: Mark Karpeles". So the account is likely on the company name - he's the only authorized signer.

Yeah, how dares he provide a service used by thousands, while not knowing every single laws in a country in which he wasn't born, nor living in.

'Murica!

Trading's working for now.
BitStamp's up.

Where do you see that?  The account is in the name of the LLC however last time I checked fictional legal entities (corporations and limited liability companies) don't have physical form and thus can't sign their own name so any corporate account will have real humans which are given (usually by corporate resolution) permission to sign in the name of the company.  No bank in the US will allow you to open an account in the name of a company, trust, or foundation with at least one "real person" signatory on the account.

Glad I only wanted to operate in the UK then. That does sound logistically complex and expensive as you said.

I see - I read it wrong. Editing. Thanks

Or the laws pertaining to his type of business in a country where he opened a bank account and conducts substantial volumes of transactions?

Have you thought that logic through?  If that was the standard then YOU would need a MSB registration as would every single one of Dwolla customers.

Actually FinCEN doesn't care if you are a "business" or not.  Luckily that isn't why they had their account frozen.

This is great news. I don't know what everyone's worried about.

In order for bitcoin to succeed, Gox has to go.

Everyone's whining "Well if something happens to Gox, price will crash!"

Sure, in the short term, twitchy fingers can cause flash price movements when things happen to Gox.

But Gox has been partially responsible for many of the major negative price events, including this one. They are truly incompetent. They STILL have a woefully inadequate trading engine. They STILL routinely experience lag and DDOS. They allow trading even when there's 20 minutes of lag time, something no "big boy" exchange would ever consider. And now their Dwolla capabilities are neutered because Karpeles fucked up when he was filling out a form.

Gox has to go.

I hope the US and Japanese authorities shut down Gox completely. The small exchanges will learn their lesson, and they (along with OTC) will rise and so will the volume vacuum. Then, and only then, can Bitcoin reach its true potential.

The alternative is Gox getting its act together. Does anyone still think that's going to happen? Lol.

Get your FUD straight, trolls. Gox dying a slow, painful, miserable death = GREAT FOR BITCOIN.

huh?.....

Thats so wrong


Lets me BOLD THIS CLEARLY FOR EVERYONE:

FINCEN now considers SELLING AND BUYING BTC FROM AND TO USD is money transmitting and requires to have MSB. Its CLEARLY stated in MARCH. But no you all are so busy with the price hike!

Wow.... ignorance at its best.

Agreed.

But can we please wait some 30 more hours before that happens? Please? I got, uh, some business to do before then.

Would this be considered a work around then? BTC > LTC > USD?

No.

They didn't mention BTC, but they described cryptocurrencies.

Read for yourself : http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html  if LTC falls into virtual currency.

I wouldnt bet on its any difference .

And having a MSB isn't a big deal. CampBX was able to get their shit in order. What's Gox excuse?

Thank you. This is the first thing I thought when I read the warrant.
When Gox signed up for those accounts things were completely different.

Another thing to note, games like World of Warcraft, League, Cash Shop MMOs. Are technically money transmitters too, as they exchange USD for virtual currency. As of the FinCEN ruling they are in gox's position technically. I doubt anyone of them signed up as money transmitters.

I'm surprised by how many ppl still think FinCEN is targeting MtGox.

Now MtGox is just a first case subjected to MSB requirement.

BTC is now considered like any real CURRENCY. Meaning you cant be an exchange without MSB license.

Ever need to exchange to foreign currency? you have to go to one of licensed MSB for that.

This is a lesson for any BTC start-ups that exchange BTC for USD

There is no excuse.... Gox will pay a hefty fine. Thats all come down to it. Whats more is that Coinlab will have a good case too. $75 mill is alot bigger than the fine from DHS

On a side note I start thinking Jed McCaleb was right with his Ripple protocol idea.
To fight censorship and seizures while still keeping decent liquidity we'd be better off with a lot of local smaller exchanges all taking part in a shared order book.

There is no games in US that i know exchanges USD for virtal currency. They SELL vouchers and virtual goods.

Show me one please.

Also ALL the games have TOS that prohibits ANY trading of virtual currency in game for fiat.

Kind of having a difficult time twisting this into something so positive..... no, I don't see it.

Banks, with or without agency/court actions, are the weak link. Wasn't Bitfloor's bank account shut down directly by Capital One (no court order)? And they were registered with FINCEN.

This same thing happened after UIGEA. Create a legally controversial / high-risk situation for banks (who don't like servicing MSBs in the first place, let alone those who are perceived to have the eyes of federal agencies on them), and watch what happens. Many may become fence-sitters, waiting for the situation to play out and leaving the market to shady high-margin payment processors.

In such a case, money in/money out is much slower and higher risk. People want liquidity. If prospective buyers perceive inability to easily move fiat <--> bitcoin, that's a huge threat to growth. And it's a longterm threat until the US government makes it exceedingly clear that it will not target fiat <--> bitcoin operators and their banks.

Never played Diablo 3 huh? And 3rd party buying of game currency is very big market as-well.

I doubt Ripple would DARE to touch anything subjected to MSB.

They have to be just a payment network. Selling and buying any currency, checks and money orders will be prohibited. They will come to this soon once they're working thro legal matters.

Agree 100%. Right now I'm a bear but the day Gox dies I am that much closer to becoming a bull.

The reality is that MtGox user policy already exceeds FinCEN standards, so getting registered wont be a problem. Compliance would only have to be proven at this point.

What does that have anything to do with the fine? Sure they can get license, but they will be fined for this.

You can bet if MtGOX goes bankrupted. Bitcoin price will tank..... for a while and continue so until there is an exchange that can replace MtGox.

You all say just use other exchanges and ditch MtGox. The reality is NONE of other exchanges has been tested in terms of volume, availability and security. I kept seeing other small exchanges getting hacked left and right. Its always easy to say than done.

The fact that Gox could overlook this requirement is inexcusable. Most everyone else was doing their due diligence to ensure that they were meeting regulatory requirements even before the FinCEN guidance. Now it leaves me wondering what other details they may have overlooked or not considered. Perhaps they are not even operating legally in Japan and if that is the case, a seizure of their servers will most definitely happen eventually. What assurance do we have right now that they are operating legitimately? Personally, I would not feel safe keeping anything of value in their servers right now. Time to jump the Gox ship as far as I'm concerned.

Well, I just moved the BTCs out of MtGox. Will see how this is going for the next days.

I wonder how much BTC gox is holding now vs prior of the lockdown of dwolla.

No idea about the US, but there are more than 90,000 pages of relevant BaFin regulation in my country. Expect MagicalTux to read all that crap? We  all probably violate regulations when taking a leak the wrong way. This is the whole point, tyranny through complexity. Whatever you do, you violate the law or regulation. So it's completely to the discretion of the so called authorities to seize your property or worse.

So, yeah. MagicalTux probably overlooked a couple of thousand additional regulations and laws.

Let's hope they are not doing fractional reserve.

This is what I am going to do, of course, I am going to immediately sell when I get my BTC to the other exchange.  

MtGox grew so big because noone else provided a better service. How is that great for Bitcoin if MtGox dies? I simply don't get it. If the biggest exchange falls, smaller exchages will become even easier targets.

Gox is a company that was attacked by ruthless bureaucrats. I feel truly sorry for people at Gox and wish they find a way out of the situation.

This. DHS isnt going to stop at Gox.

Yes, an interesting phenomenon is there are a lot of people invested in Bitcoin whose position is incongruent with their opinion on the effect of government intervention on bitcoin price.

For instance, people say "Government intervention/regulation/opposition will drive bitcoin price way down!" while simultaneously owning bitcoins and expecting them to appreciate.

It is absolutely 100% guaranteed that governments and large corporations will go after Bitcoin in whatever ways they can. Did anyone honestly not know this when they first invested? It's exactly what you signed up for. This is going to keep happening, over and over and over again.

So, if you think that "government intervention/regulation drives prices of goods/commodities/services/etc DOWN," i.e. you are incredibly stupid and can't take even a second to review history, then SELL ALL OF YOUR COINS NOW because your position is incongruent with your opinion on how markets work.

Last time I checked, drugs cost more than they did before the War on Drugs and torrents downloads are still wildly popular. Mixing analogies is even more fun than mixing speed and cocaine (purchased with Litecoins on Atlantis) while watching your illegal HD download of "Crank"

Is finCen guidance a law / regulation or guidance? curious ???

There is no doubt that governmental regulation is onerous, difficult and obscure, but unfortunately such is the world we live in. The point here is that they don't even seem to be trying. Reading and parsing thousands of pages of obscure documents is exactly what lawyers are for and why they get the big bucks. Hire a fucking lawyer Gox, do your job. They have been doing this for years now, none of these issues should be coming out of left field, at least not if they were serious or competent about their business.

Winner.

/thread

We agree again. This could turn into a dangerous habit. ;)

http://www.forbes.com/sites/kashmirhill/2013/05/15/the-feds-are-cracking-down-on-mt-gox-not-on-bitcoin/

They came for MTGox, but I was not MTGox, so I did not speak up...

(That said, dude knowingly lied on his application to the bank, this is a "clean" bust. Still, a bad sign.)

Well technically he check the "no" box in 2011 and it was only a couple months ago that the government clarified that they consider cryptocurrency to be money so he did not knowingly lie on the application.

Proper MSB licensing doesn't seem prohibitively expensive, other bitcoin exchanges have obtained it. The seizure has not provided any basis to conclude that the gov would shut down an exchange, other than failure to have the proper MSB license. Therefore this is very good news because more exchanges will be properly licensed in the future, and so far the focus of gov regulations and enforcement is narrow and does not appear to threaten bitcoin infrastructure or liquidity.

I suspect the DHS has nearly 7 of my bitcoin  :'(  I knew i should take it out last night, but I didn't.

They don't.  Not even 1.

You think I'll be able to get it?

Just 5 minutes ago I managed to move 100 of mine away.
It took patience and a lot of retries.

Next appointment with Gox withdrawals for me is in 24 hours and one second.

Some comprehensive legal advice:

http://moneytransmitterlicense.blogspot.ca/

An interesting "payments startup" site:

http://www.paymentsbusinessideas.com/

I still think Bitcoin and MSG are a Catch-22...
Sure, you can get all appropriate licensing...
But they will eventually come after BTC itself...
All roads lead offshore.

Of course you will.  This Dwolla thing is a nuisance - not a disaster.  It will be over and forgotten in a month or so.

The government always considered Dollars to be money. And Mutum Sigillum transmits money to and from MTGox and it's various customers. It exists solely for the purpose of transmitting money. One of the questions he answered no to was:
"Does your business accept funds from customers and send the funds based on customers' instructions (Money Transmitter)?"
The other was "Do you deal in or exchange currency for your customer?"

Even if Gox was outside of those particular regs (until the FinCEN ruling), Mutum Sigillum wasn't.

I worked in banks as a contractor for more than 20 years. Much more serious cases than this are no problem. THEY approached me for things like this and in one instance they were fine with me to go skiing for 2 weeks and fix the issue after returning.

This is an agenda and MtGox can't do anything. Do you believe the system we live in has anything to do with concepts like "rule of law" since 12 years?

They accept and send dollars, also Euros and other money.

I transferred to Dwolla from Mt. Gox yesterday.... now i see no bit coin and no money transferred from all this.

Any idea if i will ever see what was being transferred again?

Most likely. Look for headlines that start: "DHS buys new..."

I have a bank account setup specifically for sending and receiving money from my paypal account.  I use my paypal account to buy and sell stuff online all the time and I send money back and forth from paypal to my bank account.  I also transfer money from that bank account to my other bank accounts.  Does that mean I am a money transmitter?  They setup a bank account to use with their dwolla account. The only difference I can see is that on the end of those dwolla transfers they are buying or selling bitcoins to people as opposed to real world goods as I do.

My read is that after the announcement a few months ago they should have starting playing ball with FinCEN.  They apparently didn't and now they are paying the price.  What he did or did not say when he opened the account will probably mean absolutely nothing when all of the legal dust clears,

The price on other exchanges will drop as people transfer their bitcoins that they've just bought on Mt. Gox over to the other exchanges and then sell them there for dollars.

No, but Paypal is.


They set up a company to handle their money transfers in the US. That company then opened a bank account, and answered that they were not a money transmitter. It doesn't get clearer than that.

Play by the rules, or don't. This half shit is what gets people in trouble.

Do you realise that just one bank account in the USA has been closed. An account that was used to service Dwolla customers.

MtGox banks with a Japanese bank and that's where the wire transfers come from so all your USD is in Japan and not the US.

I'm with you on that. I'm not saying a run IS going to occur, but that if a run on Mt Gox does occur, where people are buying bitcoins with their dollars and then transferring them out to their personal wallets, people are saying that the price there will go higher, which it would, but then if those people try to get back into dollars elsewhere, it would drop the price on those exchanges.

I can't believe how stupid Mt Gox could be...

Opening up bank accounts and businesses in the US for the sole purpose of transferring money in and out...it's madness that they didn't think that wouldn't be a problem.

Hopefully they didn't leave too much funds in their US bank/Dwolla account when it was seized.  It would be interesting who takes the hit for this missing money...customers who were in the transfer process I guess.

I had always assumed they were fully based on Japan...why on earth did they decide to setup in the US too?  Greed I guess as they wanted to get US customers without forcing US customers to do wire transfers...

If I was Mark and I had actually signed those papers in the US about not being a money transmitter...I'd be shitting myself no joke.

Mark really showed his naivety prior to the Coinlab deal when he repeated slapped down remarks that going in the US would be a hornets nest (turns out he was already sneaking in the backdoor too).

Remember, the US govt has a way of blowing things out of proportion. Usuaully when they files things in court they make them sound far more out of line than they really are.

I'm sure that mtgox had legal counsel present when signing anything setting up a bank account, and that's how they were specifically advised. I'm not sure why its the way they did it, but I'm sure they had a reason.

Nevermind what was signed, or what paperwork etc...the point is Mt Gox had a US company setup (http://www.mutumsigillum.com/) which from their website appears to be claiming to offer hosting services etc...when infact probably 100% of their business is transferring money to Mt gox....

That is madness that you think you can do that (in the USA)...

Riiiight... I'm sure they did. Look at the history of MTGox, and ask yourself if Mark has the forethought to have had legal counsel there.

Mutum Sigillum and it's subsidiary Kalyhost has been around longer than Mark has owned MtGox.  Hosting was previously their primary business.

Wow, really? You certainly could never tell.

Unfortunately it seems they aren't much better at the exchange business than they were the ghosting business.

I'll just leave this here...

http://evewho.com/pilot/MagicalTux

FinCEN requirements, by my understanding, are concerned primarily with businesses which transfer money on behalf of other parties. If Alice transfers money to Betty to pay her for goods or services, neither Alice nor Betty is an MSB from FinCEN's point of view. But if you add an intermediary (let's call her Catherine) who takes money from Alice and gives it to Betty, and does that sort of thing commercially or in large volumes, then Catherine is an MSB and subject to regulation (because if Catherine wanted, and didn't have anyone watching, it'd be easy for her to hide questionable money in the cloud of transfers which she manages).

This LLC of Mark's is a separate entity from Mt. Gox, and is also a separate entity from all of Mt. Gox's users, right? So it's a third party which is, in large volumes, transferring money between Mt. Gox and its customers on their behalf. Thus, it's an MSB and subject to regulation.

Still stupid, unnecessary snooping.

WTF is evewho ?

It's a whois site for EVE Online.

That's right, he named his real-world corp after his MMO one.

What did you expect from the Magic the Gathering Online Exchange?

I'd like to say I'm surprised, honestly. But my momma didn't raise no liar.

This is enlightening:
http://contrariancompliance.com/2013/04/14/is-us-regulation-the-single-biggest-threat-to-bitcoin/

For me It looks like.. Goverment is a big pile of shit. Good post, sad one anyway.

Happy ending to story!!!   Morning in Japan time after i had emailed i got the USD amount back in my account!  Bought bitcoin's sent to another place lol.  So i even made a few extra bucks with coin going down from when i sold lol.

Very happy! So glad it didn't end the way I said it might. ;)

Since when does guidance become law? ::)

The guidance is meant to be interpreting existing law!

Turns out the legislators used a time-machine to go into the future, learn about cryptocurrency, but did not detail it openly in their legislation. However, FinCen found enough clues to detect this hidden wisdom and produce the detailed guidance needed to cover cryptocurrency.

So Mt Gox broke laws about cryptocurrency which existed before Bitcoin was created.

Ha!
http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&sid=d5570d7646c5fc13fe1fa42a61d1dcf1&rgn=div5&view=text&node=31:3.1.6.1.2&idno=31#31:3.1.6.1.2.1.3.1

See here: "(m) Currency. The coin and paper money of the United States or of any other country that is designated as legal tender and that circulates and is customarily used and accepted as a medium of exchange in the country of issuance. Currency includes U.S. silver certificates, U.S. notes and Federal Reserve notes. Currency also includes official foreign bank notes that are customarily used and accepted as a medium of exchange in a foreign country."

As if they were worried that they were not clear enough that "currency" must be something issued by a government!

Onto a serious note: what you have said has just given more weight to the hypothesis that Satoshi is employed by the U.S government, that's why they knew! :o

Indeed. Despite their efforts to cover everything they omitted to cover the situation of a foreign currency not issued by any government. They also assume that it is coin or paper. FinCen have performed a herculean job in concluding cryptocurrency is included in this definition.

You can't just look at one tiny section of the code.  The money transmitter definition is more broad (one could argue overly broad) and thus covers more than just currency.


FinCEN guidance assets that virtual currencies (even decentralized ones like Bitcoin) fall under "other value that substitutes for currency".  Now the definition is painfully broad and you could argue in court that Bitcoin does NOT meet that definition.

The definition is there.  The definition is the regulation.  FinCEN guidance is there way of saying "when we take you to court this is what we are going to argue".  You can disagree but ultiimately at the end of the day what matters is what the guy in robes thinks.  If he agrees with FinCEN that Bitcoin is "other value that substitutes for currency".  The the activity of exchanging virtual currencies falls under the definition of the MSB.  If he disagrees then the guidance has been overturned.  

Of course even if you won the next logical step would be to FinCEN in Congressional hearings to argue that their scope needs to be expanded to explicitly (by name) regulate the exchange of virtual currency.  If Congress then passed a law giving them that authority well you are right back at the beginning.


TL/DR version:
Do you think lawyers for the state (FinCEN) could convince a judge that Bitcoin is "other value that substitutes for currency"?  If so then you should heed their guidance.  If not then don't but you should EXPECT to end up in court as FinCEN has all but told you that is where you will end up.

Mt. Gox has just removed their official statement on Facebook about the DHS incident.

This is why I like deathandtaxes, good explanations. Clean and clear.

Pretty much, they're gonna do, what "they" want to do, regardless. Pitty they have such powers like so.

That is astonishing - actually removing critical information after they posted it! My take on it is that they have noticed a substanstial amount of btc being transfered out. On the 6th of may there was about 178k btc for sale, then on may 15th about 150k - and today about 134k (for sale).

The statutory language refers to monetary instruments such as travelers checks and money orders.  It's arguable that bitcoin is not "other value that substitutes for currency".  If bitcoin is a substitute for currency, the same argument could be made about gold, silver, seashells, or just about anything else.  It's pretty clear that the law was not intended to apply that broadly.

This question will probably end up in front of a federal judge sooner or later.

About 200k BTC have changed hands in the last 60 hours or so on MtGox so maybe they were sold and are now being held by someone who hasn't relisted them for sale.

For example I purchased about 800 BTC myself yesterday and I'm only a small holder. These BTC aren't listed for sale anywhere today but they were yesterday before I acquired them.

Also more importantly - they are still on MtGox in case I want to sell them again.

The reason people are removing sell orders and buying is because the price is expected to rise.

For sure that is possible - but I was trying to find a reasonable explanation for why they removed information after they had posted it. Any other explanation is welcome as I think this move must have had some intention behind it (duh).

tl;dr:

The FinCEN guidance is mostly bullshit.  Follow it at your peril.  DeathAndTaxes is spewing irrelevant nonsense, as usual.  MS, the only entity to be affected, is technically a 3rd party money transmitter.  That's why the dollars in their account were seized.  They never touched Bitcoins.  This has nothing whatsoever to do with Bitcoins.

This part, at least, is true. The rest is debatable.

Was pleasantly surprised by the first few replies. Was expecting a bunch of negative comments along the lines of "Cya at 1 figure" etc.

I have a feeling the fall of Mt. Gox could be a good thing for BTC.. We'll see though.

Well, if it is proved in court that they deleted that information it would not be any good to them.

At least they admit in support tickets that Dwolla widthdraws are unavailable but hiding the fact that their account got locked by authorities is just insane.

So what i have gathered so far seems to be indicating that gox is being investigated for operating a money transfer service and this has been defined by the FinCen guidance (and explicitly described in the warrant) as involving an alternative currency (BTC). Therefore if Gox are found in court to have broken this law there would be a legal precedent that Bitcoin is recognised as a currency.

Could any one with better undertanding of this matter please correct me if I am wrong.

I have had a look at the affidavit. As far as I can tell, the position seems to be as follows:

1. A  dwolla account holder  sells his bitcoins and requests the withdrawal of his dollars to his Dwolla account.

2. Instead of Mt Gox sending those dollars directly to the customer's Dwolla account, instead it sends them to its subsdiary company ("Mutum") which is a Delaware company with an account at Wells Fargo in the U.S.

3. Mutum then sends the funds onwards to the customer's Dwolla account.

4. Mutum is thus acting as a money transmitting business but is not licensed to do so.

5. The Department of Homeland Security has obtained an order from the Maryland District Court freezing the contents of the account of Mutum at Wells Fargo.

A number of points arise:

1. The action is against Mutum rather than Mt Gox.

2.  It is unclear whether the DHS may argue in future that Mt Gox (which is a Japanese company) breaches US law by making direct payments to U.S. individuals and companies. But this is not the issue in this case, though it something that I am sure Mt Gox is considering very carefullly..

3. It is unclear why Mt Gox uses Mutum as an intermediary rather than simply remitting funds directly to U.S. customers.

4. It is unclear what any of this has to do with the Department of Homeland security

5. The affected funds are those which were in transit from Mt Gox via Mutum to customer Dwolla accounts as at the date of the freezing order. Quantity unknown.

6. It is unclear how Mt Gox will, in future, remit funds to Dwolla accounts.

7.  The freezing order is purely because Mutum acts as a money transmitting business of USD as between Mt Gox and customer dwolla accounts. It has nothing to do with the transmission by Mt Gox of BTC purchased by clients (whether in the U.S. or elsewhere).The position would be exactly the same if Mt Gox were a precious metal exchange. The freezing order is directly at the U.S. proceeds of sale being remitted via a U.S. subsidiary to dwolla accounts.

Good analysis.

Questions. What is the track record of resolution of similar situations with other companies? Can Mutum apply for MSB status, quickly, retrospectively, and expect to get it? Or have they lost their chance and their US operation will remain somewhat crippled?

Of course, they were Magic Gathering card exchange, they need no license back in the days.

Considering the fact that the government retrospectively required them to get licensed, it would be ridiculous if they couldn't.