Bitcoin Forum

Here is a link to the warrant that the Department of Homeland Security filed against Dwolla:

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

The warrant refers to laws which can be found at: http://www.law.cornell.edu/uscode/text/18/981 and
http://www.law.cornell.edu/uscode/text/18/1960

I am not a lawyer.  But, in my limited understanding of what I read, to transmit money in the USA, your company must be licensed in the state in which you conducting business. From the warrant, it was not the assets of MtGox that were taken, but Mutum Sigillum, the intermediary company between Dwolla and Mtgox. It was the Mutum Sigillum account that was confiscated.

From my limited understanding of the law, and I am NOT a lawyer, it would seem that had Mutum Sigillum been registered or licensed to transmit money, then this would not have happened.

I do believe that the US Government, in particular, the Department of Homeland Security, is frightened of bitcoin and has been looking for anyway possible to destroy it.

Since, bitcoin itself cannot be stopped, since it is not localized, and since its status as a currency is vague, since it is only data, transaction records on a blockchain, to stop it, DHS has taken the strategy to attack the exchanges. Had the MtGox people not lied on the forms to open their Veridian account, this might not have happened.

Why is DHS frightened of Bitcoin? Because they, rightfully so, want to protect the American people from terrorist attacks. One of the ways that various (both politically and radical, fundamental religious based) terrorist groups sustain their efforts is by getting donations from supports in one country and sending those funds to another country. I can imagine the meeting in some office in Washington, D.C. or Langley, where some men in suits come up with a hypothetical scenario where someone buys bitcoin in Europe or Africa, or the Middle East, sends it to someone in Russia or Asia to buy arms, and sends some of it to the US, where it is converted to USD in order to fund some terrorist activity. Whether or not that scenario could ever really happen, the fact that it could be hypothetically imagined, and that these bitcoin transactions could occur independent of the conventional banking system, which at present is highly scrutinized by US and EU law enforcement agencies, caused these men in D.C. and Langley to become very fearful.

I personally, do not condone or support the engagement of any illegal activity with bitcoin. I have visited SR (Silk Road) three or four times and frankly, after the initial novel amusement that that stuff was being sold, I found SR to be boring. I would prefer to promote cooperation and communication between people who are enemies by using Bitcoin to fund and finance true charities that help people constructively. Bitcoins could be used to pay a Saudi software engineer to write code for an Israeli agricultural company. Or, to for a jewelry artist in New Zealand to sell his artwork to a woman in Canada without worrying about the rip off that is credit card merchant processing.

Despite all the good things that could be accomplished with bitcoin, I can imagine the fear of certain people about how bitcoin could be used for funding evil people's actions.

But, I am not sure whether to be angry with MtGox for not making sure their operation was completely legal and could withstand legal attacks, or with the DHS for being overzealous in protecting Americans from imagined menaces.

Not having an easy way to fund your account on the world's largest bitcoin exchange does stifle trading and I think damages the future of Bitcoin.


Lorenzo Money

This is not the beginning of the end of Bitcoin. It's not even the beginning of the coming battle against Bitcoin by the forces of statism. They are barely aware of the threat that Bitcoin poses - yet. This is just the government reacting to new ways of money laundering. The government doesn't see Bitcoin as an enemy - yet. That battle is coming however, and will take place on many fronts, and we should prepare ourselves.

If the news yesterday didn't cause a major panic, then headlines like this aren't going to do much to move the price. You need to find another way to troll for a lower entry point.

It's actually the beginning of the end of 'America'.

+1

Beginning of the Zombie apocalypse ::)

I don't think so, but I'm afraid things will have to get even worse before they'll get better. I'm persuaded that in the end the power of cryptography will pose society a stark choice between radical liberty or tyranny, as described here (http://osaka.law.miami.edu/~froomkin/articles/tcmay.htm). People will pull back from the brink then. But in the near future the instincts of both politicians and society at large will be to seek some sort of middle ground. It will take a long time for them to realise that none exists and to act accordingly.

DHS exists, first and foremost, to protect the private banking interests that have a monopoly on the issuing of currency and credit via the Federal Reserve. "Terrorism" is always the excuse used by political and money powers when they're defending their turf or looking to expand their control over a population. The largest terrorist organization on the planet, the USG, protecting anyone from terrorism is a lesson in cognitive dissonance. In political matters, always follow the money instead of the promise of being kept safe.

Bitcoin is a threat to the reputation of the Federal Reserve and other central banks such as the ECB. The Fed, via its proxy DHS, can't come down on Bitcoin all at once. If it did, it would show Bitcoin to be the threat it actually is. It will start small like this and then slowly build. By the end of the year, I fully expect to see "Bitcoin funds terrorists in [COUNTRY]" stories popping up in the corporate media.

Thread title overblown. This is a crackdown on unlicensed exchange services. The bitcoin community has been saying for *years* that this would happen.

While there may be a temporary lack of liquidity if Gox can't handle this, it just spurs development of compliant (and presumably more robust) exchanges. As OP states, this wouldn't have happened if Gox had a Money Transmitting license.

It's been obvious for quite some time that bitcoin's exchange infrastructure is weak. That was emphasized last month. This just makes it even more painfully obvious.

The VC money heading into bitcoin businesses is already likely targeting licensed, robust, exchange services. We just have to wade through in the meantime.

Beginning of the end for Gox perhaps, but not Bitcoin. In fact, this will be a good wakeup call for future exchanges: be absolutely clear that you are operating within legal boundaries, or don't set up an exchange at all.

Well, the race is on for "legitimacy" in the public eye. With enough Silicon Valley money and mindshare, such headlines would be widely understood to be silly.

The same arguments were made at the birth of the internet, but technology won the day. Bitcoin is similarly strong, and we'll end up with regulated and non-anonymous exchange points and large services, which is fine. The promise of bitcoin for most people (in the West) is reduction of fees and transactional friction, and a store-of-value; eg, Gold 2.0.

I thought the title of this implies the beginning of the end of this thread.

Mods please change the title of this to " I don't know what the fuck I'm talking about"

Or operate in cyberspace and the black market.

Should we set our hair on fire and run around in mass hysteria yet?

https://i.imgur.com/txX69xj.gif

I share your faith in Bitcoin's fundamentals over the power of government. I guess my point is that Bitcoin represents the ultimate threat to the banks the support the government and they'll pull all the stops in order to protect their interests. If they can convince their security droids in their various policing agencies that Bitcoin is a threat, it will get weird and ugly before it gets better.

Everyone calm down and read the warrant (page 2, emphasis added):

"As part of the account opening process, Wells Fargo required Karpeles [GOX owner] and Mutum Sigillum LLC [GOX sub] to complete a "Money Services Business (MSB) Accounts, Identification of an MSB Customer" form. That document was completed on May 20, 2011, and identified Mutum Sigillum LLC as a business not engaged in money services. The application asks several questions; to include, "Do you deal in or exchange currency for your customer?" and "Does your busienss accept funds from customers and send the funds based on customer's instructions (Money Transmitter)?" Karpeles answered these questions "no," indicating that Mutum Sigillum LLC does not deal in or exchange money, and that it does not send funds based on customer instructions."

Gox appears to have misrepresented themselves in the forms they submitted to Wells Fargo, and failed to comply with the basic MSB FinCEN regs that are already on the books. This is not a bitcoin gov takedown, just enforcement of basic MSB regs due to Gox incompetency.

That letter is fake, so fake. There is no letterhead, no district court seals, no homeland security seals, not even seals of the officials signing it. I have spent many a year working in the military and for the government. Official documents have official seals, this is BS. All of it.


This is the standard letter used by US District Courts for Search and Seizure http://www.uscourts.gov/uscourts/FormsAndFees/Forms/AO093.pdf (http://www.uscourts.gov/uscourts/FormsAndFees/Forms/AO093.pdf)

After processing it is stamped and signed by the district clerk as well, the letter from the OP has none of that, it screams fake.

It would look similar to this http://www.wired.com/images_blogs/threatlevel/2013/12/Carpathia-search-warrant.pdf (http://www.wired.com/images_blogs/threatlevel/2013/12/Carpathia-search-warrant.pdf) if it were real in any capacity.

Beginning of the End of MTGOX!!

Bitcoin is fine and trading has not been adversely effected today, the market doesn't care much I take it.

Bitcoin will survive even if we have to exchange face to face at coffee shops!!

I think Karpeles thought these questions through, and just got too tricky for his own good.

"Do you deal in or exchange currency for your customer?" - No.  Gox exchanges money - and only in Japan.  Mutum Sigillum just sends money to people.

"Does your busienss accept funds from customers and send the funds based on customer's instructions (Money Transmitter)?" - No.   Mutum Sigillum has no customers - nobody pays it anything for its services.  It takes Gox money and sends it to people - but those people are not customers, because they pay Mutum Sigillum nothing.

I'd be willing to bet that those are the thoughts that went through Karpeles' head as he was filling out his answers to those questions.

Some VC-backed exchange with fancy lawyers will inevitably emerge with the proper MSB licenses.

I agree, you can be clever while BTC is below the rader, but that reasoning is way too cute when you're the biggest exchange and BTC market cap reaches $1 billion.

Yeah.  And - in passing - I'll add that Mutum Sigillum translates contextually as "Silent Shield".  Clever.

so is bitcoin a currency or a commodity? if it's a commodity would the same rules apply?

Bitcoin is no more of a threat to the US dollar than the Euro or the British pound. It is not legal tender and it cannot be used to pay taxes. The Feds probably give a rat's ass about bitcoin.

"The definition of a money transmitter does not differentiate between real currencies and convertible virtual currencies. Accepting and transmitting anything of value that substitutes for currency makes a person a money transmitter under the regulations implementing the BSA." - http://www.fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html

I think the US government will carefully avoid defining bitcoin as either a commodity or a currency for as long as possible.  That will make it easy for them to apply whatever rules they choose, in whatever circumstance a given definition is the most advantageous.

Accepting anything of value? So everyone who accepts any form of money is a money transmitter?

You are being paranoid or just attention whoring...

Per law, MTGOX are going to get either a fine or 5 years in jail for what they've done (non-compliance with money-transmitting laws).
Sounds like a hell of a break to me vs shutdown/seizure.

The Warrant is a fake....look at my post on page 1 and see the difference between a real US District Court Warrant and that crap people are passing around, SO VERY FAKE.

This times 1,000,000...
And they will run a proper exchange.

This is just a prelude to criminal charges against Principals of MtGox...
It couldn't happen to a sleazier bunch of people...
Just a replay of Full Tilt Poker taken over by Poker Stars.

Here are the laws they broke...
It's not about filling out a form incorrectly:

http://www.law.cornell.edu/uscode/text/18/1960

This is the judge that signed the warrant:

http://msa.maryland.gov/msa/mdmanual/39fed/04usmag/html/msa13415.html

Virtually everything I've ever heard from MtGox = BS...
Like they REALLY first knew of this by "reading it on the internet"?

IMO, the Bitcoin Universe will be a lot better off without them...
These assholes have done everything possible to CENTRALIZE Bitcoin...
Not to mention releasing Ripple to replace BTC.

Many here have Stockholm Syndrome because Gox has you by the nuts.

Please support the smaller exchanges...
1000s of small exchanges distributed world wide = decentralization.

It depends on what the money is being accepted for. If the money is being accepted for goods or services, then the person is not a money transmitter, but if the money is being accepted in exchange for transferring another form of money to another party, then the person is a money transmitter. Here's the full context:

"Definitions of User, Exchanger, and Administrator

            This guidance refers to the participants in generic virtual currency arrangements, using the terms "user," "exchanger," and "administrator." A user is a person that obtains virtual currency to purchase goods or services. An exchanger is a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency. An administrator is a person engaged as a business in issuing (putting into circulation) a virtual currency, and who has the authority to redeem (to withdraw from circulation) such virtual currency.

Users of Virtual Currency

            A user who obtains convertible virtual currency and uses it to purchase real or virtual goods or services is not an MSB under FinCEN's regulations. Such activity, in and of itself, does not fit within the definition of "money transmission services" and therefore is not subject to FinCEN's registration, reporting, and recordkeeping regulations for MSBs.

Administrators and Exchangers of Virtual Currency

            An administrator or exchanger that (1) accepts and transmits a convertible virtual currency or (2) buys or sells convertible virtual currency for any reason is a money transmitter under FinCEN's regulations, unless a limitation to or exemption from the definition applies to the person. FinCEN's regulations define the term "money transmitter" as a person that provides money transmission services, or any other person engaged in the transfer of funds. The term "money transmission services" means "the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means."

            The definition of a money transmitter does not differentiate between real currencies and convertible virtual currencies. Accepting and transmitting anything of value that substitutes for currency makes a person a money transmitter under the regulations implementing the BSA. FinCEN has reviewed different activities involving virtual currency and has made determinations regarding the appropriate regulatory treatment of administrators and exchangers under three scenarios: brokers and dealers of e-currencies and e-precious metals; centralized convertible virtual currencies; and de-centralized convertible virtual currencies."

Thanks for the link.  I hadn't read that in years and miss Tim May the firebrand.

Dwolla a money transmitter since they transmitted money from a customer to Mutum Sigillum LLC.  
Mutum Sigillum LLC only deals in US dollars, so it is not an exchange entity.
Mutum Sigillum LLC has a account with Wells Fargo where their USD resides.
The warrant presumes that the USD in Mutum Sigillum LLC is then re-transmitted. Why would it need to be?
Mt. Gox can move USD from this account to anyone in the world via Dwolla or Wire Transfer in order to satisfy the service business of Mt. Gox proper in Tokyo.

It is clear that Mt. Gox LLC in Tokyo would be an exchange under US law, if it were in a US jurisdiction. However, it is not in a US jurisdiction so that should not matter.
Mt. Gox uses wire transfers to get customers their money, so whoever they initiate the wire with and the bank that holds their deposits are doing the actual transfer of funds and both of those institutions should be licensed money transmitters.
Mt. Gox uses Dwolla to get customers their money, they use Wells Fargo to hold their deposits for Dwolla transfer. In this case, the two transmitters are Dwolla and Wells Fargo.

Also, DHS is as dumb as a stick so they are probably just trying to make hay for some senator that was paid off by someone who doesn't like bitcoin.
If this was the SEC or Treasury I would be worried.
On the other hand, Mt. Gox employees could under go rendition and end up in Gitmo.  >:(

I hope Canada conquers us.

soon US will ban BItcoin, so what ?

Bitcoin doesn't pose a threat to technologically sophisticated governments.

Well, for starters it will take away or greatly diminish their power to print money.

All things considered, all of the rumbling when it comes to MtGox does not bode well for Bitcoin in the short term as it relies way too much upon the MtGox exchange.

Long term, BTC will definitely survive IMHO, but short term I would not be surprised to see a scenario being worked out by authorities to bring MtGox to its knees. Tomorrow another headline, stating the Japanese Government closed down all Japanese bank accounts of Mt.Gox? I mean: what's next?? It doesn't matter how you twist this thing: if we want mass adoption for Bitcoin, such a fucking up by Mt.Gox  >:( or any other exchange won't bring it... (What on earth were they thinking on completing the bank forms??)

So if this continues any longer I would expect to see BTC prices collapse once more, be it temporarily.  The reason being: trust is currently FAR from present in the market - on the slightest hickup we see heavy price drops in BTC. Yes, it then rebounds, just waiting for the next "negative news". That's not a vote of confidence. I wouldn't be surprised to see double digits within a week if this shit keeps going on.

I like your argument, and indeed, as BTC Books said, I imagine that's similar to the reasoning Gox used when setting up the account with Wells Fargo.

But I wonder if the Feds saw money going into this Wells Fargo account via Dwolla, and then back out of the same account to other individuals via Dwolla, and have decided that this activity constitutes "transmitting." It's more like a clearing account, but it could appear from the outside that it was the very definition of money laundering.

Of course, rather than approach the company with questions, our government by the people, for the people, seizes everything and tarnishes their reputation with a criminal complaint, when a simple meeting could have brought Gox into compliance. That's just speculation, of course, but it would be typical of how bureaucrats work at the federal level.

Firstly  - The Fincen Licensing requirement was very clear - One can argue the facts of whether MTGOX was truly a money changer in the US, but it is a moot point since the people who would make that call have done so

Secondly - The question I have is, why MTGOX thought it would not apply to them or did not seem to concern them

Thirdly - Coinlab has a golden opportunity if they do it right

I believe MtGox would be an "exchange" under the FinCen guidance published in April, that is, if they were located in the U.S.


Since this involves a separate U.S. based LLC that doesn't actually do anything but clear funds from Dwolla, they may have decided that it didn't meet the definition of a money transmitter.

I agree though, if there was any doubt they should have registered since it's not a complicated process for a multi-million dollar company and they don't have anything to hide. Or maybe they got bad legal advice.

Coinlab seems incredibly incompetent to me and just interested in making a quick buck.  Why else would they not have taken any steps toward building their own exchange?

They gave that up long ago, right? 

Coinlab wanted their American/Canadian account database. an unimaginable customer list already setup and moving Bitcoin. Now they will have to spend their own money to create an exchange and lure customers to open new accounts. Would have been nice for things to go smoothly, but Murphy's law applies to everything.

We must be in the early days of bitcoin given all the amateur decisions being made with bitcoin businesses.

Evolution in action, smoothie.

2009 was the genesis, 2013 is the infancy, 2017 will be fucking puberty, 2021 adulthood lol
Joking aside, I expect around 2020 to be mature enough to have specific official support (or censorship!) from countries around the world.
Regulations, legislations and a wide update to the tax forms.

"End"? When will the all-mighty authorities that you all worship so much be able to shutdown Silk Road? All the talks with no substance, it's getting bored. I guess if you have worshipped the politicians for so long he/she will start to talk like them.

I'm certainly more angry at Mtgox.  Looking at how the CEO filled out those wells fargo documents, he just flat out lied on them. Period.

It seems like every week or month it becomes more and more obvious that the guy running Mt. Gox simply has little to no experience in running a company like this and really has no idea what he's doing.  It's been problem after problem and mistake after mistake.

I look at this is a positive thing in the long run.  Yes in the short run it could cause a lot of problems for the bitcoin community.  But in the long run things like this are needed so other people have a clear understand how to follow the laws and operate a bitcoin exchange.

I'm also disappointed.  For a modestly-sized operation, AML/BSA and state compliance isn't an outrageous task.  To be sure, you need to spend time and money that cut into profits.  But there is simply no way for BC to survive when its most visible, active and profitable entities won't move above-board.

What have they done to show incompetence though? They've done everything they've promised to do.  Meanwhile Mt gox. continues to make mistake after mistake and not do things they promise both customers and business partners they will do.

As far as starting your own exchange....why start something from scratch when you have something else to offer that allows you to make a business deal where right away you get a good start in the industry.


Coinlab's offers their connections to silicon valley, their connections to business and finance, their access to American market, and their ability to be licensed and legal to operate in America.  That's something Mt. Gox simply didn't have.   A smart business person is going to see that and offer their services in exchange for mt gox's customers and technology. To me that doesn't show incompetence but shows people who actually know what they are doing and how to start/run a successful business.

I haven't seen any evidence showing they have them, all I see is talk.

They are backed by VC's with strong decade long connections in Silicon Valley,  they ARE FICEN compliant and DO have a business agreement's with an actual Bank in America.  Some of the top investors/guys at Coinlab have decades of experience in the tech industry having held high level positions at companies like Facebook, Google, Amazon, Apple, and others.   The industry connections and the legal compliances they agreed to provide to mt. gox they actually DO have. It's not just talk.

Now let me ask you this though.... how are they suppose to do anything when Mt. Gox failed to do what they promised to do.  How can Coinlab use their connections when Mt. Gox failed to provide them with accounts and technology they promised to provide.

Coinlab certainly does have the connections , the backings, and the legal compliances to help and do what they promised to do.  You can't do that though when Mt. Gox fails to deliver.

And THIS is why Coinlab has sued. They are trying to get the ball rolling and get things done, Mt. Gox has prevented them from doing so though.

The deal was quite simple overall.  We have connections and business experience in America and have legal approval from bank(s) and adhere to American laws. Provide us with your American customers and let us use your trading system and our connections and business experience in America will help you branch out to America...legally.  Unforuntitly Mt. Gox failed to deliver so there's not much Coinlab can now do on their end,  except sue to either get Mt. Gox to actually do what they promised, or to simply get out of the contract with Mt. Gox so they can do things on their own or find others to work with.

Everything besides your first paragraph are just speculations, I don't think we know enough to figure out what's really happening(e.g., who breached the contract first). And about the facts you listed in the first paragraph, VC backing means nothing to me(heck, even Opencoin got backings!), and the $500,000 they got is certainly pocket money for VCs. FinCEN compliance is a fine point, but it still doesn't prove their competence. About the agreement with the bank, I don't know enough detail to comment about what kind of an agreement it really is, so I remain skeptical.

Can people please stop saying things like "The Warrant against Bitcoin". There is no warrant or lawsuit against Bitcoin. There are warrants and lawsuits about money laundering and financial services.

Nobody actually cares about Bitcoin yet :) It took 'them' years to wrap their heads around the Internet enough to start to try (and fail) to control it. It will take about the same amount of time for Bitcoin.

Lots of people however care about money laundering, and you can't expect that Bitcoin is magical and therefore exempt from money laundering laws.

Then they'll use Bitcoins themselves if that were the case. I don't think bribed government employees or government operatives care if they get paid in Bitcoin or gold, they just want their money.

He did not lie, he told the truth. The entity in question did nothing more than fwd payments.

Take this example. Company A owns companies B and C. Company B is an auto dealership. Company C is a pizza shop. At the end of every month, B and C send all income above expenses to A, which then distributes the profits to the shareholders. If someone gets horribly sick from rotten sausage on a pizza and sues C and wins, A and B are not responsible. You can't sue A and expect to win.

That's what's going on here, the court is accepting that the US based company is the same at MTGox, which it's not. Different entity which does not trade bitcoin at all. So it's BS.

"You can beat the wrap but you can't beat the ride"

It could take years to work out and that's probably the point. Delay and disrupt.

By the way, I think this is like post #1000 to predict the end of bitcoin. I have been reading these since bitcoin was $.50.

Sigh...bitcoin wasn't even mentioned, MTGOX was breaking the law...move on already, this has nothing to do with bitcoin and everything to do with ONE company breaking the law.  Notice how no other U.S. based bitcoin company was affected..yeah, they weren't breaking the law.

Not sure if this applies, but, if it does, wouldn't *every Bitcoin client* be subject to this (be considered a money transmitter)?
American statute, 18 USC § 1960
"(2) the term “money transmitting” includes transferring funds on behalf of the public by any and all means including but not limited to transfers within this country or to locations abroad by wire, check, draft, facsimile, or courier;"

Well, if an exchange wants to run they must play by FinCENs rules or get shut down, like any other exchange.

These idiots didn't file the paperwork, and they are being punished for it.

Bitcoin (or its newly minted 20 or so offspring) itself isn't going anywhere, just people that don't bother to do the reading.

thats a warrant for mt-gox, not for bitcoin ... TROLL

The way you treat others always comes back to you eventually. It probably didn't help Mt.Gox that they also promised to collaborate with their U.S. partner Coinlab and then reneged on their agreement...

This is probably why they wanted out of NA in the first place.  Oh well, whatever reason Gox had to stick around, I hope it was worth it.

Has anyone dug up the warrant which was used to seize the Wells Fargo account yet.  The Dwolla warrant says that the Wells Fargo account was seized days earlier.

Also, although the specific violation that's cited in the warrant relates to MtGox not registering with FinCEN, that very same section of the code also requires money transmitters to meet state registration requirements.  MtGox would still have been vulnerable even if they were registered with FinCEN because they haven't gone ahead with their plans for register at state level (something Mark said last year they were looking into, suggesting that he knew the requirement was there).

The warrants gave DHS the power to seize the Wells Fargo and Dwolla accounts, but it's highly possible that MtGox has committed a shit-ton of other violations apart from the one needed to justify the seizure and that action will be taken against them for more than just failing to register with FinCEN.