Bitcoin Forum

This is a rational and logic-based approach to piece together a theory as to the recent DHS actions regarding Mt Gox.
What was the probable cause to start an investigation?

Clues:

Only Mt Gox's Dwolla account was frozen - No other exchanges utilizing Dwolla were effected. This is cleary not a move against Bitcoin as the Gov't always acts quickly and decisively with cases involving widespread organizations. Furthermore, Mt Gox exchange and transfers of bitcoins have not been affected. This was only directed at funding through Dwolla to Mt Gox.

Court order stats information came from an individual. The only reasons someone would take the time to inform them, and spend months making transactions that they could trace them, is that the person lost money! What likely happened is that someone heard about Bitcoin during the recent media hype, transferred a large sum of money into MT Gox through Dwolla, then lost it all on Satoshi Dice (like this guy)http://www.reddit.com/r/SuicideWatch/comments/1e6iro/i_have_lost_60000_gambling_with_bitcoin_i_have/ (http://www.reddit.com/r/SuicideWatch/comments/1e6iro/i_have_lost_60000_gambling_with_bitcoin_i_have/)

1 day later, Satoshi Dice blocks US players While they claim that this not "in any way, related to the recent Gox/Dwolla court order issue" but a preemptive measure to protect their shareholders. "Note that this decision does not mean that online gambling is illegal in the US, nor does it mean that Bitcoin gaming is illegal. However, the courts have not been clear on the definition of gambling, nor
on what would constitute 'legitimate gaming,' nor are jurisdictions properly defined, and thus this is a proactive measure to protect those involved in the project. Further, to clarify, SatoshiDice is hosted in Netherlands, Iceland, and Ireland, and has never utilized US currency or engaged with the US banking system whatsoever." Voluntarily cutting off their biggest source of profits, the timing, and their attempts to distance themselves legally are what lead me to my conclusion.

My Theory: A large gambling loss of Bitcoins on SatoshiDice by a US resident lead to the DHS investigation and eventual seizure and forfeiture of MT Gox's US bank account. As US anti-internet-gambling laws would be difficult to prove (requires that they knowingly funded gambling), the DHS instead filed charges against Mt Gox due to non-compliance of FinCEN regulations.

This is only a hypothesis! I am not claiming to be right (why I am posting in the SPECULATION thread), just trying to make sense out of the recent events. There are many countless other possible motivations of the complainant, I am just hypothesizing on one possibility. We may never know the motivations.

Other Theories (post them in the comments and I'll add if they are based in reason):

• Coinbase attempt to take US market from Mt Gox... amazing strategy if true (low possibility, located in Washington State however)
  
• New investor lost large % during the crash (very high possibility)
  
• Bank employee discovered bank filing discrepancy by MT Gox (very low possibility, bank isn't located in Maryland)
  

What do you think? What are some other possible motivations?

link please

Has there been any info on when Mt Gox will have Dwolla up again?   

Bitcoin gaming site SatoshiDice closes to US players
http://www.coindesk.com/bitcoin-gaming-site-satoshidice-closes-to-us-players/ (http://www.coindesk.com/bitcoin-gaming-site-satoshidice-closes-to-us-players/)

NOTICE: Your IP appears to be from the United States or another jurisdiction where SatoshiDice does not offer its service.
http://www.satoshidice.com/ (http://www.satoshidice.com/)

It is up to the court. As of today the funds are considered seized and forfeited to the US Gov per FinCEN regulations.

I'm guessing never.

^^^This

as soon as mtgox has its MT licence?

HOw much power does DHS have?


I have noticed that the FBI and DHS have been getting increased power to do basically whatever they want.

At least in most other countries, such a thing can create a big ruckus, you have court order after court order. And especially in the US, I have always seen most cases become BIG. But this national security thing seems to somehow fly under the radar with things happening.

So, how much power do they actually have?

It would help if some government agency actually came out and stated what they wanted Bitcoin (or anything like it) exchangers/merchants/miners/users to do. Currently its just a vague mass of legalese.

In this case, it was not an overreach. The DHS seized a US account that was exchanging funds, without having correctly filled out the paperwork to do so.  It was within their jurisdiction because the US-based account, Mutum Sigillum LLC, accepted funds from Dwolla (which came from customers' funding), then transferred those funds from the US to Japan.  DHS simply went through the same steps, verified the money was transferred, and demonstrated that Mark Kerpeles was not truthful/accurate in how he filled out his paperwork.  The fine - money or jail, is laid out.

The scary period, for me at least, was when this information was not known. Initially, it was a question of whether the US Government:
-Had crossed wires, with one agency looking to regulate while another looked to combat
-Had switched positions from implicit support (via regulation) to opposition
-Had begun the silent war on Bitcoin by beginning to attack and cut off the funding sources
-Had identified a violation of law which legitimized the seizure of the account.

The evidence we have visible and public all supports the fourth possibility.  This was the regulation they spoke of, months ago.  For Bitcoin to thrive long term, regulation has to happen.
That it happened, and the world didn't end - I consider a big plus for Bitcoin.  Much like the implicit acceptance of Bitcoin by stating intent to regulate, they again demonstrated implicit acceptance of Bitcoin by leaving Bitcoin alone, and going after the violation of an existing law.

Now if and when we begin to see a shift in posture, that's when I'll start getting a bit more concerned.

Possible motivation: coinlab's lawyers stumbled on it while doing fact finding (or Mark slipped and mentioned it as a reason for wanting to do the deal).  No evidence for this other than timing.  I don't even consider it likely, just possible.

Something bigger is brewing.      http://projectavalon.net/forum4/showthread.php?57144-Doug-Hagmann-s-DHS-insider-update---IT-HAS-BEGUN.--

I think people fail to appreciate the true nature of the US govt. It is to safeguard it's citizens! Nothing more, nothing less. It is reactionary to the demands of its citizens. The extremely high level of financial regulations, especially in the areas of people who are trusted with your money, are due to the numerous and devastating financial scams that have occurred in the early days of the US stock market. Over time these rules become less and less enforced as priorities are shifted elsewhere, but then a Bernie Madoff comes along and everyone blames the government for not protecting them.

Mt Gox wasn't targeted because it's the largest exchange, it was targeted because someone filed a complaint which was then investigated IMO. It was a reactionary move.

The irony is that Mt Gox could of avoided this seizure of all US funds, and a seprate $75m lawsuit, if they had followed through on their contract with Coinlab, who is an approved MSB. For the life of me I won't understand what they were thinking.

Oh you have got to be kidding me. How can you even believe this. This argument is not based on any logical or rational thought whatsoever. Don't pollute your mind with someones delusions.

Maybe it was Coinlab bitch ass move to force MtGox's hand to work with them, now at a bargain.

I will make it easy for peopleto understand: I would have sued MT Gox for giving any other company my data. COinlab was supposed to get huge amounts of data from US people. If this had gone through, I would argue that everyone would have had to give consent that coinlab gets this info. Especially under Japanese law.

From https://mtgox.com/privacy_policy

If you don't agree with their terms, you probably should stop using them.

I'm thinking this (http://www.reuters.com/article/2013/05/17/net-us-bitcoin-accounts-idUSBRE94G0LS20130517) may actually pass if Mt. Gox would register with FinCen and it seems it was a Maryland informant who brought it to DHS.

The closure was due to Karpeles' lack of having a MT / MSB license in the state which he set up the Dwolla / Sigllium* LLC.  The warrant PDF stated he answered "No" to several MT / MSB questions.  Just an agent had used it enough to connect the dots and have the power to actually have a judge issue some papers.

I don't think it had anything to do with Satoshi Dice or the Coinlab stuff.

Oh, speculation thread.   Yeah I'll say this + Coinlab is going to signficantly screw them over or close Gox eventually.  Unless they can meet the required paperwork and there's no jail time or however it works out. 

Nah, MtGox can't be closed by the US, way out of the US jurisdiction.
The only thing that can happen is that MtGox will lose the US market at worse, but I can imagine at least two ways to bypass any ruling against Mutum Sigillum and be right back on track with Dwolla again.

"Bypass any ruling against Mutum Sigillum"? How does that work?

They can't "close" it in the sense of say, a suspended corporation. But this really boils down to how well Mt Gox is managed in the case that more accounts are targeted. The feds have jurisdiction over US accounts and can obtain jurisdiction over many foreign accounts (e.g. in Japan). Hence, liquidity becomes king. IMO, this isn't about whether the feds can close Gox, it's about how badly it can bleed it from the inside out. If they continue to serve the US market in the face of, say, an increasingly threatening situation from the US government, they better get smart about where they hold funds and how they batch cashouts.

Account siezure isn't the only tool in the US governments toolbox.

We better hope that Mt Gox was smart about where they hold funds and how they conduct cashouts. With USD making up 84% of the total currency exchange volume; Mt Gox at 76% of a $1.26 billion dollar market; having two US bank accounts seized and your largest liquidity steam cut off all at once could spell disaster if you didn't preform the proper due diligence in risk management. Mt Gox has assured its clients it will cover any funds that were seized.

Only small time buyers use Dwolla as the maximum transfer limit is $5000.

The US Government seized all the money and decided to keep it as they are fully entitled to do under their own laws.

Apparently they did this to protect the American people.

Do you feel more or less protected when your money is sezied by your goernment ?

What I'd like to know is, who absorbed the cost of this ? Did any individual customers lose money or was the cost of this
absorbed by MtGox / Dwolla ?

Really? All the info they had about Dwolla/DHS seems to have been removed from their site, or am I missing something?

I keep reading this, but what exactly is "small time" about a $5000 per transaction limit? You can do 5 transactions in a row on the same day at a cost of $1.25 without ever leaving your desk or filling out any forms. Also, business accounts have a $10,000 per transaction limit.

Not that there's anything wrong with being "small time," as I imagine most of us were exactly that when we started out, but I think you underestimate the demographic using Dwolla.

entitled to is subjective. if mtgox didn't commit any crimes the money should be returned with interest (as if the gov would ever pay interest on their messups)