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1  Economy / Speculation / Re: Gox Exit/Entrance Speculation on: February 27, 2014, 02:27:51 AM
Good; it looks like the FBI may be getting involved. And the Bitcoin Foundation is helping with a criminal probe. That phone call between Matonis and Karpeles must have been quite severe.

http://www.bloomberg.com/news/2014-02-26/bitcoin-exchange-mt-gox-shutdown-said-to-be-probed-by-u-s-.html
http://www.bloomberg.com/video/fbi-said-to-probe-criminal-violations-by-mt-gox-tpCZEWuhTRqD24E_W9gewQ.html
2  Economy / Speculation / Re: Predict the next Gox revelation here and win respect from fellow forum members on: February 27, 2014, 12:10:59 AM
Here's mine.

https://bitcointalk.org/index.php?topic=487393.0
3  Economy / Speculation / Re: Gox Exit/Entrance Speculation on: February 26, 2014, 04:07:50 PM
This is what I was asking from the start -- the explicit definition of "security" and whether or not bitcoin can be interpreted to be within the purview of that definition. I am confident that an asset does not need to be explicitly classified as a security if it fits the legal definition. I am not confident that bitcoin necessarily fits that definition. I wanted clarification on this point.

I see; perhaps we were getting our lines crossed. They must first issue guidance on Bitcoin and actually formally regulate it before they can come after anyone for insider trading or anything else that is illegal under the SEC with regards to Bitcon trading (obviously Ponzi schemes, et al, are still fair game). Even if they do end up regulating it, it would not be retroactive (i.e. they would not come after people for past behavior). If the CFTC ends up regulating BTC, there is a good chance that trading on insider information would be legal. Why? Because it's legal in the FOREX market and the CFTC may regulate it like they regulate FOREX. The SEC does not regulate FOREX. Just my thoughts.

One more thought -- depending on whether or not Gox had any investors (I don't think it did), providing false balance sheets and not being transparent with investors can certainly make the SEC come knocking on one's door.
4  Economy / Speculation / Re: Gox Exit/Entrance Speculation on: February 26, 2014, 02:04:24 AM
The SEC already regulates insider trading and front running. Is this confusing for you? Whether or not those regulations apply to bitcoin is a matter of conjecture on both of our parts.

Ok, can you show me the SEC ruling that shows that Bitcoin has been classified as a security? The SEC regulates 'securities'. Their rules only apply AFTER something has been classified as a security, and not before. Perhaps this is your confusion. Bitcoin has not yet been classified as a security, hence the fact nobody knows how it will one day be classified. Until then, none of the SEC or CFTC rules apply.
5  Economy / Speculation / Re: Gox Exit/Entrance Speculation on: February 26, 2014, 01:33:38 AM
Security regulations won't apply until the SEC steps in and begins regulating. They haven't done that yet. Is this confusing for you?

6  Economy / Speculation / Re: Gox Exit/Entrance Speculation on: February 26, 2014, 01:17:11 AM
I've been regulated by both the SEC and CFTC, I have undergone AML procedural training and consider myself fairly knowledgeable with regards to Reg-D regulation and hedge fund law (considering I've been involved in management of these types of entities). I can put you in contact with an attorney if you don't take my word for it.

http://www.mondaq.com/unitedstates/x/283878/Commodities+Derivatives+Stock+Exchanges/Regulating+Bitcoins+CFTC+vs+SEC
http://www.jdsupra.com/legalnews/bitcoin-current-us-regulatory-developme-38412/

Until they are regulated, they are not. It's that simple. You will know when they are regulated. There will be no ambiguity because guidelines will be issued. It's highly likely that one of these reg bodies will regulate it in the future......but that doesn't apply to today. Again, this is not legal advice, just opinion. I am not an attorney.

Alright, I'm finished with this topic. This is becoming a troll fest.
7  Economy / Speculation / Re: Gox Exit/Entrance Speculation on: February 26, 2014, 01:00:39 AM
Yes. Again, what is not clear is that bitcoin does not fall under SEC regulation. You've said nothing to prove that whatsoever.

No, it is very clear that Bitcoin itself does not currently fall under the SEC or else they would be regulating it. Please show me evidence stating that it is currently regulated by the SEC. I can't show you a regulation that does not exist. But I can tell you that if the regulation does not exist, it cannot be applied. Regulations must exist to be applied. If you can show me the regulation, I will concede.

Also, it's clear that the general operations of a Bitcoin exchange don't fall under the SEC because the SEC is currently not regulating Bitcoin exchanges as they are MSBs. So, the SEC could not prosecute an exchange for front-running or insider trading. If you think they could, please provide evidence showing me A) their current power to regulate Bitcoin exchange operations and B) the fact that that don't allow this specific activity. These two things must be in place BEFORE they can regulate these types of things.

What is not clear? Are you thinking that the SEC is secretly regulating Bitcoin but they haven't told anyone?

Enforcement agencies, not courts, decide when and how to apply regulations. Courts decide whether they acted legally after the fact.


Yes, but they must first have a basis to apply the regulations. The SEC cannot jump into a fray that is outside of their realm initially and then let courts decide if they can be there. It cannot prosecute a potato case based on the fact that it is a potato alone. It must be within it's realm of regulation. Then the court can decide if the law is being applied correctly.

What basis do you have to say "arbitrarily"? You have not even cited any law! What legal basis do you have to say that SEC regulations are not applicable? Hint: None so far. This is just conjecture on your part -- you are simply appealing to authority by attempting to state your opinion as fact.


I cannot cite a law that doesn't exist. Can you have me prosecuted by a law that doesn't exist? No, you cannot.

Bitcoin exchanges fall under FINCEN regulation for the purpose of transmitting and converting money. That is all. This does not mean that any and all actions taken by bitcoin exchanges are regulated and enforced by FINCEN. As you indicated earlier, a bitcoin exchange that engages in other types of fraud may be dealing with the DOJ, for instance.


True, as I have said. But then we are not talking about securities law. We are talking about criminal fraud or something else. FINCEN or the DOJ can prosecute but they would not be using securities law. How is this hard to understand? I'm not sure why you keeping bringing securities law into this.


8  Economy / Speculation / Re: Gox Exit/Entrance Speculation on: February 25, 2014, 11:48:40 PM
The implicit permission for exchanges to engage in fraudulent practices -- such as insider trading and front running -- which would be illegal in any other conceivable market.

I am asserting that the spirit of securities regulations were to address fraud in investment markets. The only thing that separates bitcoin from stocks or physically-backed commodities in this sense is the existence of an underlying asset. I am not convinced that this basis alone permits market actors to legally engage in fraud.

I think you are confused as to how the U.S. legal system works. Are you British? Perhaps it's different in the U.K. I used to live there but don't know the nuances of their legal system.

If something doesn't fall under the SEC regulation, then they cannot use securities laws to prosecute. It's extremely clear. Sure, they may in the future but that would not apply to something that happened today and it would have nothing to do with precedent. Actually, the CFTC has already said that they could easily have the power in the future to regulate so it's highly unlikely it would ever be an SEC issue.

The courts do not have the power to pick an SEC regulation and arbitrarily apply it to Bitcoin. It's either SEC regulated or it's not. No precedent is needed. Currently, Bitcoin exchanges fall under FINCEN as MSBs.

http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html
http://fincen.gov/financial_institutions/msb/msb.registration.html

The things that would make SEC laws apply are -- if someone had a Bitcoin fund and used it to defraud. Any equity fund is regulated by the SEC, whether it contains Bitcoins or potatoes.

And no -- insider trading is not illegal in any other market. It's illegal in the stock market but not, to a large degree, in the commodity markets. And the FOREX market, a massive global currency market, does not have insider trading laws. It is 100% legal to trade on insider information in FOREX. The only time it becomes illegal in any market is if a regulatory authority that deems it illegal has the power to regulate that market. There is no ambiguity and a judge cannot simply create a precedent that changes this fact. So, insider trading is currently legal for Bitcoin in the U.S. It's actually quite simple and not dependent on a precedent.
9  Economy / Speculation / Re: Gox Exit/Entrance Speculation on: February 25, 2014, 11:03:36 PM

Had a similar thought when I first read the leaked (or maybe "leaked") document. What if leaking an undeniably damaging (for mtgox' reputation) document is actually a scapegoat, to take the wind out of even worse accusations.

Say for a second Mark acted fraudulently. Reading a few articles in the general media, it looked like the discussion had turned to the unbelievable incompetence with which gox was run. "How can they lose 740k coins without noticing". Say he gets away with that perception, but in reality, kept parts (or all) of the supposedly lost funds as private profit.

Well, like I said, that was my first or second thought that came through my head when I read the draft. Not sure how likely it is.

Exactly. With this # of coins in question there could very well be an element of what you are describing playing out. To me, this possible explanation is at least AS likely as an 'accidental' loss of 744K coins? Perhaps even more likely.....
10  Economy / Speculation / Re: Gox Exit/Entrance Speculation on: February 25, 2014, 10:57:11 PM

Remember that Pirate40 was charged by the SEC for violating securities law. Securities laws do apply to bitcoin businesses. Clearly there is a difference between a BTC-denominated security and BTC -- but I am very much unconvinced that securities regulation do not apply to pertinent businesses.
[/b]

So, what are you saying here? Of course SEC laws apply to anyone purporting to sell an investment scheme. He could have been involved in a 'potato' based investment scheme and the SEC would have gotten involved because he was promoting an investment scheme. Mt Gox was not promoting an investment scheme. They are an exchange. The Pirate40 example has no relation to Mt Gox, which is what I am trying to explain to you.

In my view, this would very much violate the spirit of securities regulation. The fact that BTC is not backed by any asset does not explicitly allow businesses to engage in fraud.


What is this? What would violate the spirit of securities regulation? The reason the SEC got involved with Pirate40 isn't because the coins were stolen, it was because he promoted an investment scheme and then stole coins. If Pirate40 had an exchange and used it to steal coins, the FBI would have gotten involved. It would not have been an SEC matter. I'm confused as to how this example convinces you that securities law applies.....
11  Economy / Speculation / Re: Gox Exit/Entrance Speculation on: February 25, 2014, 10:35:40 PM
http://www.bingham.com/Publications/Files/2012/02/A-Practical-Guide-to-Japanese-Insolvency-Procedures


'a trustee has very few public disclosure requirements in respect of the debtorís financial well-being. For instance, the laws do not require U.S.-style monthly operating reports to creditors, nor do they require a disclosure statement in support of a plan of reorganization'

'a courtsupervised restructuring process in Japan tends to be far less transparent than in the United States.'

'the systemís lack of required notice, disclosure and hearings makes it difficult for smaller creditors (even financial creditors) to play an active role'

'Corporate Reorganization Law Trustee: An individual appointed by the court to run the debtorís affairs and to develop its restructuring
Plan. Although historically the trustee has been an independent bankruptcy professional, recent cases have permitted the appointment of an existing member of management.'
12  Economy / Speculation / Re: Gox Exit/Entrance Speculation on: February 25, 2014, 10:26:36 PM
There are laws regarding fraud and laws regarding securities, and the two can be separate. If Karpeles ran off with the coins, securities law isn't relevant. We're talking theft on a massive scale....straight up fraud, both civil and criminal. Japanese National Police, not the FSA.
13  Economy / Speculation / Re: Gox Exit/Entrance Speculation on: February 25, 2014, 10:15:25 PM

Remember that Pirate40 was charged by the SEC for violating securities law. Securities laws do apply to bitcoin businesses. Clearly there is a difference between a BTC-denominated security and BTC -- but I am very much unconvinced that securities regulation do not apply to pertinent businesses.

In my view, this would very much violate the spirit of securities regulation. The fact that BTC is not backed by any asset does not explicitly allow businesses to engage in fraud.

Sure, if there are no laws that can be applied, there are no laws that can be applied. You haven't actually done the legal research to determine whether or not there are applicable laws.

No, I haven't and there probably are laws that can be applied. Pirate40 violated SEC law because he was engaged in a fraudalent Ponzi investment scheme. This falls under the SEC and is completely different than someone front-running unregulated Bitcoin or simply stealing someone else's coins. If someone broke into your house and stole your BTC, the SEC would not get involved.

Listen, I am not defending Gox. I can't stand the company. And they probably committed fraud on many levels that can be prosecuted under some sort of law. The FBI would probably have found a way to prosecute them for wire fraud (at least) if they were US based and accepting USD. But you mentioned insider trading and front running in a previous post. IMO securities law does not apply to those and may not apply here because he was not engaged in an "investment" scheme and securities laws don't apply to Bitcoin trading.

I will say -- back in April Gox put out a ridiculous PR stating the Bitcoin is meant to always increase in value, among other very unprofessional statements. In the US, the SEC probably would've gotten involved because you cannot improperly promote something as an investment.

Again, not legal advice -- simply my opinion.
14  Economy / Speculation / Re: Gox Exit/Entrance Speculation on: February 25, 2014, 09:24:14 PM

That's what I meant by "other appropriate agency." Bitcoin must fall under the purview of a regulatory agency. I meant actual laws -- not a stated position which can be reversed.

But if that 'other agency' does not have laws on the books that pertain to front-running, etc etc, then it is not illegal. And only FSA would have those laws. Does that make sense?

In the U.S., Bitcoin is regulated under FINCEN (MSB). They have no avenue to regulate front-running or insider trading. Insider trading in Bitcoin is 100% legal. If it were regulated by the SEC it would be illegal.

I'm not an attorney; this is not legal advice.
15  Economy / Speculation / Re: Gox Exit/Entrance Speculation on: February 25, 2014, 09:14:06 PM

See what the FSA has to say about it. And then ponder how the law could conceivably be interpreted. I can't be bothered, personally.

http://online.wsj.com/news/articles/SB10001424052702304834704579402751676012112?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304834704579402751676012112.html

"Bitcoin isn't a currency; it works as an alternative to currencies, like gold," an FSA spokesman said Monday. "The FSA is in charge of currency-based services. Therefore, bitcoin exchanges are not a subject to our regulatory oversight."
16  Economy / Speculation / Re: Gox Exit/Entrance Speculation on: February 25, 2014, 09:05:52 PM

I'd say good luck to anyone pushing that argument. Again, that the FSA has not chosen to regulate bitcoin as yet, and the fact that there are no regulations specific to bitcoin do not mean that these businesses are not subject to applicable laws. It's a matter of which regulations bitcoin falls under, and when the FSA or other appropriate agency decides to pursue that matter.

I get what you're saying -- fraud is still illegal. But securities laws are very specific. Insider trading laws are much more limited in the commodities markets (I was regulated by the CFTC, so I know a little about this). Insider trading laws don't exist with Bitcoin.

Outright theft is illegal, of course. Front-running? I don't see how that would be considered illegal but could certainly be grounds for a Civil case.
17  Economy / Speculation / Re: Gox Exit/Entrance Speculation on: February 25, 2014, 08:15:57 PM
Pretty sure Mark has a dartboard with cool computer phrases on it like "take down site", "lose coins", "make announcements soonish", "purchase similar domain", etc., that he throws darts at. Competency/knowledge isn't the Goxxian strong suit.

Agreed.
18  Economy / Speculation / Re: Gox Exit/Entrance Speculation on: February 25, 2014, 08:13:24 PM
I think the most obvious motive for a conspiracy would be just to fake insolvency (can it be proven?) and run with the Bitcoins. In that regard it would make perfect sense to 'leak' said document with the information it contains.

This too! Yep. And simpler. He starts over with a massive cache of coins.....

Perhaps it began unraveling with a few lost coins and then he decided to take what he could while he could.

All speculation, of course.
19  Economy / Speculation / Re: Gox Exit/Entrance Speculation on: February 25, 2014, 08:11:37 PM

There seems to be a common misconception about what it means to be "unregulated". It doesn't mean that businesses engaged in the exchange of bitcoins are not subject to any laws.

I am confident that operating an insolvent corporation and engaging in securities fraud (front running, insider trading) are illegal.

I am not. Front-running is illegal if one is regulated by the SEC. Is it illegal if one is unregulated? It is illegal to trade stocks using insider information, but not Bitcoin. There are no regulations other than MSB requirements that provide any legal avenues for this......I suppose it would be a Civil Court issue. Bitcoin is not a security.
20  Economy / Speculation / Re: Gox Exit/Entrance Speculation on: February 25, 2014, 08:04:08 PM
I don't know Japanese law. From what I understand, Bitcoin is completely unregulated and they have a 'hands off' approach. I'm not sure it would be illegal. In the U.S, sure. Please correct me on this.

And even if the leak itself was truly an accident, this might still be his best last gasp attempt. Perhaps the document was real, accidentally leaked, but he is trying to partner up with someone somehow. He will find no takers in the reputable BTC community.

It looks to be a third-party consulting/private equity preliminary evaluation using insider information and written with them, obviously. Stating it "certainly deserves to [go bankrupt] as a company" is the kind of contrition that people want to hear, of course.
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