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Author Topic: Reminder: you can and should abort in-person currency trades at any time  (Read 5483 times)
Mike Hearn
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October 21, 2012, 03:48:40 PM
 #1

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

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

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

After he finished talking, I politely told him I couldn't really trade with him after hearing all that. He was quite nice about it and then simply got up and left.
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hazek
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October 21, 2012, 03:56:02 PM
 #2

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

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

My personality type: INTJ - please forgive my weaknesses (Not naturally in tune with others feelings; may be insensitive at times, tend to respond to conflict with logic and reason, tend to believe I'm always right)

If however you enjoyed my post: 15j781DjuJeVsZgYbDVt2NZsGrWKRWFHpp
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October 21, 2012, 04:30:25 PM
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Today I met up for an in person trade and I aborted it. The reason is that the guy almost immediately told me he was a drug dealer and used Bitcoin to sell drugs into the USA from Europe.


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

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


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cypherdoc
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October 21, 2012, 04:31:02 PM
 #4

MH, someone like you, with such high visibility and so much to lose, should probably confine your trading to exchanges.
Mike Hearn
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October 21, 2012, 04:42:28 PM
 #5

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

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

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

Frankly I got the impression he had memorized a list of buzzwords. At one point he referred to IR codes, which seems like a pretty odd mistake for somebody who claimed to have a long technical career and a "business" that used Bitcoin.
cypherdoc
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October 21, 2012, 04:50:14 PM
 #6

You are way too visible and important to the community to be doing this sort of thing in my opinion.
kangasbros
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October 21, 2012, 05:12:31 PM
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I definitely agree - if you exchange money or any kind of goods/services, and the customer mentions illegal activity, it is wisest to withdraw from the business right away. For your own protection.

cypherdoc
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October 21, 2012, 05:14:24 PM
 #8

Did he know your identity ahead of time?
moni3z
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October 21, 2012, 05:21:26 PM
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I'm not going to interrogate whoever is selling me bitcoins but if they came right out and said it was from drugs I'd walk away too that screams fed entrapment.
Raoul Duke
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October 21, 2012, 05:22:11 PM
 #10

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

casascius
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October 21, 2012, 05:27:08 PM
 #11

I don’t really understand much about in person trading regulations for currencies. If I met someone and I had a bunch of Euro Banknotes and traded them for U.S. Dollars with someone and he bought drugs, guns or Cuban cigars with them would I really have any liability? Is it reasonable to prosecute the money exchanger for a part in the crime? I do in person exchange occasionally because it’s faster and easier than MtGox but I will stop if someone thinks there is a real liability in doing it but I don’t want to stop just out of paranoia.

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

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

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

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

Companies claiming they got hacked and lost your coins sounds like fraud so perfect it could be called fashionable.  I never believe them.  If I ever experience the misfortune of a real intrusion, I declare I have been honest about the way I have managed the keys in Casascius Coins.  I maintain no ability to recover or reproduce the keys, not even under limitless duress or total intrusion.  Remember that trusting strangers with your coins without any recourse is, as a matter of principle, not a best practice.  Don't keep coins online. Use paper or hardware wallets instead.
DublinBrian
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October 21, 2012, 05:32:27 PM
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I don’t really understand much about in person trading regulations for currencies. If I met someone and I had a bunch of Euro Banknotes and traded them for U.S. Dollars with someone and he bought drugs, guns or Cuban cigars with them would I really have any liability? Is it reasonable to prosecute the money exchanger for a part in the crime?
Selling bitcoins is no problem, but buying them could be.

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

casascius
Mike Caldwell
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October 21, 2012, 05:44:27 PM
 #13

That’s an extreme example.

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

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

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

Companies claiming they got hacked and lost your coins sounds like fraud so perfect it could be called fashionable.  I never believe them.  If I ever experience the misfortune of a real intrusion, I declare I have been honest about the way I have managed the keys in Casascius Coins.  I maintain no ability to recover or reproduce the keys, not even under limitless duress or total intrusion.  Remember that trusting strangers with your coins without any recourse is, as a matter of principle, not a best practice.  Don't keep coins online. Use paper or hardware wallets instead.
Mike Hearn
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October 21, 2012, 05:46:27 PM
 #14

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

The fact that a supposed drug seller was wanting to acquire Bitcoins is one of the inconsistencies I mentioned. Presumably the problem people like that would have is selling Bitcoins for fiat.
kiba
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October 21, 2012, 05:49:22 PM
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Mike: ever thought of buying a video camera to record your transaction?

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October 21, 2012, 06:05:37 PM
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No, I was going to sell coins for CHF, not buy them. The amount in question was 100 CHF, which is about the same in dollars. It's not enough to do much of anything.

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


He's prob buying product from NL with coins and shipping to his US partner for cash in mail through switzerland a non known drug exporting country for bypassing customs flags
Mike Hearn
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October 21, 2012, 06:18:32 PM
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As I said before, currency exchange can be a regulated business, in which case the answer is a qualified yes. However, you don't become a regulated entity just by swapping some bank notes. There are thresholds that have to be met.

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

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

Most countries have similar sized thresholds. In Switzerland there are a bunch of them. This guide seems to be a good reference.

Rule of thumb, if you're doing currency exchange "a lot", like at the level of an actual business or with huge transactions, then you need to research the relevant laws. I doubt anyone listing on localbitcoins can possibly meet the thresholds unless those thresholds are unexpectedly lowered, or they live in a country with no thresholds at all.
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October 21, 2012, 07:39:52 PM
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It sounds sketchy and I'm sorry you had that experience. It would be better if local bitcoins had some sort of feedback system.

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

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October 21, 2012, 07:59:00 PM
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Quote
Today I met up for an in person trade and I aborted it. The reason is that the guy almost immediately told me he was a drug dealer and used Bitcoin to sell drugs into the USA from Europe. This was based on almost no prompting at all, he just came out with it. In fact he was very talkative for a self-confessed criminal who just met a total stranger and said many things that simply did not add up, or which contradicted each other. Even if I was the type to do currency trades with drug dealers (I'm not), I was left with the distinct impression that he might not be a real dealer at all but rather some kind of investigator.
It very well might be a trap. Or the other person might be high on coke or some other "look Mom I'm Chuck Norris" drug. Or he just wanted to look tough and in reality he is going to spend the coins on bittit.info

Don't ask don't tell is best approach. Personally for me it is not a problem to deal with such persons even if I know what he is going to do with the coins or I know from where the other person got his coins.
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October 21, 2012, 11:00:55 PM
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It is illegal to aid and abet a criminal. Selling bitcoins claims to a known drug dealer would be a form of aiding and hence criminal. I sincerely doubt that the person was a true drug dealer, and I highly suspect that this was a law enforcement officer. They will have significant difficulty in going after silk Road directly, however, they can take out the secondary market for bitcoins by prosecuting relatively innocent people under this obscure law... And no one will object to this method of trying to stop bitcoin because it just sounds so bad when an otherwise law-abiding citizen does something like help drug dealers.

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

Hardfork aren't that hard.
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