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Author Topic: FinCen preparing to prosectute some Bitcoin users  (Read 9099 times)
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April 24, 2013, 11:45:37 AM
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FinCen - Financial Crimes Enforcement Network

Bradley Jansen of freebanking.org http://www.freebanking.org/author/jansen/ mentioned this on "Let's Talk Bitcoin"'s podcast from today. His words, not mine. A MUST LISTEN! Starting at around the 9 minute mark and roughly half the show.
Show Notes - http://feedproxy.google.com/~r/TheDailyBitcoinShow/~3/LKTs7vLbpLI/lets-talk-bitcoin-episode-001 
MP3 - http://feedproxy.google.com/~r/TheDailyBitcoinShow/~5/v1uhZzA06to/89228962-mindtomatter-lets-talk-bitcoin-episode-001.mp3

I imagine the first prosecutions will clearly be for things related to drug purchases, laundering money, etc. Regardless, when this happens it will affect the largest network of bitcoin users.
He said FinCen has been the single biggest factor in stomping out currency competitors. e.g. - EGold
The Patriot Act has made them all the more powerful.

He said he heard it through the grapevine - that FinCen has prosectutions in the works for Bitcoin broadly speaking. He said FinCen put out the guidance in order to prosecute. And their guidelines were ambiguous as we all noticed. And he reiterated he knew the prosecutions were in the works BEFORE the FinCen guidance. This is something we have to prepare for as a community. I am planning on donating to Freebanking.org as a sort of insurance (and big Thankyou). Any other ideas on defending this en mass? It is better we prepare for this as FinCen is doing. I'm sure some of us have already started. We need a strong group of people, doesn't need to be large, just look at how the gun lobby just won out.

Things like "regulations" (quotes intended) can be a very very big hurdle. Luckily VC's are starting to bring money into bitcoin as well as people all over the world. But, the USA is turning into a bit of a, let's just say, strict State and we need to prepare for the worst. WE are going to have to defend ourselves.

Let's continue our Anti-Fragile nature,
IAS

BTC = Black Swan. The theory was developed by Nassim Nicholas Taleb to explain: 1. The disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance, and technology 2. The non-computability of the probability of the consequential rare events using scientific methods (owing to the very nature of small probabilities) 3. The psychological biases that make people individually and collectively blind to uncertainty and unaware of the massive role of the rare event in historical affairs. BTC = Antifragile - "Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty. Robust is not the opposite of fragile.
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April 24, 2013, 12:10:16 PM
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They might prosecute for money laundering, sure. Probably not buying drugs, but the police would go after that. :-(

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April 24, 2013, 12:14:25 PM
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First they ignore you, done
then they laugh at you, done
then they fight you, <---- we are here
then you win
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April 24, 2013, 12:17:18 PM
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They might prosecute for money laundering, sure. Probably not buying drugs, but the police would go after that. :-(

My concern is for those who move their bitcoins into and out of dollars, if only occasionally. They hinted that they don't like that.

This is a serious thing, I really recommend you guys listen to that podcast. It is better to be prepared.

BTC = Black Swan. The theory was developed by Nassim Nicholas Taleb to explain: 1. The disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance, and technology 2. The non-computability of the probability of the consequential rare events using scientific methods (owing to the very nature of small probabilities) 3. The psychological biases that make people individually and collectively blind to uncertainty and unaware of the massive role of the rare event in historical affairs. BTC = Antifragile - "Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty. Robust is not the opposite of fragile.
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April 24, 2013, 12:18:15 PM
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They might prosecute for money laundering, sure. Probably not buying drugs, but the police would go after that. :-(

My concern is for those who move their bitcoins into and out of dollars, if only occasionally. They hinted that they don't like that.

This is a serious thing, I really recommend you guys listen to that podcast. It is better to be prepared.

The quote thing is great. But don't you think the "fight" will better be done with preparation and legally? I mean that is in a way, our greatest hope - but not our only hope.

BTC = Black Swan. The theory was developed by Nassim Nicholas Taleb to explain: 1. The disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance, and technology 2. The non-computability of the probability of the consequential rare events using scientific methods (owing to the very nature of small probabilities) 3. The psychological biases that make people individually and collectively blind to uncertainty and unaware of the massive role of the rare event in historical affairs. BTC = Antifragile - "Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty. Robust is not the opposite of fragile.
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April 24, 2013, 12:40:36 PM
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I am planning on donating to Freebanking.org as a sort of insurance (and big Thankyou).

If you figure out a way to donate using bitcoins, please share.  I only saw PayPal.

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April 24, 2013, 12:41:54 PM
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Well, you do have to pay capital gains taxes.

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April 24, 2013, 12:55:55 PM
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If FinCen start prosecutions against individuals and/or companies the next progression will be confiscation of their assets and possibly the coins they used in their transactions (easily traceable via blockchain) so in theory you could have 100 Btc in your wallet which has been used in a drug transaction and are therefore an accessory after the fact.
Suppose you bought those coins from Mtgox, they have your bank details and are therefore easily traceable.

How many people would like their names appearing in the papers as being connected to a drug or paedo ring?

Possibly another way of scaring people away from getting involved in the bitcoin economy?

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April 24, 2013, 01:00:19 PM
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If FinCen start prosecutions against individuals and/or companies the next progression will be confiscation of their assets and possibly the coins they used in their transactions (easily traceable via blockchain) so in theory you could have 100 Btc in your wallet which has been used in a drug transaction and are therefore an accessory after the fact.
Suppose you bought those coins from Mtgox, they have your bank details and are therefore easily traceable.

How many people would like their names appearing in the papers as being connected to a drug or paedo ring?

Possibly another way of scaring people away from getting involved in the bitcoin economy?
they still have to prove that you had knowledge that the money was used for illegal activities. just as the police can't confiscate your dollar bills because they been used in a drug transaction 10 months ago, they can't confiscate your coins because they were allegedly from a drug transaction.

1ELvnrA6PhUyDBS6iR25K1Xx4xXL6VMfJX
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April 24, 2013, 01:07:23 PM
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If FinCen start prosecutions against individuals and/or companies the next progression will be confiscation of their assets and possibly the coins they used in their transactions (easily traceable via blockchain) so in theory you could have 100 Btc in your wallet which has been used in a drug transaction and are therefore an accessory after the fact.
Suppose you bought those coins from Mtgox, they have your bank details and are therefore easily traceable.

How many people would like their names appearing in the papers as being connected to a drug or paedo ring?

Possibly another way of scaring people away from getting involved in the bitcoin economy?


LoL good luck with confiscation of bitcoin if you are stupid enough to give them access to wallet you don't deserve them. They can't put in jail every one, starve them to death

http://www.youtube.com/watch?v=uHxIssSROjk
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April 24, 2013, 01:12:19 PM
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I am planning on donating to Freebanking.org as a sort of insurance (and big Thankyou).

If you figure out a way to donate using bitcoins, please share.  I only saw PayPal.

I just noted that. Sort of VERY ironic, no? Or is it a safety feature?

BTC = Black Swan. The theory was developed by Nassim Nicholas Taleb to explain: 1. The disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance, and technology 2. The non-computability of the probability of the consequential rare events using scientific methods (owing to the very nature of small probabilities) 3. The psychological biases that make people individually and collectively blind to uncertainty and unaware of the massive role of the rare event in historical affairs. BTC = Antifragile - "Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty. Robust is not the opposite of fragile.
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April 24, 2013, 02:15:52 PM
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Bitcoin users preparing to prosecute FinCen

https://localbitcoins.com/?ch=80k | BTC: 1LJvmd1iLi199eY7EVKtNQRW3LqZi8ZmmB
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April 24, 2013, 02:34:06 PM
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If someone participates in illegal stuff, they will be prosecuted no matter what vehicle they use. Now, if bitcoin itself comes under attack - then it's all the reason to get involved and organize opposision.

If bitcoin is bad in and of itself, then also cell phones, roads, laptops and hammers are bad in and of itself.
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April 24, 2013, 02:38:03 PM
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There is nothing wrong with trading btc for services, for other cryptocurrencies, or for USD. FinCen only cares about you if you are a virtual currency "issuer" or "exchanger". At the moment, there is basically no such thing as a decentralized cryptocurrency issuer, so what you ought to think about is whether you are an exchanger. A bitcoin virtual currency exchanger is someone who makes a business of exchanging btc for dollars, or for other cryptocurrencies, or who transfers value denominated in btc between accounts. If you are such a person, e.g., Mt. Gox, and you are doing this "in the US" then you are a money service business and had better be registered with FinCen, and you had better have an AML-KYC compliance program.

That said, for a real business, it is not the end of the world to register with FinCen and comply with AML-KYC. It involves some thought, having written policies etc., and having personnel to review accounts and file routine reports. The cost of compliance is fixed and manageable.

The problems start when your success outruns your experience-based respect for danger. If you're some 15-year-old minting btc money in your mom's basement with your wild west crypto exchange that you hacked together over a week, and suddenly you wake up one morning with a million bucks worth of btc in your wallet, you should probably hire a real law firm with experience in the payments industry. You could hire me, but I would just repeat what I already said and give you the name of some biglaw shop in DC.

The trickier problem for the industry (again, in the US) is state money transmitter licensing. Here you have to be on the lookout for 50 different legal regimes.  In some states it may be sufficient to have a bank or other licensed financial institution handle your funds. But that is not always enough.  This can trip up experienced players, and has (see, e.g., Square in Illinois).

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April 24, 2013, 02:42:44 PM
 #15

Correct thread title:

Some random guy says that he's heard from "anonymous sources" (aka other random guys), that the government is preparing to prosecute some bitcoin users

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April 24, 2013, 02:49:50 PM
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Would a possible loophole around the money transmitter license be too setup automatic payments from the pool to the exchange and sell them from there. So you technically are not transmitting anything as the wallet address used in the pool is the same as the one in your exchange account.  Fincen stated transmitting btc to convert to usd without the license is illegal, simply remove yourself as the transmitter and you are good. Or you can always buy gold coins from amagimetals and sell those.
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April 24, 2013, 02:55:26 PM
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bam91, I am not sure which person you are referring to. Do you mean, if you are a miner, how do you avoid registering? My view is that a miner is not an issuer or an exchanger simply by virtue of selling their rewards for dollars.
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April 24, 2013, 02:57:05 PM
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Correct thread title:

Some random guy says that he's heard from "anonymous sources" (aka other random guys), that the government is preparing to prosecute some bitcoin users

Which makes this 'news piece' about as useful as 'be on the lookout for a male, 30-65, 4ft-7ft and wearing clothes"
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April 24, 2013, 02:57:44 PM
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brb, going underground.

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April 24, 2013, 03:01:27 PM
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I will post the quote from fincen when i get home but based off of memory i believe fincen had three definitions, user, issuer and exchanger. User may be a miner, issuer doesnt exist as noone controls bitcoin and exchanger are the exchanges. More importantly they stated that if you use btc to purchase goods you do not need a money transmittet license however, if you transmit btc in exchange for usd you require the license. Obviously more clarification is required from fincen but going by currrent statement, selling btc is illegal.
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