2013-05-15 [ARStech] Feds reveal the search warrant used to seize Mt Gox account

[deepceleron]

http://arstechnica.com/tech-policy/2013/05/feds-reveal-the-search-warrant-that-seized-mt-gox-account/

In the warrant, a special agent with Homeland Security Investigations (HSI), states that there's probable cause to believe Mt. Gox is engaging in "money transmitting" without a license, a crime punishable by a fine or up to five years in prison. The warrant goes on to demand that Dwolla hand over the keys to account number 812-649-1010, which is owned by Mt. Gox subsidiary Mutum Sigillum LLC.

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

The warrant also indicates that a seizure warrant was issued for mtgox's Wells Fargo account on May 9. The transfers of money to Dwolla by this account led them to go after the Dwolla account also.

For those that thought that the "guidance" from FinCEN was a prelude to enforcement, you win:

According to bank records, this transfer was completed through the subsidiary, Mutum Sigillum (sp) LLC. This demonstrates that Mutum Sigillum LLC is engaged in a money transmitting business but is not registered as required with FinCen.

[vokain]

So, any info on whether BTC purchased via Dwolla+MtGox are subject to forfeiture?

[deepceleron]

So, any info on whether BTC purchased via Dwolla+MtGox are subject to forfeiture?

That's like asking if radio waves being transmitted through houses without a TV license are subject to forfeiture.

[Severian]

For those that thought that the "guidance" from FinCEN was a prelude to enforcement, you win:

If you pay close attention, all psychotics send a tell before they act.

[ManBearPig]

http://www.youtube.com/watch?v=nmkF2k1UYIM

[cloudswrest]

For those that thought that the "guidance" from FinCEN was a prelude to enforcement, you win:

If you pay close attention, all psychotics send a tell before they act.

From Mencius Moldbug's lastest blog post on Bitcoin

Matonis does not include the most telling parts of the Bradley Jensen interview (my transcript).  Around 17:30:

Jensen: "I have heard through the grapevine that FinCEN has prosecutions in the works for Bitcoin broadly speaking. My guess, based on the timing of the guidance, and what I had heard previously from the rumor mill about the prosecutions, is that FinCEN put out the guidance sort of ex post facto to justify the prosecutions that they're about to launch."

Interviewer: "So you expect this to happen within in the next couple of months..."

Jensen: "Again, I've heard different rumors, it's difficult to predict, but yeah. We knew that the prosecutions were in the works, and then later the guidance came out, it seems like a sort of CYA approach to how they're doing it."

[jl2012]

So someone intentionally made false declaration when opening a bank account. That's illegal anyway, no matter it's related to btc or not

[Severian]

So someone intentionally made false declaration when opening a bank account.

Why should anyone be concerned about Mtgox's  observance of the law when the government obviously doesn't pay any attention to it either?

[jl2012]

So someone intentionally made false declaration when opening a bank account.

Why should anyone be concerned about Mtgox's  observance of the law when the government obviously doesn't pay any attention to it either?

Because the gov has ballistic missile, mtgox does not

[Severian]

Because the gov has ballistic missile, mtgox does not

There are other ways to get fiat onto Gox if one has an overriding desire to use the service. I was responding to your point of Mtgox's actions being "illegal", a highly subjective term these days.

[DeathAndTaxes]

So someone intentionally made false declaration when opening a bank account. That's illegal anyway, no matter it's related to btc or not

There is a plausible defense for the statement in 2011.  Nobody anywhere in the government (any government) had made any type of guidance, determination, or regulation regarding Bitcoin being a currency or that a Bitcoin exchange was a MSB or money transmitter.  Now not registering as a MSB AFTER FinCEN released its guidance in March 2013.  Well that is another story.  Not sure why MtGox didn't do that or how they expected FinCEN to simply ignore their lack of registration.

[ineededausername]

So someone intentionally made false declaration when opening a bank account. That's illegal anyway, no matter it's related to btc or not

There is a plausible defense for the statement in 2011.  Nobody anywhere in the government (any government) had made any type of guidance, determination, or regulation regarding Bitcoin being a currency or that a Bitcoin exchange was a MSB or money transmitter.  Now not registering as a MSB AFTER FinCEN released its guidance in March 2013.  Well that is another story.  Not sure why MtGox didn't do that or how they expected FinCEN to simply ignore their lack of registration.

It seems to me that Gox did attempt to use CoinLab as a way to get rid of their shaky legal standing on the MSB issue.

[DeathAndTaxes]

So someone intentionally made false declaration when opening a bank account. That's illegal anyway, no matter it's related to btc or not

There is a plausible defense for the statement in 2011.  Nobody anywhere in the government (any government) had made any type of guidance, determination, or regulation regarding Bitcoin being a currency or that a Bitcoin exchange was a MSB or money transmitter.  Now not registering as a MSB AFTER FinCEN released its guidance in March 2013.  Well that is another story.  Not sure why MtGox didn't do that or how they expected FinCEN to simply ignore their lack of registration.

It seems to me that Gox did attempt to use CoinLab as a way to get rid of their shaky legal standing on the MSB issue.

However strangely per CoinLab MtGox is the one who failed to transfer the customers as agreed.  I mean it would seem MtGox had three choices:
a) register their US subsidiary as a MSB
b) close all US customer accounts and deal only with non-US customers
c) transfer US customers to a third party (coinlabs) who would need to be registered as a MSB.

It appears MtGox opted for:
d) do nothing and hope that as the self described world's largest Bitcoin exchange they somehow would miss the notice of FinCEN.  A tiny player might, but MtGox?

[Terk]

There is a plausible defense for the statement in 2011.  Nobody anywhere in the government (any government) had made any type of guidance, determination, or regulation regarding Bitcoin being a currency or that a Bitcoin exchange was a MSB or money transmitter.  Now not registering as a MSB AFTER FinCEN released its guidance in March 2013.  Well that is another story.  Not sure why MtGox didn't do that or how they expected FinCEN to simply ignore their lack of registration.

While I agree, that since governments don't recognize bitcoin as a currency, then they shouldn't try to apply currency-related laws to it, there is the second thing.

"Does your business accept funds from customers and send the funds based on customers' 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.

It seems that Mutum Sigillum LLC operations were exactly to “accept funds from customers and send the funds based on customers' instructions” as the company was incorporated with that single purpose in mind and served only this one goal - to transfer people's money into MtGox.

[wormbog]

Karpeles clearly lied on his Wells Fargo bank application, and then failed to come into compliance with the recent FinCEN guidance. From the very beginning, the use of Dwolla was to avoid dealing directly with US bank transfers. It was only a matter of time before the gov't moved to take them down.

This is a good thing. Many of the existing bitcoin exchanges are tech projects run by enthusiasts. Now we're seeing the wave of investment capital that will finance the creation of legally-compliant exchanges. While they're building their businesses they'll also be putting essential security measures in place, purchasing deposit insurance, building alliances with other businesses, training support staff, etc. We need those things if we hope to see bitcoin go mainstream one day.

When the upcoming wave of legitimate bitcoin exchanges comes online we'll be witnessing the birth of the next generation of wealthy banking elite. And their fortunes will be denominated in bitcoin.

[BitChick]

Karpeles clearly lied on his Wells Fargo bank application, and then failed to come into compliance with the recent FinCEN guidance. From the very beginning, the use of Dwolla was to avoid dealing directly with US bank transfers. It was only a matter of time before the gov't moved to take them down.

This is a good thing. Many of the existing bitcoin exchanges are tech projects run by enthusiasts. Now we're seeing the wave of investment capital that will finance the creation of legally-compliant exchanges. While they're building their businesses they'll also be putting essential security measures in place, purchasing deposit insurance, building alliances with other businesses, training support staff, etc. We need those things if we hope to see bitcoin go mainstream one day.

When the upcoming wave of legitimate bitcoin exchanges comes online we'll be witnessing the birth of the next generation of wealthy banking elite. And their fortunes will be denominated in bitcoin.

Yes.  Glad to see there was some legitimate reasons behind the seizure at least. 

[BTCLuke]

So, er... Anyone asking what other known money uploaders like Dwolla are doing business with MtGox?

If they aren't paying attention to the latest FinCen rules, they could have DHS agents en route to their door as we speak...

BitInstant? AurumXchange? OKPay?


Uncle sam has already put Roger Ver in prison once... They'd salivate over a chance to do the same to BitInstant if they find a similar situation!

[oakpacific]

These misled people will only stop when they watch in awe how the drug dealers/gamblers/money launderers still transmit money under bright sunlight despite all they have tried.

[BTCLuke]

These misled people will only stop when they watch in awe how the drug dealers/gamblers/money launderers still transmit money under bright sunlight despite all they have tried.

Why would that stop them?

They won't stop bro... If we want to keep using bitcoins, we have to decentralize everything they touch.

[oakpacific]

These misled people will only stop when they watch in awe how the drug dealers/gamblers/money launderers still transmit money under bright sunlight despite all they have tried.

Why would that stop them?

They won't stop bro... If we want to keep using bitcoins, we have to decentralize everything they touch.

All right, maybe they will keep trying to hit their heads against a brickwall, who knows.

It probably not decentralized enough for a law-abiding Joe Sixpack to use bitcoins, but it's enough for any tech-savvy enough people, especially the outlaws to trade with bitcoins whatever the authorities do. Silk road is there, web of trust is there, the smart contract is built right in the blockchain, and the mining would not stop unless they can confiscate every connected computer in the world.