The Warrant against Dwolla and Bitcoin: The Beginning of the End of Bitcoin

[Pale Phoenix]

Firstly  - The Fincen Licensing requirement was very clear - One can argue the facts of whether MTGOX was truly a money changer in the US, but it is a moot point since the people who would make that call have done so

I believe MtGox would be an "exchange" under the FinCen guidance published in April, that is, if they were located in the U.S.

Secondly - The question I have is, why MTGOX thought it would not apply to them or did not seem to concern them

Since this involves a separate U.S. based LLC that doesn't actually do anything but clear funds from Dwolla, they may have decided that it didn't meet the definition of a money transmitter.

I agree though, if there was any doubt they should have registered since it's not a complicated process for a multi-million dollar company and they don't have anything to hide. Or maybe they got bad legal advice.

[flound1129]

Thirdly - Coinlab has a golden opportunity if they do it right

Coinlab seems incredibly incompetent to me and just interested in making a quick buck.  Why else would they not have taken any steps toward building their own exchange?

[hashman]

Bitcoin doesn't pose a threat to technologically sophisticated governments.

Well, for starters it will take away or greatly diminish their power to print money.

They gave that up long ago, right? 

[Guardian of Forever]

Coinlab wanted their American/Canadian account database. an unimaginable customer list already setup and moving Bitcoin. Now they will have to spend their own money to create an exchange and lure customers to open new accounts. Would have been nice for things to go smoothly, but Murphy's law applies to everything.

[smoothie]

We must be in the early days of bitcoin given all the amateur decisions being made with bitcoin businesses.

[BTC Books]

We must be in the early days of bitcoin given all the amateur decisions being made with bitcoin businesses.

Evolution in action, smoothie.

[bitsalame]

We must be in the early days of bitcoin given all the amateur decisions being made with bitcoin businesses.

2009 was the genesis, 2013 is the infancy, 2017 will be fucking puberty, 2021 adulthood lol
Joking aside, I expect around 2020 to be mature enough to have specific official support (or censorship!) from countries around the world.
Regulations, legislations and a wide update to the tax forms.

[oakpacific]

"End"? When will the all-mighty authorities that you all worship so much be able to shutdown Silk Road? All the talks with no substance, it's getting bored. I guess if you have worshipped the politicians for so long he/she will start to talk like them.

[BTCisthefuture]

But, I am not sure whether to be angry with MtGox for not making sure their operation was completely legal and could withstand legal attacks, or with the DHS for being overzealous in protecting Americans from imagined menaces.

I'm certainly more angry at Mtgox.  Looking at how the CEO filled out those wells fargo documents, he just flat out lied on them. Period.

It seems like every week or month it becomes more and more obvious that the guy running Mt. Gox simply has little to no experience in running a company like this and really has no idea what he's doing.  It's been problem after problem and mistake after mistake.

I look at this is a positive thing in the long run.  Yes in the short run it could cause a lot of problems for the bitcoin community.  But in the long run things like this are needed so other people have a clear understand how to follow the laws and operate a bitcoin exchange.

[MSantori]

I'm also disappointed.  For a modestly-sized operation, AML/BSA and state compliance isn't an outrageous task.  To be sure, you need to spend time and money that cut into profits.  But there is simply no way for BC to survive when its most visible, active and profitable entities won't move above-board.

[BTCisthefuture]

Thirdly - Coinlab has a golden opportunity if they do it right

Coinlab seems incredibly incompetent to me and just interested in making a quick buck.  Why else would they not have taken any steps toward building their own exchange?

What have they done to show incompetence though? They've done everything they've promised to do.  Meanwhile Mt gox. continues to make mistake after mistake and not do things they promise both customers and business partners they will do.

As far as starting your own exchange....why start something from scratch when you have something else to offer that allows you to make a business deal where right away you get a good start in the industry.


Coinlab's offers their connections to silicon valley, their connections to business and finance, their access to American market, and their ability to be licensed and legal to operate in America.  That's something Mt. Gox simply didn't have.   A smart business person is going to see that and offer their services in exchange for mt gox's customers and technology. To me that doesn't show incompetence but shows people who actually know what they are doing and how to start/run a successful business.

[oakpacific]

Coinlab's offers their connections to silicon valley, their connections to business and finance, their access to American market, and their ability to be licensed and legal to operate in America.  

I haven't seen any evidence showing they have them, all I see is talk.

[BTCisthefuture]

Coinlab's offers their connections to silicon valley, their connections to business and finance, their access to American market, and their ability to be licensed and legal to operate in America.  

I haven't seen any evidence showing they have them, all I see is talk.

They are backed by VC's with strong decade long connections in Silicon Valley,  they ARE FICEN compliant and DO have a business agreement's with an actual Bank in America.  Some of the top investors/guys at Coinlab have decades of experience in the tech industry having held high level positions at companies like Facebook, Google, Amazon, Apple, and others.   The industry connections and the legal compliances they agreed to provide to mt. gox they actually DO have. It's not just talk.

Now let me ask you this though.... how are they suppose to do anything when Mt. Gox failed to do what they promised to do.  How can Coinlab use their connections when Mt. Gox failed to provide them with accounts and technology they promised to provide.

Coinlab certainly does have the connections , the backings, and the legal compliances to help and do what they promised to do.  You can't do that though when Mt. Gox fails to deliver.

And THIS is why Coinlab has sued. They are trying to get the ball rolling and get things done, Mt. Gox has prevented them from doing so though.

The deal was quite simple overall.  We have connections and business experience in America and have legal approval from bank(s) and adhere to American laws. Provide us with your American customers and let us use your trading system and our connections and business experience in America will help you branch out to America...legally.  Unforuntitly Mt. Gox failed to deliver so there's not much Coinlab can now do on their end,  except sue to either get Mt. Gox to actually do what they promised, or to simply get out of the contract with Mt. Gox so they can do things on their own or find others to work with.

[oakpacific]

Coinlab's offers their connections to silicon valley, their connections to business and finance, their access to American market, and their ability to be licensed and legal to operate in America.  

I haven't seen any evidence showing they have them, all I see is talk.

They are backed by VC's with strong decade long connections in Silicon Valley,  they ARE FICEN compliant and DO have a business agreement's with an actual Bank in America.  Some of the top investors/guys at Coinlab have decades of experience in the tech industry having held high level positions at companies like Facebook, Google, Amazon, Apple, and others.   The industry connections and the legal compliances they agreed to provide to mt. gox they actually DO have. It's not just talk.

Now let me ask you this though.... how are they suppose to do anything when Mt. Gox failed to do what they promised to do.  How can Coinlab use their connections when Mt. Gox failed to provide them with accounts and technology they promised to provide.

Coinlab certainly does have the connections , the backings, and the legal compliances to help and do what they promised to do.  You can't do that though when Mt. Gox fails to deliver.

And THIS is why Coinlab has sued. They are trying to get the ball rolling and get things done, Mt. Gox has prevented them from doing so though.

Everything besides your first paragraph are just speculations, I don't think we know enough to figure out what's really happening(e.g., who breached the contract first). And about the facts you listed in the first paragraph, VC backing means nothing to me(heck, even Opencoin got backings!), and the $500,000 they got is certainly pocket money for VCs. FinCEN compliance is a fine point, but it still doesn't prove their competence. About the agreement with the bank, I don't know enough detail to comment about what kind of an agreement it really is, so I remain skeptical.

[Logik]

Can people please stop saying things like "The Warrant against Bitcoin". There is no warrant or lawsuit against Bitcoin. There are warrants and lawsuits about money laundering and financial services.

Nobody actually cares about Bitcoin yet It took 'them' years to wrap their heads around the Internet enough to start to try (and fail) to control it. It will take about the same amount of time for Bitcoin.

Lots of people however care about money laundering, and you can't expect that Bitcoin is magical and therefore exempt from money laundering laws.

[Luckybit]

Bitcoin doesn't pose a threat to technologically sophisticated governments.

Well, for starters it will take away or greatly diminish their power to print money.

Then they'll use Bitcoins themselves if that were the case. I don't think bribed government employees or government operatives care if they get paid in Bitcoin or gold, they just want their money.

[CypressXM]

But, I am not sure whether to be angry with MtGox for not making sure their operation was completely legal and could withstand legal attacks, or with the DHS for being overzealous in protecting Americans from imagined menaces.

I'm certainly more angry at Mtgox.  Looking at how the CEO filled out those wells fargo documents, he just flat out lied on them. Period.

It seems like every week or month it becomes more and more obvious that the guy running Mt. Gox simply has little to no experience in running a company like this and really has no idea what he's doing.  It's been problem after problem and mistake after mistake.

I look at this is a positive thing in the long run.  Yes in the short run it could cause a lot of problems for the bitcoin community.  But in the long run things like this are needed so other people have a clear understand how to follow the laws and operate a bitcoin exchange.

He did not lie, he told the truth. The entity in question did nothing more than fwd payments.

Take this example. Company A owns companies B and C. Company B is an auto dealership. Company C is a pizza shop. At the end of every month, B and C send all income above expenses to A, which then distributes the profits to the shareholders. If someone gets horribly sick from rotten sausage on a pizza and sues C and wins, A and B are not responsible. You can't sue A and expect to win.

That's what's going on here, the court is accepting that the US based company is the same at MTGox, which it's not. Different entity which does not trade bitcoin at all. So it's BS.

"You can beat the wrap but you can't beat the ride"

It could take years to work out and that's probably the point. Delay and disrupt.

[RodeoX]

By the way, I think this is like post #1000 to predict the end of bitcoin. I have been reading these since bitcoin was $.50.

[txmasut]

Here is a link to the warrant that the Department of Homeland Security filed against Dwolla:

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

The warrant refers to laws which can be found at: http://www.law.cornell.edu/uscode/text/18/981 and
http://www.law.cornell.edu/uscode/text/18/1960

I am not a lawyer.  But, in my limited understanding of what I read, to transmit money in the USA, your company must be licensed in the state in which you conducting business. From the warrant, it was not the assets of MtGox that were taken, but Mutum Sigillum, the intermediary company between Dwolla and Mtgox. It was the Mutum Sigillum account that was confiscated.

From my limited understanding of the law, and I am NOT a lawyer, it would seem that had Mutum Sigillum been registered or licensed to transmit money, then this would not have happened.

I do believe that the US Government, in particular, the Department of Homeland Security, is frightened of bitcoin and has been looking for anyway possible to destroy it.

Since, bitcoin itself cannot be stopped, since it is not localized, and since its status as a currency is vague, since it is only data, transaction records on a blockchain, to stop it, DHS has taken the strategy to attack the exchanges. Had the MtGox people not lied on the forms to open their Veridian account, this might not have happened.

Why is DHS frightened of Bitcoin? Because they, rightfully so, want to protect the American people from terrorist attacks. One of the ways that various (both politically and radical, fundamental religious based) terrorist groups sustain their efforts is by getting donations from supports in one country and sending those funds to another country. I can imagine the meeting in some office in Washington, D.C. or Langley, where some men in suits come up with a hypothetical scenario where someone buys bitcoin in Europe or Africa, or the Middle East, sends it to someone in Russia or Asia to buy arms, and sends some of it to the US, where it is converted to USD in order to fund some terrorist activity. Whether or not that scenario could ever really happen, the fact that it could be hypothetically imagined, and that these bitcoin transactions could occur independent of the conventional banking system, which at present is highly scrutinized by US and EU law enforcement agencies, caused these men in D.C. and Langley to become very fearful.

I personally, do not condone or support the engagement of any illegal activity with bitcoin. I have visited SR (Silk Road) three or four times and frankly, after the initial novel amusement that that stuff was being sold, I found SR to be boring. I would prefer to promote cooperation and communication between people who are enemies by using Bitcoin to fund and finance true charities that help people constructively. Bitcoins could be used to pay a Saudi software engineer to write code for an Israeli agricultural company. Or, to for a jewelry artist in New Zealand to sell his artwork to a woman in Canada without worrying about the rip off that is credit card merchant processing.

Despite all the good things that could be accomplished with bitcoin, I can imagine the fear of certain people about how bitcoin could be used for funding evil people's actions.

But, I am not sure whether to be angry with MtGox for not making sure their operation was completely legal and could withstand legal attacks, or with the DHS for being overzealous in protecting Americans from imagined menaces.

Not having an easy way to fund your account on the world's largest bitcoin exchange does stifle trading and I think damages the future of Bitcoin.


Lorenzo Money

Sigh...bitcoin wasn't even mentioned, MTGOX was breaking the law...move on already, this has nothing to do with bitcoin and everything to do with ONE company breaking the law.  Notice how no other U.S. based bitcoin company was affected..yeah, they weren't breaking the law.

[crumbcake]

Sigh...bitcoin wasn't even mentioned, MTGOX was breaking the law...move on already, this has nothing to do with bitcoin and everything to do with ONE company breaking the law.  Notice how no other U.S. based bitcoin company was affected..yeah, they weren't breaking the law.

Not sure if this applies, but, if it does, wouldn't *every Bitcoin client* be subject to this (be considered a money transmitter)?
American statute, 18 USC § 1960
"(2) the term “money transmitting” includes transferring funds on behalf of the public by any and all means including but not limited to transfers within this country or to locations abroad by wire, check, draft, facsimile, or courier;"