Did Karpeles lie?

[oakpacific]

So I read the warrant against Gox, http://cdn.arstechnica.net/wp-content/uploads/2013/05/Mt-Gox-Dwolla-Warrant-5-14-13.pdf , and I think basically they are trying to justify the seizure by saying Gox is involved in dealing in currency and transmitting money for their customers, which Karpeles denied when he registered the account with the bank, however, I doubt whether such accusation is really well-founded.

First, the warrant is very assertive that Bitcoin is a digital currency, and Gox is a digital currency exchange, nevertheless, according to http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&sid=d5570d7646c5fc13fe1fa42a61d1dcf1&rgn=div5&view=text&node=31:3.1.6.1.2&idno=31#31:3.1.6.1.2.1.3.1(search for "(m) Currency")  Gox cannot be called a currency exchanger or dealer because it doesn't deal in foreign currencies, you cannot exchange dollars for other currencies on Gox directly, you can only exchange them for bitcoins, which is not a currency by their definition.(In fact, the Japanese authority considered Bitcoin a ledger and decided not to regulate)

Second, Gox cannot be called a money transmitter either, according to the definition from the same source(search for "money transmitter"):"(5) Money transmitter —(i) In general. (A) A person that provides money transmission services. The term “money transmission services” means the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means. " Especially the following two exceptions:

"(ii) Facts and circumstances; Limitations. Whether a person is a money transmitter as described in this section is a matter of facts and circumstances. The term “money transmitter” shall not include a person that only:

(A) Provides the delivery, communication, or network access services used by a money transmitter to support money transmission services

......

(E) Provides prepaid access; or

(F) Accepts and transmits funds only integral to the sale of goods or the provision of services, other than money transmission services, by the person who is accepting and transmitting the funds."

So my conlcusion is there should have been no need for Gox to register as a money transmitter, as they never engaged in exchanging one person's currency and funds for another person's, and Karpeles should indeed answer "No" to the two questions. Any legally knowledgeable guy please enlighten me if I am wrong.

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[deepceleron]

I was just reading the seizure PDF, and the judge is probably a DHS rubber-stamper; if she didn't sign drone strikes, wiretaps, and seizures daily, she would be replaced.

The evidence presented that mtgox is a money transmitter fails analysis. It is an assault on personal property without trial or process. I could make the same statements:

deepceleron has a bank account,
he regularly sends money to paypal account with the moniker gay-love-supplies,
the paypal money is transmitted to customers in exchange for goods,
a confidential informant had money transmitted to him in exchange for one used inflatable sheep. The informant then transmitted the money back to the account holder in exchange for "TSA anal lube".

Therefore based on my training and experience, deepceleron is a money transmitter and the contents of his accounts are subject to forfeiture.

[solex]

I was just reading the seizure PDF, and the judge is probably a DHS rubber-stamper; if she didn't sign drone strikes, wiretaps, and seizures daily, she would be replaced.

The evidence presented that mtgox is a money transmitter fails analysis. It is an assault on personal property without trial or process. I could make the same statements:

deepceleron has a bank account,
he regularly sends money to paypal account with the moniker gay-love-supplies,
the paypal money is transmitted to customers in exchange for goods,
a confidential informant had money transmitted to him in exchange for one used inflatable sheep. The informant then transmitted the money back to the account holder in exchange for "TSA anal lube".

Therefore based on my training and experience, deepceleron is a money transmitter and the contents of his accounts are subject to forfeiture.

Yes, and if deepceleron complains about this "due process" he can stand in the queue behind the Benghazi widows, Tea Party activists and AP journalists.

[oakpacific]

I was just reading the seizure PDF, and the judge is probably a DHS rubber-stamper; if she didn't sign drone strikes, wiretaps, and seizures daily, she would be replaced.

The evidence presented that mtgox is a money transmitter fails analysis. It is an assault on personal property without trial or process. I could make the same statements:

deepceleron has a bank account,
he regularly sends money to paypal account with the moniker gay-love-supplies,
the paypal money is transmitted to customers in exchange for goods,
a confidential informant had money transmitted to him in exchange for one used inflatable sheep. The informant then transmitted the money back to the account holder in exchange for "TSA anal lube".

Therefore based on my training and experience, deepceleron is a money transmitter and the contents of his accounts are subject to forfeiture.

Yes, and if deepceleron complains about this "due process" he can stand in the queue behind the Benghazi widows, Tea Party activists and AP journalists.

And surprisingly, the great majority of gay community support the FED and consider it a solid case, because deepceleron has screwed them by processing their orders slowly, so he must be a loser/liar.

[davout]

Gox cannot be called a currency exchanger or dealer because it doesn't deal in foreign currencies, you cannot exchange dollars for other currencies on Gox directly

I think you are wrong, their multi-currency engine does it implicitly.
Devil is in the details.

[oakpacific]

Gox cannot be called a currency exchanger or dealer because it doesn't deal in foreign currencies, you cannot exchange dollars for other currencies on Gox directly

I think you are wrong, their multi-currency engine does it implicitly.
Devil is in the details.

1. The warrant itself never mentions other foreign currencies.

2. After you have bought bitcoins on Gox, there is nothing they can do to stop you from exchanging it for other foreign currencies. The exchange cannot prove that the buyer/seller are the same person. And this is at best something Gox facilitates, not participates in, the site is not built to serve and profit from this purpose, so the first thing the government should do when they find soemone is using Gox to exchange currencies is to inform them to take actions against such users, not just forfeiting their account.

[davout]

1. The warrant itself never mentions other foreign currencies.

So what, it mentions "currency exchange" which is what my point is about, they exchange currency automatically because their trading engine is built that way, USD orders could match EUR orders and it would transparent for the users.

Which is technically brilliant, but legally stupid.

2. After you have bought bitcoins on Gox, there is nothing they can do to stop you from exchanging it for other foreign currencies. The exchange cannot prove that the buyer/seller are the same person. And this is at best something Gox facilitates, not participates in, the site is not built to serve and profit from this purpose, so the first thing the government should do when they find soemone is using Gox to exchange currencies is to inform them to take actions against such users, not just forfeiting their account.

See previous comment, you miss the detail, their engine does it *automatically*.

I'm not saying that it's what they're being charged for, but it's one of the things they *could* be charged for if a judge bother to look into the details.

[oakpacific]

1. The warrant itself never mentions other foreign currencies.

So what, it mentions "currency exchange" which is what my point is about, they exchange currency automatically because their trading engine is built that way, USD orders could match EUR orders and it would transparent for the users.

Which is technically brilliant, but legally stupid.

No, the evidence DHS presented to the judge is how a CI sends USD to Gox to exchange it to BTC and exchange it back to USD for six months, obviously they are targeting BTC specifically as a currency. And did you see that they only call Gox a "digital currency exchange" immediately after they call BTC a "digital currency"? Some smoke-screen is going on here.

See previous comment, you miss the detail, their engine does it *automatically*.

I'm not saying that it's what they're being charged for, but it's one of the things they *could* be charged for if a judge bother to look into the details.

I don't think you can consider a multi-currency platform buying/selling apples as a currency exchange/money transmitter ,  even if it's being done somehow implicitly, what's really being bought/sold is more important than anything else.

[davout]

No, the evidence DHS presented to the judge is how a CI sends USD to Gox to exchange it to BTC and exchange it back to USD for six months, obviously they are targeting BTC specifically as a currency. And did you see that they only call Gox a "digital currency exchange" immediately after they call BTC a "digital currency"? Some smoke-screen is going on here.

They didn't say the Bitcoin side of things was relevant at all. You assumed that.
What is relevant is the unlicensed money transmission. Read it again, it is written very clearly.

I don't think you can consider a multi-currency platform buying/selling apples as a currency exchange/money transmitter,  even if it's being done somehow implicitly, what's really being bought/sold is more important than anything else.

It performs a currency exchange each time it matches orders with different currencies. That is factual.
Whether random people on the internet think it is important or not doesn't change that.
It is not because some X thing is judged more important than some other Y thing that the Y thing immediately disappears.

If you want to discuss legalities it's best to remain factual.

[oakpacific]

No, the evidence DHS presented to the judge is how a CI sends USD to Gox to exchange it to BTC and exchange it back to USD for six months, obviously they are targeting BTC specifically as a currency. And did you see that they only call Gox a "digital currency exchange" immediately after they call BTC a "digital currency"? Some smoke-screen is going on here.

They didn't say the Bitcoin side of things was relevant at all. You assumed that.
What is relevant is the unlicensed money transmission. Read it again, it is written very clearly.

I don't think you can consider a multi-currency platform buying/selling apples as a currency exchange/money transmitter,  even if it's being done somehow implicitly, what's really being bought/sold is more important than anything else.

It performs a currency exchange each time it matches orders with different currencies. That is factual.
Whether random people on the internet think it is important or not doesn't change that.
It is not because some X thing is judged more important than some other Y thing that the Y thing immediately disappears.

If you want to discuss legalities it's best to remain factual.

The exceptions in the code specifically stated that if you:

(A) Provides the delivery, communication, or network access services used by a money transmitter to support money transmission services


(F) Accepts and transmits funds only integral to the sale of goods or the provision of services, other than money transmission services, by the person who is accepting and transmitting the funds."

you are not a money transmitter service, I think that's where Gox falls in? Bitcoin is just the goods/service Gox sells, not too different from apples actually.

[Piper67]

I think oakpacific may have a point. The issue here is what MtGox profits from, and they profit from the sale of bitcoins, nothing else.

It will be interesting to watch this one play out in the courts, as it will no doubt establish some juridical guidance in the US as to the legal nature of cryptocurrencies. Hopefully MtGox will have the resources (and spine) to fight it out.

[oakpacific]

Hopefully MtGox will have the resources (and spine) to fight it out.

I have the same hope, but the problem is they probably don't, based on what I have seen. Gox has always been like:'Let me run the exchange and leave me alone!"

[oakpacific]

Actually, the purpose of this post, as the title stated, is to point out that, although Gox has proved to be incompetent in many cases, Karpeles has actually always been quite serious with legal affairs, it's naive to believe that he did think he can blatantly lie and get away, he must have had reasons to believe that Gox is not a money service business and he should not need to register.

[Terk]

As I wrote here:

Mutum Sigillum LLC wasn't accepting money from customers and they weren't sending money to customers. It might be the reason why they involved Dwolla instead of making people to deposit directly to Mutum Sigillum LLC. If they were only transferring money between one company and another company, they might not fall into the money transmitter category.

This is probably more complex that we think, but when at first sight it seemed that their US LLC lied in the application, at the second sight it seems that they might wrote the truth. They never accepted money from customers and they never sent money to customers. They used Dwolla for that, probably explicitly because they didn't want to be a money transmitter.

It wouldn't be that hard to accept directly wire transfers from customers to their US LLC, but they didn't do it. They accepted money transfers directly to Japan, so you could send an international wire, and their Japan company probably has it legally covered. And they used a 3rd party registered money transmitter to accept deposits in the US.

Edit: of course it's for lawyers to decide who's right and wrong here and I have no qualifications for that, so this is just a loose speculation from me.

[Delarock]

http://www.fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html

"An exchanger is a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency."

[aigeezer]

Presumably the seizure is agenda-driven. If we can figure out the (exact) agenda, we can more accurately predict process and outcomes.

A generalized hypothesis such as "to assert State power" or "to destroy BTC" won't be helpful, but a specific one such as "exhaust Gox in legal red tape in order to blah blah" might be useful.

As for whether Karpeles lied, the State will be the judge of that and there is presumably some kind of "gotcha" meme in play - so carefully exploring "lie/no lie" here may be unproductive. His team will say he did not, the State's team will say he did, and the State will make its decision. The media will take position X and the public will take position Y. Who will do what to whom, why when and how?

Huge range of possibilities. I don't think this is about the factual issue "lie/no lie" though.

[Piper67]

Presumably the seizure is agenda-driven. If we can figure out the (exact) agenda, we can more accurately predict process and outcomes.

A generalized hypothesis such as "to assert State power" or "to destroy BTC" won't be helpful, but a specific one such as "exhaust Gox in legal red tape in order to blah blah" might be useful.

As for whether Karpeles lied, the State will be the judge of that and there is presumably some kind of "gotcha" meme in play - so carefully exploring "lie/no lie" here may be unproductive. His team will say he did not, the State's team will say he did, and the State will make its decision. The media will take position X and the public will take position Y. Who will do what to whom, why when and how?

Huge range of possibilities. I don't think this is about the factual issue "lie/no lie" though.

Well, everything is agenda driven. But if this was the government's agenda (as opposed to an individual agent within the DHS), there are other ways it could've been pushed forward.

[aigeezer]

Presumably the seizure is agenda-driven. If we can figure out the (exact) agenda, we can more accurately predict process and outcomes.

A generalized hypothesis such as "to assert State power" or "to destroy BTC" won't be helpful, but a specific one such as "exhaust Gox in legal red tape in order to blah blah" might be useful.

As for whether Karpeles lied, the State will be the judge of that and there is presumably some kind of "gotcha" meme in play - so carefully exploring "lie/no lie" here may be unproductive. His team will say he did not, the State's team will say he did, and the State will make its decision. The media will take position X and the public will take position Y. Who will do what to whom, why when and how?

Huge range of possibilities. I don't think this is about the factual issue "lie/no lie" though.

Well, everything is agenda driven. But if this was the government's agenda (as opposed to an individual agent within the DHS), there are other ways it could've been pushed forward.

This one seems very clumsy even by government standards, with lots of collateral damage (BTC prices dropped hard and fast and are not yet back to where they were, for instance) and no obvious gain for the public interest. If the issue really were that someone filled out a form incorrectly, say a banker, then the resolution would normally be a polite exchange of letters between lawyers, payment of a fee, and everyone back on the golf course by three. Instead, this seems so contrived. But... what's it about, and of course, what comes next?

[oakpacific]

http://www.fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html

"An exchanger is a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency."

A guidance is not a piece of law.

[Piper67]

http://www.fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html

"An exchanger is a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency."

A guidance is not a piece of law.

And even if it were a piece of law, it still has to pass the judicial test... I'd love to see a court grappling with the fact that there isn't a "Bitcoin" anywhere, just a freely distributed ledger.

As I said, from a legal perspective, it will be popcorn time