BitSpend Business Indefinitely Closed Because Their Bank Doesn't Like Bitcoins

[ReCat]

BitSpend. A bitcoin-based company which allows you to buy items on regular websites using Bitcoins have closed down indefinitely (apparently) because their bank (chase) has confiscated all of their money, saying that they are a "high risk client" to excuse their actions.

Chase has also said that:

"We will decide within 30 days whether or not to return any or all of your funds"

As of yet we are waiting for something new in this regard.

http://www.reddit.com/r/BitSpend/comments/1go95b/updatenews_why_we_have_been_slow_and_taking/

What are your thoughts? Should BitSpend sue Chase for their massive loss of profits?

[1715443974]

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[DeathAndTaxes]

They will get every cent of their balance back and have absolutely no case on which to sue.

Banks are private property.  Banks can close an account for any reason or even a lack of reason unless it violates a protected class (race, religion, etc).

Just about every bitcoin related business (not to be confused with businesses that accept bitcoins) has had at least one bank account closed.  You either adapt and move on, or you get out of the business.

[ReCat]

They will get every cent of their balance back and have absolutely no case on which to sue.

You don't seem to have noticed the part where Chase basically said "we might give you back some money".

Either way, Banks still have to be regulated, controlled, backed and insured by the government. So the government has a lot to do with the banks. I doubt the government would let a bank confiscate a bunch of money just because it wants to. It has to be a court order or something.

[justusranvier]

You either adapt and move on, or you get out of the business.

The business model of BitSpend.net is highly suited to crowdsourcing.

A bank can easily close a single bank account owned by a single business, but no one could realistically shut down a coordinated network of dozens or hundreds of people who were all willing to use their dollars to make purchases on behalf of BTC-paying customers.

[ReCat]

I'm not quite sure how this could be done in a cheat-proof way, though.

[franky1]

more reason to have a business relationship with your bank and local financial authority if you intend to deal with FIATchanging multiple hands.

and get rid of the arm chair anarchist views of ignorance is bliss when it comes to FIAT.

my bank manager knows me, we have shaken hands many times. he understand bitcoin, understand my business model so i have no issues continuing to do what i do. and no fear of sudden crazy actions from the bank

[justusranvier]

I'm not quite sure how this could be done in a cheat-proof way, though.

If you mean the risk of the crowdsourced affiliates cheating, it will never be cheat-proof but the risk can be managed. The organizers start out with a handful of vetted affiliates to make the purchases, and bring in new ones via a kind of probation period where the purchases you are given to handle are initially small until you build up reputation. The BTC payments are held in escrow by the organizers during the probation period until the customer confirms receipt, and later as soon as the affiliate provides proof of the order.

[legitnick]

BitSpend. A bitcoin-based company which allows you to buy items on regular websites using Bitcoins have closed down indefinitely (apparently) because their bank (chase) has confiscated all of their money, saying that they are a "high risk client" to excuse their actions.

Chase has also said that:

"We will decide within 30 days whether or not to return any or all of your funds"

As of yet we are waiting for something new in this regard.

http://www.reddit.com/r/BitSpend/comments/1go95b/updatenews_why_we_have_been_slow_and_taking/

What are your thoughts? Should BitSpend sue Chase for their massive loss of profits?

God, I hate banks and fiat currency. Long live Bitcoin.

[DeathAndTaxes]

my bank manager knows me, we have shaken hands many times. he understand bitcoin, understand my business model so i have no issues continuing to do what i do. and no fear of sudden crazy actions from the bank

Yeah and if the bank's computer model says you are high risk the account will be closed by corporate and there is absolutely nothing your local banker (who has no real power) can do.  We did $20M in transactions, generated nearly $50K in banking fees, never had a single complaint, never had a single case of fraud, were registered as an MSB, provided both bank anti-fraud team and local banker a 20 page document outlining our business model and the account was summarily closed by corporate due to high risk nature of our business.

[BitcoinAshley]

Have bitcoin companies considered using local banks and credit unions? I realize the "big evil banks" might have a more convenient branch location, might have better deals for businesses, but the risk of being shut down I'd think would be higher with a "big evil bank." Not that smaller banks aren't so harmless, but they actually need the business.

IMO if you are a bitcoin business and you have a bank account with Chase, RBS, HSBC, BoA, etc - you are asking for trouble and should have multiple bank accounts or at least a contingency plan in case one gets randomly shut down with no notice.

[CasinoBit]

my bank manager knows me, we have shaken hands many times. he understand bitcoin, understand my business model so i have no issues continuing to do what i do. and no fear of sudden crazy actions from the bank

Yeah and if the bank's computer model says you are high risk the account will be closed by corporate and there is absolutely nothing your local banker (who has no real power) can do.  We did $20M in transactions, generated nearly $50K in banking fees, never had a single complaint, never had a single case of fraud, were registered as an MSB, provided both bank anti-fraud team and local banker a 20 page document outlining our business model and the account was summarily closed by corporate due to high risk nature of our business.

My thoughts exactly, no need to jump to far fetched conspiracies.

[franky1]

They will get every cent of their balance back and have absolutely no case on which to sue.

You don't seem to have noticed the part where Chase basically said "we might give you back some money".

Either way, Banks still have to be regulated, controlled, backed and insured by the government. So the government has a lot to do with the banks. I doubt the government would let a bank confiscate a bunch of money just because it wants to. It has to be a court order or something.

you got no clue how the system works.. so here goes..

regulators such as fincen/FSA dont proactively shut down businesses. they work off of reports known as SARS reports given by banks and individuals where there is a real risk of a crime happening based on the best judgements of banks and individuals evidence at hand., so the FINCEN/FSA will never tell a bank to shut down an account, on a whim.

now stepping down the ladder to the level of banks. it is the banks responsibility to monitor its customers (not the regulators) and if a bank see's something dodgy or gets a complaint from a customer they are suppose to freeze an account and investigate the legitamacy of the business and or the complaint. the bank are not allowed to reveal to the bank account holder the exact nature of why they are being investigated.

once the bank has done its internal investigation and decided a crime has been committed then and only then would a SARS report be generated and FINCEN/FSA(SOCA) made aware of the potential crime. for further investigations to occur. if other bank account holders are involved fincen/FSA would suggest to those banks to begin investigations and if enough info is there to freeze the account then they will but only after fincen/FSA receive a SARS report with enough evidence to act on.

the banks don't freeze accounts on a whim, they have to have good reason. and even after the good reason they have to have enough information to make a sars report of an actual crime.

i repeat
fincen/FSA will not ask a bank to freeze an account on a whim. fincen/FSA need to have received a SARS report about the people involved to then get the banks to act.

take mtgox for instance.. they had a confidential informant send them a SARS report before anything happened to MTGOX

now the weakest point is the banks.. as they are the point where a account can be frozen on less legitimate reasons. and if a crime has not been committed they HAVE TO release the account.

the banks do not simply run away with the money on a whim.

it may be worth reading the regulations once in a while. so having a working relationship with the local bank manager more so then just one hand shake and a business plan you can quash any concerns the bank has and ensure your rating with the bank is not high risk.

[franky1]

my bank manager knows me, we have shaken hands many times. he understand bitcoin, understand my business model so i have no issues continuing to do what i do. and no fear of sudden crazy actions from the bank

Yeah and if the bank's computer model says you are high risk the account will be closed by corporate and there is absolutely nothing your local banker (who has no real power) can do.  We did $20M in transactions, generated nearly $50K in banking fees, never had a single complaint, never had a single case of fraud, were registered as an MSB, provided both bank anti-fraud team and local banker a 20 page document outlining our business model and the account was summarily closed by corporate due to high risk nature of our business.

saying your local bank manager had no powers is a moot a point as saying how does corporate head quarters of your bank know your transactions are related to bitcoins, and not something unrelated. like memberships/advertising/etc.

its all about how you come across to the banks and inform them of the business plan and how you will reduce risks and self manage issues, to make sure the banks never have any issues. and to continue regular chats with them.

just handing over a business plan and thinking thats all thats needed for the year is not helpful

[DeathAndTaxes]

my bank manager knows me, we have shaken hands many times. he understand bitcoin, understand my business model so i have no issues continuing to do what i do. and no fear of sudden crazy actions from the bank

Yeah and if the bank's computer model says you are high risk the account will be closed by corporate and there is absolutely nothing your local banker (who has no real power) can do.  We did $20M in transactions, generated nearly $50K in banking fees, never had a single complaint, never had a single case of fraud, were registered as an MSB, provided both bank anti-fraud team and local banker a 20 page document outlining our business model and the account was summarily closed by corporate due to high risk nature of our business.

saying your local bank manager had no powers is a moot a point as saying how does corporate head quarters of your bank know your transactions are related to bitcoins, and not something unrelated. like memberships/advertising/etc.

its all about how you come across to the banks and inform them of the business plan and how you will reduce risks and self manage issues, to make sure the banks never have any issues. and to continue regular chats with them.

just handing over a business plan and thinking thats all thats needed for the year is not helpful

Yeah once again a) there were no issues and b) the closure had nothing to do with Bitcoin (in our case).  The model based on account transaction volume predicted the account was high risk and the closure was absolute.  Our local banker was actually pretty upset given we were a high grossing account for the local branch.

If you never reach that point then your "relationship" with local branch manager is meaningless you wouldn't be closed anyways and if you do reach that point your local branch manager isn't going to stop a closure.

As it relates to the OP like I said they will get all their funds back and they have absolutely no grounds to sue.  A bank can close an account for any reason at any time even without a reason and there is no grounds for a suit.

[justusranvier]

"Antifragility" means that sooner or later more Bitcoin businesses are going to start thinking about their paths forward in entirely different ways. Their internal dialogues will go something like this:

"Now that we know you're going to use the rules to fuck us unless we jump through your unending series of hoops, we've decided that fuck your rules - we'll make our own. Where before we were using as a regular business, we'll instead form distributed informal networks. We'll focus all our efforts on meeting the needs of our customers and resisting your efforts to shut us down and none of our efforts on compliance. Everybody's going to get paid in BTC and nothing is going to be reported to the IRS. If you manage to shut down the network we build now then we'll just build a larger one next time and spend more resources on making harder for you to detect and interfere with."

[ReCat]

They will get every cent of their balance back and have absolutely no case on which to sue.

You don't seem to have noticed the part where Chase basically said "we might give you back some money".

Either way, Banks still have to be regulated, controlled, backed and insured by the government. So the government has a lot to do with the banks. I doubt the government would let a bank confiscate a bunch of money just because it wants to. It has to be a court order or something.

you got no clue how the system works.. so here goes..

regulators such as fincen/FSA dont proactively shut down businesses. they work off of reports known as SARS reports given by banks and individuals where there is a real risk of a crime happening based on the best judgements of banks and individuals evidence at hand., so the FINCEN/FSA will never tell a bank to shut down an account, on a whim.

now stepping down the ladder to the level of banks. it is the banks responsibility to monitor its customers (not the regulators) and if a bank see's something dodgy or gets a complaint from a customer they are suppose to freeze an account and investigate the legitamacy of the business and or the complaint. the bank are not allowed to reveal to the bank account holder the exact nature of why they are being investigated.

once the bank has done its internal investigation and decided a crime has been committed then and only then would a SARS report be generated and FINCEN/FSA(SOCA) made aware of the potential crime. for further investigations to occur. if other bank account holders are involved fincen/FSA would suggest to those banks to begin investigations and if enough info is there to freeze the account then they will but only after fincen/FSA receive a SARS report with enough evidence to act on.

the banks don't freeze accounts on a whim, they have to have good reason. and even after the good reason they have to have enough information to make a sars report of an actual crime.

i repeat
fincen/FSA will not ask a bank to freeze an account on a whim. fincen/FSA need to have received a SARS report about the people involved to then get the banks to act.

take mtgox for instance.. they had a confidential informant send them a SARS report before anything happened to MTGOX

now the weakest point is the banks.. as they are the point where a account can be frozen on less legitimate reasons. and if a crime has not been committed they HAVE TO release the account.

the banks do not simply run away with the money on a whim.

it may be worth reading the regulations once in a while. so having a working relationship with the local bank manager more so then just one hand shake and a business plan you can quash any concerns the bank has and ensure your rating with the bank is not high risk.

Well then.

I was just going by what the BitSpend team and the Chase employee said.

[franky1]

Yeah once again a) there were no issues and b) the closure had nothing to do with Bitcoin (in our case).  The model based on account transaction volume predicted the account was high risk and the closure was absolute.  Our local banker was actually pretty upset given we were a high grossing account for the local branch.

understood. luckily my bank in england.. both local and at head quarters level would have regular contact so that if it approaches limits i would have been adequately informed to then increase my 'capital' to cover issues (in the UK its basically moving up the levels of the FSCS insurance fund policy prices).

as for bitspend and any future fiat touching businesses:
stick to the rules
keep in regular contact with your bank
have a well developed 'handbook' to reduce risks a bank would see

[Severian]

as for bitspend and any future fiat touching businesses:
stick to the rules
keep in regular contact with your bank
have a well developed 'handbook' to reduce risks a bank would see

It's already been pointed out to you that Bitcoin businesses that adhere to the rules and have pals in banks are still getting shutdown.

[halfawake]

Try the Internet Credit Union instead for your next business account: https://iafcu.org/.  According to this article: http://spectrum.ieee.org/tech-talk/computing/networks/credit-union-bitcoins-new-best-friends they are a bitcoin friendly bank, and it looks like they are owned by the Internet Archive, one of the few companies that pays its employees (partially) in bitcoins.

[Stephen Gornick]

Where before we were using as a regular business, we'll instead form distributed informal networks. We'll focus all our efforts on meeting the needs of our customers and resisting your efforts to shut us down and none of our efforts on compliance.

That's a key point.

BitSpend only needed a bank account to restock the dollars on the payment cards they use for making the purchases as part of their service.   If they used a bank account debit card, then obviously that was at risk of the bank taking an action like this.     But if instead they had a credit card or prepaid debit card even which could be reloaded as needed, they simply only need a way to convert bitcoins to the funds for reloading.  One labor-intensive approach is to convert bitcoins to cash and use the cash to buy Moneypak, which is then used to reload the card.   No bank account is necessary.

This whole process would be unnecessary if the merchants were to accept Bitcoin for payment though, cutting the payment card (and their bank issuers) out of the picture completely.