Legal ramifications of the Lightning Network

[DooMAD]

So for anyone still new to LN, long story short, it's possible to not just open a new channel with your desired recipient to pay them directly, but also to route payments through anyone you both already have a channel open with.

Alice can open a payment channel with Bob and transact directly with them.  Or, if Alice and Bob both each have a channel open with Charlie already, they don't need to open a channel with each other and can route the payments directly through Charlie.

So my question is, if Alice and Bob were exchanging something illegal for their transaction, is Charlie legally complicit in the crime if the payment was routed through his channel?  It's likely Charlie may know nothing about what was being bought or sold, but technically he has helped facilitate a payment for it.  Can you inadvertently and unintentionally break the law just by having channels open with other people who may be trading in illegal goods and services without you even knowing about it?

 

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[Lampaster]

There is such a thing as the presumption of innocence. In order for Charlie to accuse of complicity need to have evidence that he was unaware of the illegality of the transaction. The seller of weapons in the store is not complicit in the murder if he legally sold the weapons to future murderer. Your statement is wrong.

[richardsNY]

So my question is, if Alice and Bob were exchanging something illegal for their transaction, is Charlie legally complicit in the crime if the payment was routed through his channel?  It's likely Charlie may know nothing about what was being bought or sold, but technically he has helped facilitate a payment for it.  Can you inadvertently and unintentionally break the law just by having channels open with other people who may be trading in illegal goods and services without you even knowing about it?

I don't think so. It's basically similar to you having a full node that is the first node to push a certain transaction (not one of yourself obviously) to the network, where that transaction may have been initiated by someone buying a huge load of drugs, or whatever other horrible acts of crime. If Charlie is legally complicit in the crime, then your full node pushing that drug or whatever transaction to the network too. If I wire money to you to finance whatever illegal activities, is the bank then complicit in the crime as well? No. I don't know how possible it is to trace a transaction to its original roots after it has been pushed to the network by a node for the first time, but that's the only thing authorities have to chase after.

[DooMAD]

Your statement is wrong.

I'm not making a statement, merely asking the question.

There is such a thing as the presumption of innocence. In order for Charlie to accuse of complicity need to have evidence that he was unaware of the illegality of the transaction.

People often conflate those two things.  The presumption of innocence simply means you are innocent until you are proven guilty.  However, in the eyes of the law, being guilty generally doesn't depend on whether or not you knew you broke the law.  Ignorantia juris non excusat.  In the scenario I've posed, I stated that Charlie may not know what was being purchased.  That part was central to the premise.

The seller of weapons in the store is not complicit in the murder if he legally sold the weapons to future murderer.

If the weapon was purchased legally, then that's not a relevant example.  In this example, if someone wanted to buy a gun illegally and it could be proven by law enforcement agencies that they used your money to obtain it, what are the legal implications of that?  Could you be arrested?  Charged?  Could there be a lengthy investigation that essentially puts your life on hold until it's resolved?  You don't even have to be found guilty for it to potentially have a negative impact on you.  I just want to understand, legally speaking, what the potential complexities are.

I don't think so. It's basically similar to you having a full node that is the first node to push a certain transaction (not one of yourself obviously) to the network, where that transaction may have been initiated by someone buying a huge load of drugs, or whatever other horrible acts of crime. If Charlie is legally complicit in the crime, then your full node pushing that drug or whatever transaction to the network too. If I wire money to you to finance whatever illegal activities, is the bank then complicit in the crime as well? No.

The functions of a full node are largely automated and you don't have any financial interest in the offending transaction, so that's still not quite the same thing.  With Lightning, the funds on your channel belong to you and you have to sign the transaction to permit the payment to go through.  However, I think you salvaged it with your second example of wiring money and the bank not being complicit in the crime.  That sounds like a much better answer and far more closely analogous to the scenario posed.

[Lancusters]

All responsibility for the transaction lies with the sender and the receiver because they know the purpose of the payment. The person who provides your channel in the lease do not have to know the purpose of the payment. When you provide a car in rent you are not responsible for the illegal actions of the driver. Law enforcement agencies need to prove that you are part of the system. By default, you are only a tool.

[beasondarlene]

All responsibility for the transaction lies with the sender and the receiver because they know the purpose of the payment. The person who provides your channel in the lease do not have to know the purpose of the payment. When you provide a car in rent you are not responsible for the illegal actions of the driver. Law enforcement agencies need to prove that you are part of the system. By default, you are only a tool.

very nice vision, I think you are right in the explanation.

[tee-rex]

All responsibility for the transaction lies with the sender and the receiver because they know the purpose of the payment. The person who provides your channel in the lease do not have to know the purpose of the payment. When you provide a car in rent you are not responsible for the illegal actions of the driver. Law enforcement agencies need to prove that you are part of the system. By default, you are only a tool.

I could also add to this example another one, which seems to be more fitting here. If you use your bank account to send someone money which was obtained via or intended for some illegal activity, will the bank be held responsible for sending your funds? I'd rather say no in this case but, and this is a big but, we should never say never because there can be ramifications which may render this logic totally irrelevant and void due to an arbitrary number of reservations in the law.

[beasondarlene]

All responsibility for the transaction lies with the sender and the receiver because they know the purpose of the payment. The person who provides your channel in the lease do not have to know the purpose of the payment. When you provide a car in rent you are not responsible for the illegal actions of the driver. Law enforcement agencies need to prove that you are part of the system. By default, you are only a tool.

I could also add to this example another one, which seems to be more fitting here. If you use your bank account to send someone money which was obtained via or intended for some illegal activity, will the bank be held responsible for sending your funds? I'd rather say no in this case but, and this is a big but, we should never say never because there can be ramifications which may render this logic totally irrelevant and void due to an arbitrary number of reservations in the law.

If you ( person 1 ) sell or do something ilegal and some one ( person 2 or person 3 ) pays for it , and another one...( person 4 ) it's between person 1 and person 2 / 3 being a channel , you have a little relation. Some countries laws have 1 exception. if you are involved in a relation with some suspect , you are suspect and they can check all your last 5 years data.

In this case if you are innocent they can proof it. If not ... they can proof too the other version and let you innocent.


It's this explanation correct ??

[HeRetiK]

I don't think so. It's basically similar to you having a full node that is the first node to push a certain transaction (not one of yourself obviously) to the network, where that transaction may have been initiated by someone buying a huge load of drugs, or whatever other horrible acts of crime. If Charlie is legally complicit in the crime, then your full node pushing that drug or whatever transaction to the network too. If I wire money to you to finance whatever illegal activities, is the bank then complicit in the crime as well? No.

The functions of a full node are largely automated and you don't have any financial interest in the offending transaction, so that's still not quite the same thing.  With Lightning, the funds on your channel belong to you and you have to sign the transaction to permit the payment to go through.  However, I think you salvaged it with your second example of wiring money and the bank not being complicit in the crime.  That sounds like a much better answer and far more closely analogous to the scenario posed.

1) Lightning transaction routing is also automated. You don't actively decide which transactions to route and which not.

2) What do you mean by "financial interest in the offending transaction"? I don't think the fractions of a cent that get charged by Lightning nodes qualifies as "financial interest".

3) Lightning network will likely not be able to handle drug purchase transactions at the wholesale level.


Another example of why I doubt that running a Lightning node would you make accessory to a crime: What's with all the TOR nodes that route TOR traffic? It's been known that running an exit node can put you into legal trouble, sure. Whoever runs an illegal hidden service on TOR will also face charges, once discovered. But I've never heard of anyone running a simple non-exit TOR node getting in touch with the law over routing possibly illegal traffic. And there's much worse stuff going on over TOR than some college kid trying to buy weed.

[vit05]

I think this is a lot harder to answer. Some people are considering US law is the world's standard. The reality is that Bitcoin is global, so in each country something like this could be seen in a different way. I believe we will soon have new legislation in each country on this subject.

Today I do not see how that could be illegal. Since people will not have as much power of decision.

[cynical]

All responsibility for the transaction lies with the sender and the receiver because they know the purpose of the payment. The person who provides your channel in the lease do not have to know the purpose of the payment. When you provide a car in rent you are not responsible for the illegal actions of the driver. Law enforcement agencies need to prove that you are part of the system. By default, you are only a tool.

Is it correct to apply the case of a car rental to something which is already under surveillance by law enforcement agencies around the world, crypto?
we all know that crypto is used by some criminals because of its privacy and untraceability features,
so I would be worried that some Lightning transactions could be deemed as suspicious by those same agencies as per the scenario detailed by the OP.
I wouldnt be so sure that Charlie would be able to proved innocent in the transaction?
It certainly raises an interesting debate.