CEO OF BITCOIN EXCHANGE ARRESTED

[tvbcof]

I'm sure HSBC spent a lot of time, money and effort to cover their ass, and Shrem will probably cooperate and facilitate a further investigation and get out with hefty fines

I don't think so.

It's easy to misunderstand what happened with HSBC.

The majority of what HSBC was accused of was about not doing enough to detect and block Mexican drug cartels laundering money. Note "not doing enough".

Shrem is accused of something entirely different - not just doing an insufficient amount of work, but knowingly co-operating with someone he knew was a Silk Road dealer explicitly to help him launder money. It's the "knowingly" part that makes the huge difference.

The US DoJ did not seem to have large piles of emails from the head of compliance at HSBC showing him buying drugs and helping known dealers to evade his own controls. With BitInstant they do.

It is actually quite unlikely that there does not exist evicence of wrongdoing at many levels given the scale of HSBC's malfeascence (though I'll agree that it may not have reached their chief complience officer mainly because he/she is likely a careful and clued in person else they would not have gotten the job.)

It is also quite likely that the US DoJ does not have large piles of it, but that is probably mostly because they don't want it.  An artifact of the lobbying money spent at various levels of our government.

The trouble with secret evidence and 'parallel construction' is that it makes decisions and actions of the authorities non-believable to the clued in segment of the public.  When the likes of Shrem get busted and his counterparts at HSBC simply get an even bigger bonus at the end of the year, all of the otherwise valuable work in trying legitimately fight crime is severely depreciated.

The issue boils down to a few factors and 'transparancy' is one of the most important of these.

It's really no wonder Bitcoin businesses can't get bank accounts, when guys like Shrem were putting on a respectable face and doing that kind of thing behind the scenes. Silk Road and those involved with it are by far the most damaging thing that could ever have happened to Bitcoin, especially so early on.

Maybe, and maybe not.  It could be that Bitcoin has actually been surprisingly unmolested so far in part because there are so many mice who seem to have almost a compulsion to stick their heads into the mousetrap.  As they rapidly exit the ecosystem, that utility might vanish.

[HELP.org]

I'm sure HSBC spent a lot of time, money and effort to cover their ass, and Shrem will probably cooperate and facilitate a further investigation and get out with hefty fines

I don't think so.

It's easy to misunderstand what happened with HSBC.

The majority of what HSBC was accused of was about not doing enough to detect and block Mexican drug cartels laundering money. Note "not doing enough".

Shrem is accused of something entirely different - not just doing an insufficient amount of work, but knowingly co-operating with someone he knew was a Silk Road dealer explicitly to help him launder money. It's the "knowingly" part that makes the huge difference.

The US DoJ did not seem to have large piles of emails from the head of compliance at HSBC showing him buying drugs and helping known dealers to evade his own controls. With BitInstant they do.

It's really no wonder Bitcoin businesses can't get bank accounts, when guys like Shrem were putting on a respectable face and doing that kind of thing behind the scenes. Silk Road and those involved with it are by far the most damaging thing that could ever have happened to Bitcoin, especially so early on.

Hopefully Theymos, BFL, TradeFortress, and the members of the Foundation who are involved with them will be next.

I like to play devils advocate but that seems a little extreme. BFL and TradeFortress scammer would be nice but TBF and the admin of the main forum would probably hurt Bitcoin a little. You do understand that TBF members are most of the businesses that make Bitcoin what it is today, right?

Yes, the current Foundation should dissolve and the legitimate players can start a new one without being saddled by the historic acceptance of criminals that you see in today's Foundation.  This forum should be abandoned by all legitimate players before the admin get arrested for running an unregistered business, tax evasion, money laundering, conspiracy to commit fraud, etc.  That way the legitimate players can move forwarded and not be saddled by some of the idiots who have been permitted to run wild and cause all this damage.  I would include Alydian/Coinlab in that if you read their latest bankruptcy case.  The judge is accusing them of all sorts of things.  

[greyhawk]

Hopefully Theymos, BFL, TradeFortress, and the members of the Foundation who are involved with them will be next.

My money is on Eric Vorhees

[pungopete468]

If any of you think this isn't by design you're sadly fooling yourselves.

This is Bitcoin cleaning up the Bitcoin scene in advance of government approval and regulation.

Sad for Charlie but overall will further the life expectancy of Bitcoin.

Just an opinion and nothing more.


~BCX~

This is absolutely by design; the timing is everything.

It's no more than a cut but as a community we're still bleeding from it.

[bigasic]

Like I've read somewhere else. We are only at the beginning of the arrests of people associated with SR. There were several big exchangers on Sr, like sugarmama, I bet it wont be too long until we hear about her. Im just surprised that someone so high up in the bitcoin community was involved..

[ex-trader]

Next stop all the illegal gambling sites

That's so 2011.  Preet has been there and done that.  Google FullTiltPoker and Pokerstars.

Of course I mean the Bitcoin ones. I'm well aware they dealt with the 'real' ones years ago.

[Phinnaeus Gage]

FAIELLA, 52, of Cape Coral, Florida, and SHREM, 24, of New York, New York, are each charged with one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison, and one count of operating an unlicensed money transmitting business, which carries a maximum sentence of five years in prison. SHREM is also charged with one count of willful failure to file a suspicious activity report, which carries a maximum sentence of five years in prison.

I'm not sure, but they would come out better if they were running some sort of lottery scheme for several years with seniors as their core customer base, for the sentence for such is only a $100 fine and time served while sitting till the case is heard, at least that's what I once read somewhere.

[knedle]

Like I've read somewhere else. We are only at the beginning of the arrests of people associated with SR. There were several big exchangers on Sr, like sugarmama, I bet it wont be too long until we hear about her. Im just surprised that someone so high up in the bitcoin community was involved..

This would actually be nothing more than everyday "he wanted too much, broke the law and now he's payng for that". But the thing that he and many more like him were saying that "bitcoin is different and people invoilved in it not corrupt" (oposite to bankers, banks, goverments and everything else) will probably change life for a lot of people who believed in those lies.

Money is money no matter in what form and evil is lurking everywhere.

[Coolstoryteller]

Wow. What a load of shit. This is definitely one nail in the coffin for BTC. Enter the next era of crypto - Anoncoin, Stablecoin and Zerocoin. A completely anonymous coin is needed. This puts anyone running a bitcoin related business at risk because of the origin of the coin spent. You can think what you want but this is the beginning of the end.

Goldman Sachs and top US banks launder more money than any cartel would even hope to and they go after a brand new industry.. Shit the US is the largest importer of illegal drugs and guns. The US military in Afghanistan is the largest producer/exporter of opium in the world.

Fast n Furious
Freeway Rick Ross

http://www.lookintoit.org/Troops-Protect-Government-Drug-Dealing.html
http://www.businessinsider.com/the-us-government-and-the-sinaloa-cartel-2014-1
http://en.wikipedia.org/wiki/CIA_and_Contras_cocaine_trafficking_in_the_US
http://www.thenewamerican.com/usnews/crime/item/12247-cia-manages-drug-trade-mexican-official-says

[Minor Miner]

Hopefully Theymos, BFL, TradeFortress, and the members of the Foundation who are involved with them will be next.

My money is on Eric Vorhees

That is a very likely choice.
After that, the US operators of bitcoin securities exchanges and issuers of illegal securities.  Uyko, Burnside, GigaVPS, Josh Zerlan, Ken Slaughter, etc, etc.

They move slowly, but they do prosecute people and they do not forget.   Anyone who does not believe that should read up on CMKM Diamond Mining stock.   This fraud took place in 2007 and they are still arresting people for their role in it.   They just arrested another guy last week.

[tvbcof]

Like I've read somewhere else. We are only at the beginning of the arrests of people associated with SR. There were several big exchangers on Sr, like sugarmama, I bet it wont be too long until we hear about her. Im just surprised that someone so high up in the bitcoin community was involved..

Why?

A fair fraction of the people 'higher up' got in early.  There are a number of reasons why someone might have taken an early interest, and many of them would be associated with having a genuine need for a solution such as Bitcoin...or such as Bitcoin was 'marketed' at least.  Many of these are associated with something considered 'bad' by large segments of society.

I actually consider a well off early adopter who is 'squeaky clean' to be something of a novelty though I'm sure that many do exist.  Bitcoin is a interesting technical and social phenomenon in it's own right.  But then so are many other developments which could compete for the attention of persons with a natural interest in such things.

 edit - sp

[Chimsley]

So when are they going to arrest the rest of us?  By the logic of the feds is not every bitcoin user knowingly contributing to sites like silk road and others that deal with illegal drugs.  If you run a miner you help process transactions that allows this to happen.  Who is next to fall,  pool operators, solo miners?

Didn't a few high profile companies start accepting bitcoin?  Overstock.com for one.  We should arrest their CEO too since they are building demand for bitcoin.

Also there have been a few politicians that have accepted bitcoin donations.  There is our link between politicians and illegal drugs.  Can we arrest congress people now?

[Phinnaeus Gage]

Time for the song meme of the day: https://www.youtube.com/watch?v=chcSfTLUQ2s

[jonny1000]

I'm sure HSBC spent a lot of time, money and effort to cover their ass, and Shrem will probably cooperate and facilitate a further investigation and get out with hefty fines

I don't think so.

It's easy to misunderstand what happened with HSBC.

The majority of what HSBC was accused of was about not doing enough to detect and block Mexican drug cartels laundering money. Note "not doing enough".

Shrem is accused of something entirely different - not just doing an insufficient amount of work, but knowingly co-operating with someone he knew was a Silk Road dealer explicitly to help him launder money. It's the "knowingly" part that makes the huge difference.

The US DoJ did not seem to have large piles of emails from the head of compliance at HSBC showing him buying drugs and helping known dealers to evade his own controls. With BitInstant they do.

It's really no wonder Bitcoin businesses can't get bank accounts, when guys like Shrem were putting on a respectable face and doing that kind of thing behind the scenes. Silk Road and those involved with it are by far the most damaging thing that could ever have happened to Bitcoin, especially so early on.

Mike.  I think you make some good points and you are correct in saying the the "majority" of what HSBC did was not doing enough.  I agree that what Shrem appears to have done is terrible and one could argue that he should be prosecuted.  However I dont think its fair to say what he did is worse than HSBC.  There were other examples of inappropriate conduct in the Mexican Drug Cartel case and the Iranian Transactions case, whcih go beyond not doing enough to detect money laundering.  For example in the opening statement of the Senate investigation hearing into the issue, the Chairman of the Committee, Carl Levin said:

"HSBC’s Chief Compliance Officer and other senior executives in London knew what was going on, but allowed the deceptive conduct to continue."

See Page 4 of the following document - http://www.hsgac.senate.gov/download/?id=8b67b18b-c21d-453a-9ccc-56206a70c908

I think what really frustrates some people at the whole affair is that the Assistant Attorney General basically said that HSBC were not prosecuted because otherwise "the entire banking system would have been destabilized".

"Had the U.S. authorities decided to press criminal charges," said Assistant Attorney General Lanny Breuer at a press conference to announce the settlement, "HSBC would almost certainly have lost its banking license in the U.S., the future of the institution would have been under threat and the entire banking system would have been destabilized."

http://www.rollingstone.com/politics/news/gangster-bankers-too-big-to-jail-20130214

For further details on the matter, please read the Senate's 339 page report.
http://www.hsgac.senate.gov/download/?id=2a76c00f-7c3a-44c8-902e-3d9b5dbd0083

[tvbcof]

... Overstock.com for one.  We should arrest their CEO too since they are building demand for bitcoin.

That actually would not surprise me (though the justification would.)  Byrne is despised by Wall Street, their whores in the financial media, and regulators (largely also revolving-door whores) for not letting Overstock go tits-up like he was supposed to when they got naked-shorted to the max.

[mainline]

The blockchain is both our greatest asset and greatest liability if you ever do any transactions in Bitcoin involving anything your government doesn't like. Imagine how happy the feds were when they discovered that we keep a public and easily searchable ledger of every transaction we make. They don't even need to get a secret warrant, it's all laid open to them.

And when the big fish are fried, they can break in teh baby feds by letting them grep our Securities subforum

[tabnloz]

I'm sure HSBC spent a lot of time, money and effort to cover their ass, and Shrem will probably cooperate and facilitate a further investigation and get out with hefty fines

I don't think so.

It's easy to misunderstand what happened with HSBC.

The majority of what HSBC was accused of was about not doing enough to detect and block Mexican drug cartels laundering money. Note "not doing enough".

Shrem is accused of something entirely different - not just doing an insufficient amount of work, but knowingly co-operating with someone he knew was a Silk Road dealer explicitly to help him launder money. It's the "knowingly" part that makes the huge difference.

The US DoJ did not seem to have large piles of emails from the head of compliance at HSBC showing him buying drugs and helping known dealers to evade his own controls. With BitInstant they do.

It's really no wonder Bitcoin businesses can't get bank accounts, when guys like Shrem were putting on a respectable face and doing that kind of thing behind the scenes. Silk Road and those involved with it are by far the most damaging thing that could ever have happened to Bitcoin, especially so early on.

Mike.  I think you make some good points and you are correct in saying the the "majority" of what HSBC did was not doing enough.  I agree that what Shrem appears to have done is terrible and one could argue that he should be prosecuted.  However I dont think its fair to say what he did is worse than HSBC.  There were other examples of inappropriate conduct in the Mexican Drug Cartel case and the Iranian Transactions case, whcih go beyond not doing enough to detect money laundering.  For example in the opening statement of the Senate investigation hearing into the issue, the Chairman of the Committee, Carl Levin said:

"HSBC’s Chief Compliance Officer and other senior executives in London knew what was going on, but allowed the deceptive conduct to continue."

See Page 4 of the following document - http://www.hsgac.senate.gov/download/?id=8b67b18b-c21d-453a-9ccc-56206a70c908

I think what really frustrates some people at the whole affair is that the Assistant Attorney General basically said that HSBC were not prosecuted because otherwise "the entire banking system would have been destabilized".

"Had the U.S. authorities decided to press criminal charges," said Assistant Attorney General Lanny Breuer at a press conference to announce the settlement, "HSBC would almost certainly have lost its banking license in the U.S., the future of the institution would have been under threat and the entire banking system would have been destabilized."

http://www.rollingstone.com/politics/news/gangster-bankers-too-big-to-jail-20130214

For further details on the matter, please read the Senate's 339 page report.
http://www.hsgac.senate.gov/download/?id=2a76c00f-7c3a-44c8-902e-3d9b5dbd0083

+1

whichever side of the fence you sit on the issue of drugs matters not. the issue is the hypocrisy of it all.

[Mike Hearn]

The Iran issue with HSBC is even more complicated.

HSBC is an international bank. At the time of those events, sanctions against Iran were not international. In particular, the UK did not have US style sanctions.

So what happens when HSBC in London wants to send money to Iran? What if that transaction ends up being routed via a US part of the "same" company? Whose law takes precedence?

The obvious and natural answer is that if the customer is in the UK, then UK law takes precedence (you can replace UK for a lot of other countries). However the US government saw it differently. It thought US law should take precedence, for transactions that for various reasons were being routed via US processing or switching centers.

The "knowing evasion" aspect comes from the fact that the UK parts needed to execute legal transactions for their customers, but the Great Firewall of America would block them. So they worked around it. No laws in the UK broken as there were no sanctions at that time. In the USA, it was seen as money laundering.

The general way the US government is making its law international law via manipulation of the banking system leaves me deeply unhappy. Yes, it's nonsense that banks have become too big to enforce laws upon and nobody will argue that's a good thing. But in the case of HSBC specifically, the laws that were being enforced look more and more questionable the deeper you go.

For drug prohibition the issues are different but just as complicated.

[btcfre@k]

actually i think that what they tryin to do is to link the word :"bitcoin" to the word "crime" in the non-user peples mind (wich is approximativly 98% of the world) so they will think twice about it before get in to it.they want to stop the progression.last time i as talkin about bitcoin with a LAWYER ,i mean these guys are supposed to be smart,and the first word he said is : crime.so yeah us gov is doin a pretty good job

[MarketNeutral]

The Iran issue with HSBC is even more complicated.

HSBC is an international bank. At the time of those events, sanctions against Iran were not international. In particular, the UK did not have US style sanctions.

So what happens when HSBC in London wants to send money to Iran? What if that transaction ends up being routed via a US part of the "same" company? Whose law takes precedence?

The obvious and natural answer is that if the customer is in the UK, then UK law takes precedence (you can replace UK for a lot of other countries). However the US government saw it differently. It thought US law should take precedence, for transactions that for various reasons were being routed via US processing or switching centers.

The "knowing evasion" aspect comes from the fact that the UK parts needed to execute legal transactions for their customers, but the Great Firewall of America would block them. So they worked around it. No laws in the UK broken as there were no sanctions at that time. In the USA, it was seen as money laundering.

The general way the US government is making its law international law via manipulation of the banking system leaves me deeply unhappy. Yes, it's nonsense that banks have become too big to enforce laws upon and nobody will argue that's a good thing. But in the case of HSBC specifically, the laws that were being enforced look more and more questionable the deeper you go.

For drug prohibition the issues are different but just as complicated.

As I finance professional, I find this assessment to be completely spot on.