CEO OF BITCOIN EXCHANGE ARRESTED

[MarketNeutral]

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'm not necessarily 'hoping' for anything in this regard, but I suspect there's much more to the story than we're aware of (both before, and as information is probably still forthcoming), and it likely involves more people associated with the Bitcoin Foundation.

And good riddance to anything directly related to Silk Road.

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[ripbitinstant]

This is very shocking developmental

[Frost000]

I guess that explains the big dip in prices today. Ah well.

So can they prove that he knowingly sold Bitcoin to users who then went to directly buy drugs from Silk Road with them?

Should be interesting to see what happens. I personally never used Silk Road (got into BTC afterwards) and though I can admire it's rise from nothingness, it still sucks that it's tarnishing Bitcoin's image so much.

[jonny1000]

I am not saying I agree with the US regulations with respect to Iran and I think your characterization of the events is broadly correct.

However HSBC affliates deceptively and knowingly "stripped out" references to Iran on transactions which went through its US affiliate HBUS; HSBC and HBUS management knew about this.  This was to conceal information from US authorities otherwise these transactions would have been blocked by the Office of Foreign Assets Control filter.  As you say, these transactions did typically relate to instances where both the sender and recipient were outside of the US and therefore not necessarily bound by the sanctions.  HSBC should therefore have not processed these transactions through the US affiliate which is regulated by the US Treasury (and the Federal Reserve during some of the period in question) and subject to US law and OFAC filters.  HBUS management were therefore in breach of US law and could have been prosecuted.  In 2001 HBUS’s head of compliance warned that these transactions could have “involved wilful disregard or evasion” but the HSBC group chairman intervened to continue the information stripping.

I admit the situation was not perfect, but HSBC still deliberately stripped information out of transactions to be deceptive to authorities, although I understand the argument that this may be morally or even legally justified.

[Interized]

I am not saying I agree with the US regulations with respect to Iran and I think your characterization of the events is broadly correct.

However HSBC affliates deceptively and knowingly "stripped out" references to Iran on transactions which went through its US affiliate HBUS; HSBC and HBUS management knew about this.  This was to conceal information from US authorities otherwise these transactions would have been blocked by the Office of Foreign Assets Control filter.  As you say, these transactions did typically relate to instances where both the sender and recipient were outside of the US and therefore not necessarily bound by the sanctions.  HSBC should therefore have not processed these transactions through the US affiliate which is regulated by the US Treasury (and the Federal Reserve during some of the period in question) and subject to US law and OFAC filters.  HBUS management were therefore in breach of US law and could have been prosecuted.  In 2001 HBUS’s head of compliance warned that these transactions could have “involved wilful disregard or evasion” but the HSBC group chairman intervened to continue the information stripping.

I admit the situation was not perfect, but HSBC still deliberately stripped information out of transactions to be deceptive to authorities, although I understand the argument that this may be morally or even legally justified.

Would you mind dumbing dumb your explanation? This is very interesting but I don't understand completely.

[Holliday]

I am not saying I agree with the US regulations with respect to Iran and I think your characterization of the events is broadly correct.

However HSBC affliates deceptively and knowingly "stripped out" references to Iran on transactions which went through its US affiliate HBUS; HSBC and HBUS management knew about this.  This was to conceal information from US authorities otherwise these transactions would have been blocked by the Office of Foreign Assets Control filter.  As you say, these transactions did typically relate to instances where both the sender and recipient were outside of the US and therefore not necessarily bound by the sanctions.  HSBC should therefore have not processed these transactions through the US affiliate which is regulated by the US Treasury (and the Federal Reserve during some of the period in question) and subject to US law and OFAC filters.  HBUS management were therefore in breach of US law and could have been prosecuted.  In 2001 HBUS’s head of compliance warned that these transactions could have “involved wilful disregard or evasion” but the HSBC group chairman intervened to continue the information stripping.

I admit the situation was not perfect, but HSBC still deliberately stripped information out of transactions to be deceptive to authorities, although I understand the argument that this may be morally or even legally justified.

Would you mind dumbing dumb your explanation? This is very interesting but I don't understand completely.

Dose banksters knew what dey was doin'!

[Hashcesar84]

and now bitcoin crash!|

[urbanogt5]

I'm in shock, Bitstamp looks for me the USA exchange, if it goes down the btc will also go down, we just saw it in the market, but now the price will fall to 850 -800 in gox.  So mad

[turtoro]

I'm in shock, Bitstamp looks for me the USA exchange, if it goes down the btc will also go down, we just saw it in the market, but now the price will fall to 850 -800 in gox.  So mad

lol. relax, bitcoin is bigger than 1 man/exchange

[prezbo]

I'm in shock, Bitstamp looks for me the USA exchange, if it goes down the btc will also go down, we just saw it in the market, but now the price will fall to 850 -800 in gox.  So mad

Bitstamp is not an american exchange.

[2tights]

I guess that explains the big dip in prices today. Ah well.

So can they prove that he knowingly sold Bitcoin to users who then went to directly buy drugs from Silk Road with them?

Should be interesting to see what happens. I personally never used Silk Road (got into BTC afterwards) and though I can admire it's rise from nothingness, it still sucks that it's tarnishing Bitcoin's image so much.

This is a complete red herring. This doesn't really change anything... why are people freaking?

edit: I'd think that this is much more deserving of our focus: http://en.ria.ru/business/20140127/186966541/Russias-Central-Bank-Bitcoin-Users-Can-Face-Jail-Time.html

[tvbcof]

Dose banksters knew what dey was doin'!

HSBC negotiated from a position of strength that they'd cultivated.  In their case, a credible threat to burn down the house.

Bitcoin should take a lesson from HSBC about what can be achieved from what position, IMO.

Nothing in any of the Bitcoin Foundations roadmap seems to indicate that they have any intention of taking either the high road morally or hardening the solution against the types of attacks that can pose a threat.  They seem to wish only to lay prostrate as quickly as possible and hope that they are allowed a quite corner in the room to exist.  I'll bet (and literally am) that this strategy will result in a lethal bitch-slap.

[theonewhowaskazu]

I have to admit I panicked at first, but when I read the criminal complaint from the DoJ I saw that they are alleging that Shrem KNEW what Faiella was doing.

if the feds come after you for unknowingly selling coins to someone who then uses them for something illegal, that is really, really bad for us. If they come after you for knowingly helping someone break the law, well, that should be expected.

The big problem is that the Bitcoin Foundation is about to get a HUGE black eye from this.

This is what I think. If the guy sent an email to somebody like "Yo, you sell drugs online and I'll launder the coins out into fiat for you" then the arrest should be expected. No way anybody should be surprised about that. If the guy happened, due to no fault of his own, had a criminal decide to use his service, and he was never aware of this action, and then he was arrested... that would be unexpected.

[TruckStyling]

Pretty sure undercover agent Mike Hearn was involved in the bust. They sent him to infiltrate BF and start the smear campaign.

[crazy_rabbit]

I'm in shock, Bitstamp looks for me the USA exchange, if it goes down the btc will also go down, we just saw it in the market, but now the price will fall to 850 -800 in gox.  So mad

I think you mean "BitInstant" not "BitSTAMP".

So many "BITS".

[crazy_rabbit]

He should step down from the foundation ASAP.

[bitfreak!]

The most important aspect to the story is how they managed to read his personal emails and how they can prove that the emails they have are legitimate. They could easily write up some bogus emails and claim that he sent them, they need to be able to prove the emails were written by him.

[dewdeded]

The most important aspect to the story is how they managed to read his personal emails and how they can prove that the emails they have are legitimate. They could easily write up some bogus emails and claim that he sent them, they need to be able to prove the emails were written by him.

They just choose a court and a judge that WILL allow these emails.
Maybe they bring in fake or real computer forensic experts that can prove or do review and decide if these emails are legit.

You can be 100% sure even if these emails are fake, they will be used.

[TheButterZone]

More victimless "criminals" having the boot stamping on their face forever. Just a matter of time before every single localbitcoins seller is prosecuted for not harming anyone, because "economic liberty must be destroyed"!

[cryptoanarchist]

This is all theater to scare people.

Shrem is in the good-ole-boy-secret-handshake-club himself, and the charges are completely ridiculous.

Not following FINCEN "guidelines" is not a crime, as there is no law. Even if there was a law, there is no jurisdiction.

Hopefully, some stupid people will sell and give me some cheap buy prices.