CEO OF BITCOIN EXCHANGE ARRESTED

[Bobsurplus]

Sadly true.  Look at what happened to pirateat40.  Oh, yeah.  Nothing.  There's a civil suit by the SEC, which means the worst he'd have to do is return the money he stole and pay a fine.  Anyone who had run a Ponzi scam of this size denominated in dollars would be looking at hard time and would probably now be awaiting trial from behind bars or, if bailed out, the bail would be enormous.

Has anyone bothered reporting it to the Police as a fraud though? Maybe it might have been ignored a while back (what is Bitcoin etc) but I doubt it would be now if it went to the right people with evidence.

The fact is that most people on here want Bitcoin to grow and be accepted as a currency and with that comes responsibilities, such as obeying the laws that relate to all other currencies......

Report to the police? Be careful about reporting to the police. People have lost valuables, lives of relatives, even their own life when or because of reporting something to the police.

Yes report to police, you can take your "stop snitchin" attitude and shove it where the sun dont shine!

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[greyhawk]

What police? Remember you people abolished all governments. There is no police anymore.

[tvbcof]

Sadly true.  Look at what happened to pirateat40.  Oh, yeah.  Nothing.  There's a civil suit by the SEC, which means the worst he'd have to do is return the money he stole and pay a fine.  Anyone who had run a Ponzi scam of this size denominated in dollars would be looking at hard time and would probably now be awaiting trial from behind bars or, if bailed out, the bail would be enormous.

Has anyone bothered reporting it to the Police as a fraud though? Maybe it might have been ignored a while back (what is Bitcoin etc) but I doubt it would be now if it went to the right people with evidence.

The fact is that most people on here want Bitcoin to grow and be accepted as a currency and with that comes responsibilities, such as obeying the laws that relate to all other currencies......

Report to the police? Be careful about reporting to the police. People have lost valuables, lives of relatives, even their own life when or because of reporting something to the police.

Reporting something to the police is usually pretty safe for white people judging from the reports I've seen.  So far at least, though there does seem to be a movement towards them being generally more intimidating.  Make sense because this is the best force multiplication factor and there probably looking forward to a society in which they'll be needing it.

[darkmule]

Sadly true.  Look at what happened to pirateat40.  Oh, yeah.  Nothing.  There's a civil suit by the SEC, which means the worst he'd have to do is return the money he stole and pay a fine.  Anyone who had run a Ponzi scam of this size denominated in dollars would be looking at hard time and would probably now be awaiting trial from behind bars or, if bailed out, the bail would be enormous.

Has anyone bothered reporting it to the Police as a fraud though? Maybe it might have been ignored a while back (what is Bitcoin etc) but I doubt it would be now if it went to the right people with evidence.

The SEC shares responsibility with the FBI and FinCEN for determining whether a crime has occurred, and the facts in the civil complaint they filed unambiguously state that Shavers was running an illegal Ponzi scam, which is a criminal as well as civil violation.  Someone, somewhere in a position to prosecute considered it and chose not to do so, if not many someones.  This is somewhat similar to how Full Tilt could and should have been prosecuted just for their Ponzi-like activity and criminal self-dealing, but instead, were prosecuted for running a poker site (technically mainly for using banks in doing so).

[mainline]

Sadly true.  Look at what happened to pirateat40.  Oh, yeah.  Nothing.  There's a civil suit by the SEC, which means the worst he'd have to do is return the money he stole and pay a fine.  Anyone who had run a Ponzi scam of this size denominated in dollars would be looking at hard time and would probably now be awaiting trial from behind bars or, if bailed out, the bail would be enormous.

Has anyone bothered reporting it to the Police as a fraud though? Maybe it might have been ignored a while back (what is Bitcoin etc) but I doubt it would be now if it went to the right people with evidence.

The SEC shares responsibility with the FBI and FinCEN for determining whether a crime has occurred, and the facts in the civil complaint they filed unambiguously state that Shavers was running an illegal Ponzi scam, which is a criminal as well as civil violation.  Someone, somewhere in a position to prosecute considered it and chose not to do so, if not many someones.  This is somewhat similar to how Full Tilt could and should have been prosecuted just for their Ponzi-like activity and criminal self-dealing, but instead, were prosecuted for running a poker site (technically mainly for using banks in doing so).

Pirateat40 most likely cooperated in exchange for reduced/dropped charges.  If he had dirt to trade, he probably did.

[Bitco]

An MSB is obligated to file a SAR when the transaction meets the criteria.
The MSB is prohibited to notify the client that a SAR has been filed.
Even when directly asked or subpoenaed an MSB is prohibited from indicating if a SAR has or has not been filed.

An MSB is obligated to file a SAR when the transaction meets the criteria, but the criteria are not secret.

The MSB is prohibited to notify the client that a SAR has been filed, but the client should be able to figure out if the MSB was obligated to file a SAR.

The only thing the client is really prohibited from knowing is whether the MSB filed an unnecessary SAR.

[jballs]

An MSB is obligated to file a SAR when the transaction meets the criteria.
The MSB is prohibited to notify the client that a SAR has been filed.
Even when directly asked or subpoenaed an MSB is prohibited from indicating if a SAR has or has not been filed.

An MSB is obligated to file a SAR when the transaction meets the criteria, but the criteria are not secret.

The MSB is prohibited to notify the client that a SAR has been filed, but the client should be able to figure out if the MSB was obligated to file a SAR.

The only thing the client is really prohibited from knowing is whether the MSB filed an unnecessary SAR.

The criteria are vague enough that there is no such thing as an unnecessary SAR.

[DeathAndTaxes]

An MSB is obligated to file a SAR when the transaction meets the criteria.
The MSB is prohibited to notify the client that a SAR has been filed.
Even when directly asked or subpoenaed an MSB is prohibited from indicating if a SAR has or has not been filed.

An MSB is obligated to file a SAR when the transaction meets the criteria, but the criteria are not secret.

The MSB is prohibited to notify the client that a SAR has been filed, but the client should be able to figure out if the MSB was obligated to file a SAR.

The only thing the client is really prohibited from knowing is whether the MSB filed an unnecessary SAR.

Not exactly, the criteria is rather vague and open ended.  The intent of the requirement is for financial institutions (including MSBs) to file reports on activity that is suspicious.  Suspicious doesn't mean criminal, or known to be unlawful beyond a reasonable doubt, it simply means suspicious.

From FinCEN point of view there is no such thing as an unnecessary SAR.  SAR doesn't mean criminal activity.  Plenty of criminal activity simply never warrants a SAR because there is no circumstance that creates any level of suspicion by the financial institution.  On the other hand every day thousands of SARs are filed on legitimate activity.

It is a suspicious activity report not a criminal activity report.

http://www.fincen.gov/financial_institutions/msb/msbsar.html

[jbreher]

What police? Remember you people abolished all governments. There is no police anymore.

Oh stop it. Yes, he was reported to the police. It was the sole 'remedy' available to us under the current legal structure.

It would likely have been much more effective for several of us -- whom had been defrauded -- to find him, strap him into a chair, put a c-clamp on his knee, and tighten it another quarter turn every minute, until he coughed up his private keys. By this means, we may have recovered some meaningful fraction of our losses.

But doing this would have made us -- the defrauded -- subject to being cast in a cage, due to our oh-so-civilized legal system, which is demonstrably unconcerned with justice.

As it stands, the law knows where he is (running free), he has stolen our property, and we've got squat.

Don't talk to me about 'governments', as if they are any kind of solution.

[alekfor]

Maybe this is a bad news for bitcoin world... dont worry, more ppl can still stolen xD

[Bitco]

Not exactly, the criteria is rather vague and open ended.  The intent of the requirement is for financial institutions (including MSBs) to file reports on activity that is suspicious.  Suspicious doesn't mean criminal, or known to be unlawful beyond a reasonable doubt, it simply means suspicious.

From FinCEN point of view there is no such thing as an unnecessary SAR.  SAR doesn't mean criminal activity.  Plenty of criminal activity simply never warrants a SAR because there is no circumstance that creates any level of suspicion by the financial institution.  On the other hand every day thousands of SARs are filed on legitimate activity.

It is a suspicious activity report not a criminal activity report.

http://www.fincen.gov/financial_institutions/msb/msbsar.html

The actual wording in 31 USC § 5318 (g) is "relevant to a possible violation of law or regulation."

So yes, unlawful is part of it.  It doesn't have to be beyond a reasonable doubt.

The non-disclosure requirement applies to reports made "voluntarily or pursuant to this section or any other authority".  So it covers SARs that are required, and also reports that are made voluntarily.

Perhaps FinCEN does not consider any SAR "unnecessary", but MSBs are required to report certain things per 31 CFR §1022.320.  Reports not required by this regulation could be considered voluntary.

[BADecker]

What police? Remember you people abolished all governments. There is no police anymore.

Oh, that's right. Forgot about that. No more governments. Anybody ever try using it in court?

http://i-uv.com/oppt-absolute/original-oppt-ucc-filings/

[DeathAndTaxes]

Not exactly, the criteria is rather vague and open ended.  The intent of the requirement is for financial institutions (including MSBs) to file reports on activity that is suspicious.  Suspicious doesn't mean criminal, or known to be unlawful beyond a reasonable doubt, it simply means suspicious.

From FinCEN point of view there is no such thing as an unnecessary SAR.  SAR doesn't mean criminal activity.  Plenty of criminal activity simply never warrants a SAR because there is no circumstance that creates any level of suspicion by the financial institution.  On the other hand every day thousands of SARs are filed on legitimate activity.

It is a suspicious activity report not a criminal activity report.

http://www.fincen.gov/financial_institutions/msb/msbsar.html

The actual wording in 31 USC § 5318 (g) is "relevant to a possible violation of law or regulation."

So yes, unlawful is part of it.  It doesn't have to be beyond a reasonable doubt.

The non-disclosure requirement applies to reports made "voluntarily or pursuant to this section or any other authority".  So it covers SARs that are required, and also reports that are made voluntarily.

Perhaps FinCEN does not consider any SAR "unnecessary", but MSBs are required to report certain things per 31 CFR §1022.320.  Reports not required by this regulation could be considered voluntary.

I think we are going around in circles.

MSBs are required to report certain things per 31 CFR §1022.320

1022.320 is extremely broad and vague, as pointed by others.  

You have no idea if a tx you believe is routine, is reported by an MSB because THEY believe it fits the guidelines in 1022.320.  The idea that you would know what rises to (as an example) "serves no business or apparent lawful purpose" in the mind of the compliance officer of every single financial institution (to include MSBs) in the world, all of which are prohibited to share such criteria with you, and for whom there is a penalty for not reporting (if regulators later believe the report was intentionally withheld), is just silly.

For example say you transferred $5,000 to PayPal but you mistyped and only wanted to transfer $500.  So when it clears you transfer back $4,500 but pick the wrong account and transfer it into a different account linked to your PayPal account.  It is possible (I have no idea only PayPal would know) that they would view that as "serves no business or apparent lawful purpose", it is also possible that they wouldn't.  The criteria is very subjective.  Likewise if you deposited cash into your bank account and then later had an emergency that day and withdrew cash from a different branch that might also (once again solely up to the determination of the financial institution) result in a SAR.  I am not saying it would, because I am not foolish enough to think I can predict the actions of thousands of different entities when it comes to a loose and subjective set of criteria.

You may think you know when a SAR is required or not but the criteria is so broad and vague, that a given activity may be reported by one entity and not reported by another.  

[jballs]

Not exactly, the criteria is rather vague and open ended.  The intent of the requirement is for financial institutions (including MSBs) to file reports on activity that is suspicious.  Suspicious doesn't mean criminal, or known to be unlawful beyond a reasonable doubt, it simply means suspicious.

From FinCEN point of view there is no such thing as an unnecessary SAR.  SAR doesn't mean criminal activity.  Plenty of criminal activity simply never warrants a SAR because there is no circumstance that creates any level of suspicion by the financial institution.  On the other hand every day thousands of SARs are filed on legitimate activity.

It is a suspicious activity report not a criminal activity report.

http://www.fincen.gov/financial_institutions/msb/msbsar.html

The actual wording in 31 USC § 5318 (g) is "relevant to a possible violation of law or regulation."

So yes, unlawful is part of it.  It doesn't have to be beyond a reasonable doubt.

The non-disclosure requirement applies to reports made "voluntarily or pursuant to this section or any other authority".  So it covers SARs that are required, and also reports that are made voluntarily.

Perhaps FinCEN does not consider any SAR "unnecessary", but MSBs are required to report certain things per 31 CFR §1022.320.  Reports not required by this regulation could be considered voluntary.

I think we are going around in circles.

MSBs are required to report certain things per 31 CFR §1022.320

1022.320 is extremely broad and vague, as pointed by others.  

You have no idea if a tx you believe is routine, is reported by an MSB because THEY believe it fits that criteria.  The idea that you would know what rises to (as an example) "serves no business or apparent lawful purpose" in the mind of the compliance officer of a third party prohibited to share such criteria with you, and for whom there is a penalty for not reporting if regulators later believe he intentionally withheld the report, is just silly.

For example say you transfered $5,000 to PayPal but you mistyped and only wanted to transfer $500.  So when it clears you transfer back $4,500 but pick the wrong account and transfer it into a different account linked to your PayPal account.  It is possible (I have no idea only PayPal would know) that they would view that as "serves no business or apparent lawful purpose".  If you deposited cash into your bank account and then later had an emergency that day and withdrew cash from a different branch that might also (once again solely up to the determination of the financial institution) result in a SAR.  

You may think you know when a SAR is required or not but the criteria is so broad and vague that the same activity may be reported by one entity and not reported by another.   

I read this three times and all I could think to add was this

http://www.youtube.com/watch?v=6WedNV8TR_0


final comment on the topic I suppose...

[darkmule]

Pirateat40 most likely cooperated in exchange for reduced/dropped charges.  If he had dirt to trade, he probably did.

There's no indication any criminal action was filed let alone settled.  There's no indication anyone but the SEC is involved, which has no independent power to bring a criminal prosecution.  If the government had settled, it wouldn't be on any less terms than a return of the stolen money.  However, the civil action over the stolen money is still proceeding in federal court.  There is no good reason to believe there was ever a criminal case for there to be a plea bargain.

[darkmule]

Perhaps FinCEN does not consider any SAR "unnecessary", but MSBs are required to report certain things per 31 CFR §1022.320.  Reports not required by this regulation could be considered voluntary.

The correspondence between Shrem and co-founder Gareth Nelson made it clear that both co-founder and Shrem viewed the activity of the BTCKing account as suspicious and as exceeding the size of transactions that would qualify for mandatory reporting.  Shrem assured Nelson that he'd handle it, but instead, gave BTCKing advice on how to structure such transactions in the future, instead of performing his mandatory (and assumed) duty to report suspicious activity.

From 31 CFR § 1022.320

(2) A transaction requires reporting under the terms of this section if it is conducted or attempted by, at, or through a money services business, involves or aggregates funds or other assets of at least $2,000 (except as provided in paragraph (a)(3) of this section), and the money services business knows, suspects, or has reason to suspect that the transaction (or a pattern of transactions of which the transaction is a part):
(i) Involves funds derived from illegal activity or is intended or conducted in order to hide or disguise funds or assets derived from illegal activity (including, without limitation, the ownership, nature, source, location, or control of such funds or assets) as part of a plan to violate or evade any Federal law or regulation or to avoid any transaction reporting requirement under Federal law or regulation;
(ii) Is designed, whether through structuring or other means, to evade any requirements of this chapter or of any other regulations promulgated under the Bank Secrecy Act; or
(iii) Serves no business or apparent lawful purpose, and the reporting money services business knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction.
(iv) Involves use of the money services business to facilitate criminal activity.

Arguably, the activity involved falls under the "illegal activity" in (i) and the "criminal activity in (iv), but even if it doesn't, the "avoid any transaction reporting requirement" in (i) and the "structuring" language in (ii) certainly apply.  While there is a lot of ground where this language is arguably ambiguous and there are many situations where it might be difficult to determine whether a certain activity triggered a responsibility to file an SAR, this case is not one of them.

Shrem clearly knew the activities of the BTCKing account were in excess of reporting requirements, and explicitly made his knowledge clear to Nelson.  Rather than file an SAR, he allowed the activities to continue under a variety of ruses so transparent that Nelson continued objecting to him allowing them.

Frankly, arguably, they have enough to go after Nelson, too, but he did a much better job covering his ass in his correspondence.  Also, perhaps he's been being cooperative, so I'd tread carefully if you've had any questionable dealings with that guy.  I find it curious the only paper about him in this case so far is a few mentions of him in the indictment, and wouldn't be surprised in the least if he turns into a witness friendly to the prosecution or is busily hanging out other people to dry to save his own skin.  To me, it seems they have, at the very least, enough to slap him with a fine.

Now, I don't think the more serious money laundering case is as clear-cut as the prosecution would have us believe, though.  I think it's there more to scare him into pleading to the non-reporting charge or some lesser included offense of the money laundering case.

[mainline]

Pirateat40 most likely cooperated in exchange for reduced/dropped charges.  If he had dirt to trade, he probably did.

There's no indication any criminal action was filed let alone settled.  There's no indication anyone but the SEC is involved, which has no independent power to bring a criminal prosecution.  If the government had settled, it wouldn't be on any less terms than a return of the stolen money.  However, the civil action over the stolen money is still proceeding in federal court.  There is no good reason to believe there was ever a criminal case for there to be a plea bargain.

There seems to be a surreal level of abstraction and disconnect on this forum when people talk abut law.  If you don't think TLAs shoot the shit with each other, or that people are not questioned and pressed for info without being formally charged, you are spectacularly uninformed.  As in never bothered to watch a cop show or got a parking ticked level of uninformed.  Forget IRL experience. 

[darkmule]

Pirateat40 most likely cooperated in exchange for reduced/dropped charges.  If he had dirt to trade, he probably did.

There's no indication any criminal action was filed let alone settled.  There's no indication anyone but the SEC is involved, which has no independent power to bring a criminal prosecution.  If the government had settled, it wouldn't be on any less terms than a return of the stolen money.  However, the civil action over the stolen money is still proceeding in federal court.  There is no good reason to believe there was ever a criminal case for there to be a plea bargain.

There seems to be a surreal level of abstraction and disconnect on this forum when people talk abut law.  If you don't think TLAs shoot the shit with each other, or that people are not questioned and pressed for info without being formally charged, you are spectacularly uninformed.

Exactly what on Earth did I say that you decided to turn into this outlandish straw man and then attack?  I think I was very, very clear that other law enforcement agencies would, almost as a matter of course, have been aware of this case in some form or another and would have had to have made a conscious decision not to prosecute.  Read better next time, please.

[cryptoanarchist]

What's so ridiculous is that you're all arguing over just another made-up news story. Shrem isn't in jail - of course. He's just another actor in the Masonic Theater.

The news was crafted just for you, right in time for their regulations hearing.

[Bitco]

Arguably, the activity involved falls under the "illegal activity" in (i) and the "criminal activity in (iv), but even if it doesn't, the "avoid any transaction reporting requirement" in (i) and the "structuring" language in (ii) certainly apply.  While there is a lot of ground where this language is arguably ambiguous and there are many situations where it might be difficult to determine whether a certain activity triggered a responsibility to file an SAR, this case is not one of them.

It was not "funds derived from illegal activity".  Allegedly, some of the funds might later have been used to buy drugs, but that hadn't yet happened. So (i) is out.

It was not structured to avoid the currency reporting requirement.   Shrem and BTCKing allegedly discussed $1000 and $4000.  The currency reporting requirement is $10,000.  Perhaps it could be viewed as evading some other requirement, but there isn't a clear case for (ii) here.

What about (iv) use of the money services business to facilitate criminal activity?  Perhaps.