BitInstant CEO arrested by FBI

[leopard2]

if his counsel advised him to stop and the did not, then he deserves the Darwin award  

[1715366573]

1715366573

[1715366573]

1715366573

[1715366573]

1715366573

[1715366573]

1715366573

[DeathAndTaxes]

If Shrem has a good lawyer, maybe they'll try to negotiate a settlement similar to the HSBC case.

HSBC's "deal" involved paying $5B, accepting a $20B plus prison time suspended sentence with 5 year probation, and the not so subtle threat that if HSBC went down it would take down the US financial system, and plunge the country back into recession.

Not sure that is going to work here.

[jbreher]

There are several oddities in the complaint. As just one example, the assertion is made therein that SR was an 'illegal website'. WTF is an illegal website? Sure, it was a website that allowed some of its users to engage in illegal activity. But the distinction between that and 'illegal website' is significant.

[jbreher]

Anyway since it is not one of the charges it is not key.

Code:

#include <std_disclaimer.h> // IANAL

Not sure. If the money is not known to be used for an illegal purpose, can any of the activity constitute laundering?

I would hope there is room here for a good lawyer to beat this.

AFAIK, it is not illegal in and of itself to sell XBT for FRN. Agreed?

The fact that this sale happens on a site that also facilitates the illegal sale of drugs would seem irrelevant to me. Well, not _irrelevant_, but defensible. The FRN <> XBT transaction itself is not rendered necessarily illegal by association (at least I would think).

If there was such a thing as an 'illegal website', it would simplify the government's position. It might conceivably make such FRN <> XBT transactions happening upon such a site to be necessarily illegal. But I don't think there is any such thing as an 'illegal website'.

And if the FRN <> XBT transactions are not illegal, how could facilitation of any such transactions be money laundering?

Yes, I understand that statutory definitions require reporting of any 'suspicious activity'. However, if the activity (by BTCKing) is known (by Shrem) to not be illegal in and of itself, how could it be suspicious?

cue(wrath);

ETA: I would not be surprised if the wording "illegal website" was included to puposefully inflate the possible reaction in the mind of the reader. I expect this trope to be repeated throughout whatever proceedings will follow.

[jbreher]

But what if Shrem knew it to not only be illegal but Shrem's lawyer told Shrem to ban the guy because it was illegal? 

Oy Vey. What if, what if... whaat iiiif?

I think de gubmint must first establish that 'it' (presumably BTCKing selling XBT for FRN) is illegal. I think this is already a stretch goal. Ever sell bitcoins for cash, Goat? (Don't answer that, just think about whether you might have once found yourself in an instance where you might) Sketchy website or not, I don't think this is, in and of itself, illegal.

[TheButterZone]

But what if Shrem knew it to not only be illegal but Shrem's lawyer told Shrem to ban the guy because it was illegal? 

Oy Vey. What if, what if... whaat iiiif?

I think de gubmint must first establish that 'it' (presumably BTCKing selling XBT for FRN) is illegal. I think this is already a stretch goal. Ever sell bitcoins for cash, Goat? (Don't answer that, just think about whether you might have once found yourself in an instance where you might) Sketchy website or not, I don't think this is, in and of itself, illegal.

He is not being charged with selling BTC for fiat. He is being charged with money laundering.

Selling BTC for fiat will be defined as money laundering by totalitarians if it isn't already.

[TheButterZone]

Selling BTC for fiat will be defined as money laundering by totalitarians if it isn't already.

Not in the USA, FINCen just said it was not an action even requiring one to register.

Government says a lot of things, and does a lot of other things.

[lonelyminer (Peter Šurda)]

He is not being charged with selling BTC for fiat. He is being charged with money laundering. You do know there is a difference? Maybe you are just trolling...

Actually, he's not being charged with money laundering, but conspiracy to commit money laundering. This means he is not alleged to commit money laundering himself, but helped others do it. He logically cannot have committed money laundering (disguising the illegal origin of money), as the illegal trades on Silk Road happened after BitInstant/Charlie sold Bitcoins to BTCking. What we have here is called "reverse money laundering", when "clean" money is used to commit crimes.

That being said, I regrettably agree with Goat that it does not look good for Charlie. Even though it does not look like he committed money laundering, that's not enough to get him off the hook.

[Bitcoinpro]

Governments and Empire have been the running the silk road drug empire since it was donkeys on gravel road.

Ever heard of the Opium wars.

[jbreher]

He is not being charged with selling BTC for fiat. He is being charged with money laundering. You do know there is a difference? Maybe you are just trolling...

Yes, I understand the difference. Please reread what I wrote to begin with. Or follow this...

My naive definition of 'money laundering'* is moving money that was obtained through illegal means in order to conceal its illegal derivation.

The point is that, if this be the definition (again, perhaps naive), then if the money was not obtained illegally, nothing one does with that money is to be considered 'laundering'.

So in my mind, it comes back to whether or not selling XBT for FRN is in and of itself illegal. And if not, does associating through a venue that is also used for illegal purposes make it illegal? My guess is that this is a defensible position.

Though I'll agree with you - the feds usually make whatever they want stick.

[DeathAndTaxes]

My naive definition of 'money laundering'* is moving money that was obtained through illegal means in order to conceal its illegal derivation.

The point is that, if this be the definition (again, perhaps naive), then if the money was not obtained illegally, nothing one does with that money is to be considered 'laundering'.

The actual charge is "conspiracy to engage in money laundering" not money laundering.
http://www.justice.gov/usao/nys/pressreleases/January14/SchremFaiellaChargesPR/Faiella,%20Robert%20M.%20and%20Charlie%20Shrem%20Complaint.pdf
(see count #3)

A conspiracy charge (and this applies to any crime) doesn't require all conspirators to be directly engaged in the underlying crime.  If they were, the prosecutor would just charge them with the underlying crime (it is often easier to prove than the conspiracy).  All that is requires for a conspiracy charge is for each person to further the underlying crime by action and intent.  

Of course the fact that BitInstant is/was a MSB, and Charlie was the compliance officer, isn't going to go over well in court.

Pro tip #1: Don't register as a MSB if you intend to violate the obligations of a MSB.
Pro tip #2: Don't accept the role of the company compliance officer if you will feel tempted to break those rules in the future.

[QuestionAuthority]

My naive definition of 'money laundering'* is moving money that was obtained through illegal means in order to conceal its illegal derivation.

The point is that, if this be the definition (again, perhaps naive), then if the money was not obtained illegally, nothing one does with that money is to be considered 'laundering'.

The actual charge is "conspiracy to engage in money laundering" not money laundering.
http://www.justice.gov/usao/nys/pressreleases/January14/SchremFaiellaChargesPR/Faiella,%20Robert%20M.%20and%20Charlie%20Shrem%20Complaint.pdf
(see count #3)

A conspiracy charge (and this applies to any crime) doesn't require all conspirators to be directly engaged in the underlying crime.  If they were, the prosecutor would just charge them with the underlying crime (it is often easier to prove than the conspiracy).  All that is requires for a conspiracy charge is for each person to further the underlying crime by action and intent.  

Of course the fact that BitInstant is/was a MSB, and Charlie was the compliance officer, isn't going to go over well in court.

Pro tip #1: Don't register as a MSB if you intend to violate the obligations of a MSB.
Pro tip #2: Don't accept the role of the company compliance officer if you will feel tempted to break those rules in the future.

Essentially you're saying Charlie is fucked. What is the penalty for that then? 20 years and fines? Just fines?

[QuestionAuthority]

My naive definition of 'money laundering'* is moving money that was obtained through illegal means in order to conceal its illegal derivation.

The point is that, if this be the definition (again, perhaps naive), then if the money was not obtained illegally, nothing one does with that money is to be considered 'laundering'.

The actual charge is "conspiracy to engage in money laundering" not money laundering.
http://www.justice.gov/usao/nys/pressreleases/January14/SchremFaiellaChargesPR/Faiella,%20Robert%20M.%20and%20Charlie%20Shrem%20Complaint.pdf
(see count #3)

A conspiracy charge (and this applies to any crime) doesn't require all conspirators to be directly engaged in the underlying crime.  If they were, the prosecutor would just charge them with the underlying crime (it is often easier to prove than the conspiracy).  All that is requires for a conspiracy charge is for each person to further the underlying crime by action and intent.  

Of course the fact that BitInstant is/was a MSB, and Charlie was the compliance officer, isn't going to go over well in court.

Pro tip #1: Don't register as a MSB if you intend to violate the obligations of a MSB.
Pro tip #2: Don't accept the role of the company compliance officer if you will feel tempted to break those rules in the future.

Essentially you're saying Charlie is fucked. What is the penalty for that then? 20 years and fines? Just fines?

25 years, maybe fines. but he is being charge with more than one thing.

What shitty legal system. The people you want to see rot in prison, like Trendon Shavers, will get off without a scratch and Charlie will rot. Fuck the world.

[empoweoqwj]

Nobody said life was fair. In particular, nobody said the legal system was fair. "The law is an ass" sums it up best.

[TheButterZone]

Nobody said life was fair. In particular, nobody said the legal system was fair. "The law is an ass rapist" sums it up best.

ftfy

Literally, at times.

http://www.nydailynews.com/news/national/new-mexico-man-sues-authorities-anally-probed-8-times-article-1.1507651
http://www.youtube.com/watch?feature=player_embedded&v=EQ6xemaR6Og

[DeathAndTaxes]

Essentially you're saying Charlie is fucked. What is the penalty for that then? 20 years and fines? Just fines?

Well that is up to a jury.   I think the conspiracy charge might be beatable and the operating an unlicensed money transmission business is likely just garbage to pad the complaint.  Still the charges on willfully failing to file mandatory reports seem pretty hard to beat.  

The civil penalties (which would be against Charlie and the company jointly) are $25,000 per incident.  The complaint never states the number of incidents but if we assume ~$1M /$500 = 20,000 transactions.  Now the other party often exceeded the limits (which Charlie had to clean up) so lets say it was only 10,000 incidences which mandated reporting @ $25,000 penalty each that is $250 million?  Ok say it was only 5,000 and the govt can only prove 2,000 of those.  At $25K a pop that is still $50M likely more than the combined assets of both the company and the man.

The criminal penalties for willful non-compliance are 5 years, 10 years if in connection with another crime.
http://www.law.cornell.edu/cfr/text/31/1010.840

Granted I am not a lawyer and this isn't legal advice but lets assume he beats or has dismissed all the other charges.  The charge for willfully violating the BSA while less tha money laundering still carries some weight.  Then again maybe they let him plead out.  Maybe the prosecutor will accept 5 years probation, and enough fines to force the company into bankruptcy as the "pound of flesh".  If the prosecutor has a strong case and is looking to prove a point, he could go for a lot more.   Reading the complaint the prosecutor appears to be holding a good hand (at least on the lesser charges) so a lot will depends on what the prosecutor wants to do.

[Entropy-uc]

  Probation and fines which are enough to bankrupt him and the company.  Still if the prosecutor has a strong case and is looking to prove a point, well he could go for a lot more.

After watching the New York regulatory hearings is there any doubt the prosecutor is looking to prove a point?

[DeathAndTaxes]

 Probation and fines which are enough to bankrupt him and the company.  Still if the prosecutor has a strong case and is looking to prove a point, well he could go for a lot more.

After watching the New York regulatory hearings is there any doubt the prosecutor is looking to prove a point?

No doubt but I guess it comes down to how far is he willing to go.  Knowing HSBC executives for example laundered billions and faced not a day in jail will he still seek the max jail time for the employee of this company in order to prove a (hypcritical) point?  Or will he be satisfied with destroying the company along with probation and a plea?  I guess we'll find out soon enough.

[Entropy-uc]

 Probation and fines which are enough to bankrupt him and the company.  Still if the prosecutor has a strong case and is looking to prove a point, well he could go for a lot more.

After watching the New York regulatory hearings is there any doubt the prosecutor is looking to prove a point?

No doubt but I guess it comes down to how far is he willing to go.  Knowing HSBC executives for example laundered billions and faced not a day in jail will he still seek the max jail time for the employee of this company in order to prove a (hypcritical) point?  Or will he be satisfied with destroying the company along with probation and a plea?  I guess we'll find out soon enough.

I honestly doubt he will get more than 3 to 5 years. If he gets 25 years there will some backlash not cuz he did a crime but because of how unfair/balanced the punishment was.

I would agree.  But I doubt it goes to court.  The prosecutor will threaten 25 years, and settle something on the order of 3 to 5 plus ruinous fines.

[empoweoqwj]

 Probation and fines which are enough to bankrupt him and the company.  Still if the prosecutor has a strong case and is looking to prove a point, well he could go for a lot more.

After watching the New York regulatory hearings is there any doubt the prosecutor is looking to prove a point?

No doubt but I guess it comes down to how far is he willing to go.  Knowing HSBC executives for example laundered billions and faced not a day in jail will he still seek the max jail time for the employee of this company in order to prove a (hypcritical) point?  Or will he be satisfied with destroying the company along with probation and a plea?  I guess we'll find out soon enough.

I honestly doubt he will get more than 3 to 5 years. If he gets 25 years there will some backlash not cuz he did a crime but because of how unfair/balanced the punishment was.

I would agree.  But I doubt it goes to court.  The prosecutor will threaten 25 years, and settle something on the order of 3 to 5 plus ruinous fines.

How can he pay the fines? They've taken control of all his BTC. Personally, I think they will try to hammer him, but it depends very much on who he is serving up to the feds. If he spills all, he might get away with a short term. If not, 20 years.