State of Florida attacks Bitcoin

[EchoingUprise]

Florida is an ideal pro-dollars state. The reason is, it has lots of retirees who are on Social Security. Retire to Florida the saying used to be. And that's what thousands of elderly people have done.

The state has been living off the money those retirees spend, and neither the retirees or the state want anything to do with a form of trade that could destroy money and their way of life.

Think of it. If Bitcoin became popular, and people started using it in place of money in a big way, we could actually see a collapse of the money system. That would mean the collapse of both the resources for the retired elderly, and the state as well.

While this will not likely happen for some time, Florida is having nothing to do with it. They are "nipping it in the bud" so to speak, and trying to earn some free money off the accused, who probably won't get their money back even if the charges are dropped.

I think your logic is a bit off, even if Florida is truly anti-bitcoin. If Bitcoin became popular, it would still be spent just like money and sales tax would still be collected at the retail level, so Florida would not make any less of their revenue. Only case where Florida would not make revenue, is if laws came down that said Bitcoin is treated as a commodity and therefore when you bought something with it, it would be more so considered a trade of one good for another and no sales tax would be collected in that case (I believe).

What you say is true. However, the use of Bitcoin, being decentralized, would cause such an increase of hard-to-track under-the-table activity, that if it were in widespread use, Bitcoin could change the whole appearance of money movement and trading. It might even cause the PEOPLE to review how they are being misrepresented by all the government officials, none of which obeys his/her oath of office. Nobody who is satisfied with things the way they are wants that.

I will agree that Bitcoin does make it harder to track under the table activity in a way, but I have read many news articles stating the US Dollar is still the easiest way to perform any "illegal" actives. While Bitcoin may cause the people to review the government, that is doubtful. I fully agree that most government officials act in their own best interest and not in the best interest of the people they are supposed to represent, but I hope people will finally wake up on their own. If Bitcoin happens to be that catalyst, then so be it. If not, something should eventually come along.

[darkmule]

Entrapment has been and always will be a common tactic amongst law enforcement in America.

If they know people wan't prostitutes they will set up fake prostitution stings , if they know people want drugs they will have undercovers selling drugs, if they know people want to launder their illegally gained funds they will set up sting ops that would attract those type of people.

I don't think this is an attack on bitcoin so much,  just another example of police going undercover and offering illegal things/services and then see who bites.

In a normal case of entrapment, everyone involved knows the product is illegal.  Bitcoin is not illegal.

Unless there's more to this than just selling Bitcoin, which is a commodity, not a recognized form of money that goes through the banking system, this would be setting people up for something they had no reason even to believe was illegal, because this is a completely novel interpretation of the law.

Assuming, that is, that there is nothing more than selling Bitcoin involved here.

[darkmule]

I wouldn't jump to conclusions from the sparse facts in these news stories.  I'd like to see the actual complaints.  The media often gets things completely wrong.  One story, for instance, claims they're using the state equivalent of the statute used on Charlie Shrem, but doesn't actually say which statute (there are two charges in that complaint) or what part of it, or what they're actually alleging other than that people sold Bitcoin.

http://www.scribd.com/doc/205808113/Def-Espinoza

What a horribly written document.  Of course, most documents written by police are.  The facts alleged here, though, are that they arranged a meet with this guy where they told him they were going to use Bitcoin to buy stolen credit card numbers from Russian criminals.  In other words, he knew the purchase was going to go toward criminal activities.

Seriously, people, anyone who ever sells Bitcoin, if someone tells you something like that, tell them to GTFO.  That person is either an idiot or a cop.

http://www.scribd.com/doc/205808118/Def-Reid

And this sting used exactly the same rationale.  The undercover officer told the suspect he intended to purchase stolen credit card numbers with the Bitcoin.  That doesn't sound very smart to me.  Anyone who hears that and then goes ahead with it anyway is at best aiding and abetting.

I suspected there was more to this than just selling Bitcoin.  The worrisome aspect is if this ends in something other than a plea deal, it might set a bad precedent that selling Bitcoin does, in fact, constitute "money transmittal."  I think buying Bitcoin, if done as a business, might, because you'd actually be delivering money.  Someone selling Bitcoin, though, is just selling a commodity, more like someone selling stuff on Amazon.

[BTCisthefuture]

Entrapment has been and always will be a common tactic amongst law enforcement in America.

If they know people wan't prostitutes they will set up fake prostitution stings , if they know people want drugs they will have undercovers selling drugs, if they know people want to launder their illegally gained funds they will set up sting ops that would attract those type of people.

I don't think this is an attack on bitcoin so much,  just another example of police going undercover and offering illegal things/services and then see who bites.

In a normal case of entrapment, everyone involved knows the product is illegal.  Bitcoin is not illegal.

Unless there's more to this than just selling Bitcoin, which is a commodity, not a recognized form of money that goes through the banking system, this would be setting people up for something they had no reason even to believe was illegal, because this is a completely novel interpretation of the law.

Assuming, that is, that there is nothing more than selling Bitcoin involved here.

Knowing that the person you're selling bitcoin to is using them as a means to make an anonymous purchase of stolen credit card information would be considered aiding in money laundering as far as I see it.  Selling bitcoin to someone is fine,  selling bitcoin to someone who has told you he's converting his dollars so he can buy stolen credit card information with the bitcoins and he's told you this multiple times over a 2 month span is where things start to turn illegal.

Same would be true if someone approached you with cash and told you the money was stolen so he needed to exchange it for your cash so it wouldn't come back to him, that would be a similar situation.  Trading cash isn't illegal, but in that situation you'd be helping someone launder money and you'd be aware of it since they told you the reason for the exchange.

So just to clarify, a lot of articles are leaving out the part about the undercover cop telling the bitcoin seller he needed the bitcoin to buy stolen cc info with it, supposedly the undercover agent said this multiple times over a 2 month span so the bitcoin seller has little excuse for saying he "didn't know"

[moni3z]

Florida and NY are the two states that always go after payment processors who don't have state licenses to operate. Avoid those 2 states at all costs or pay off their corrupt legislators to give you licenses. LE posing as Bitcoin traders and trying to get somebody to trade over $10k with them for no ID so they can extort them with laundering charges and seize all their money was bound to happen.

[darkmule]

Florida and NY are the two states that always go after payment processors who don't have state licenses to operate. Avoid those 2 states at all costs or pay off their corrupt legislators to give you licenses. LE posing as Bitcoin traders and trying to get somebody to trade over $10k with them for no ID so they can extort them with laundering charges and seize all their money was bound to happen.

Except they didn't do just that.  They approached them claiming to want to buy Bitcoin to commit outright crimes.  But yes, New York is the most likely state to simply go right after Bitcoin sellers for no other reason than just selling Bitcoin.  These Florida LEAs felt it necessary to do a sting.  Otherwise, they'd have just arrested them the first time they showed up and sold a small about of Bitcoin.

How smart could these dudes have been?  "Hey, mon, I'm not a narc, really!  I just want to buy this coin to go commit a bunch of crimes!  You okay with that, brah?"  And these clowns agreed to do it.

[odolvlobo]

Thanks for posting links to the complaints.

It is interesting that the description of Bitcoin was fairly accurate and concise. That surprised me some.

I laughed when I read "Special Agent Ponzi, United States Secret Service, determined that Michaelhack's fee was ...". Is that his real name? That's hilarious!

[ducatitalia]

While there are certainly elements of standard criminal prosecution here, along the lines of the stolen credit cards issue...it feels as though the simple act of selling BTC for profit is really in question.  It would seem that BTC should be treated like any other asset under capital gains laws, but the "money laundering" aspects are really not clear at this point...could the simple act of buying and selling BTC in and out of fiat alone for profit become a crime...?  Applying existing law to unprecedented economic developments and technology is always a challenge, but it seems as though there could be some very real cause for concern regarding who may get caught up in the crossfire of transition.  At least until the laws are clarified regarding application to digital currency.

[shawshankinmate37927]

I laughed when I read "Special Agent Ponzi, United States Secret Service, determined that Michaelhack's fee was ...". Is that his real name? That's hilarious!

I assumed it was an alias to protect his true identity since he's involved in undercover sting operations.

[russokai]

You missed a key part of the story where the undercover agent told the bitcoin seller that he was going to use the bitcoins to purchase stolen credit card information. 

That is the least important part of this case.

[russokai]

They approached them claiming to want to buy Bitcoin to commit outright crimes.  But yes, New York is the most likely state to simply go right after Bitcoin sellers for no other reason than just selling Bitcoin.  These Florida LEAs felt it necessary to do a sting.  Otherwise, they'd have just arrested them the first time they showed up and sold a small about of Bitcoin.

No because they don't arrest people for breaking the law.  They arrest them for breaking the law when they feel they have a strong enough case for a conviction.  And a jury probably wouldn't convict someone for selling $301 of bitcoin.

My god some people are here are clueless...a lot of you.

[darkmule]

If you read the criminal complaint, it states the seller was charging the Undercover cop 20% commission.

Perhaps they weren't dumb, just a bit blinded by 20% commission on a $30,000 deal.

Frankly, a vig like that sounds to me very indicative that defendant knew something was shady and was therefore charging extra.  Who would agree to a fee that large who wasn't up to something (or in this case a cop).

[CryptoVortex]

You missed a key part of the story where the undercover agent told the bitcoin seller that he was going to use the bitcoins to purchase stolen credit card information. 

That is the least important part of this case.

This may be the least important part of the story to you, but it is an absolutely critical part of the money laundering case.  There is no way they would have indicted these guys for money laundering without that.  Even if they had, the prosecutor would drop the charge to avoid the embarrassment of an acquittal or, worse, a dismissal.

However, I agree that this is not particularly relevant to the charge of running an unlicensed money transfer business. One thing that is unclear from these indictments is whether the sting was intended to uncover money laundering or just unlicensed money transfer. 

It will be interesting to see whether these cases go to trial.  It seems plausible to me that they will want to use these cases, in which a conviction will be relatively straightforward, to establish a precedent.  If they truly just wanted to nab these two guys, then I would expect expect the defendants to plead out.  The prosecutor might not offer them a reasonable plea deal if they want the precedent for future, murkier situations, such as cases connected to Silk Road.

[Bitye West]

If US law enforcement keeps up this kind of bullshit, they will succeed in forcing the Cash->Bitcoin market underground.

If they crack down hard enough on LocalBitcoins, an equivalent darknet site will pop up where people send cash in mail to buy their coins.

[darkmule]

It will be interesting to see whether these cases go to trial.  It seems plausible to me that they will want to use these cases, in which a conviction will be relatively straightforward, to establish a precedent.

Exactly.  A plea deal would say they were just going after shutting down bad actors.  Not offering a plea and going out of their way to prosecute would indicate they actually want to establish a precedent that simply selling Bitcoin is operating an unlicensed money transmitting business, so as to be able to pull in a wider dragnet at some later date.

I have to say that if the claims in the complaint are factually true (always a big if), these two clowns have done Bitcoin a grave disservice themselves.  If someone comes up to you and says they want you to sell them Bitcoin so they can commit open crimes with it, and you facilitate it, YOU are a criminal yourself, you are not doing Bitcoin any favors, and THE GUY IS PROBABLY A COP.

[yannis7777]

First, read the articles at these links:

http://www.morningnewsusa.com/three-bitcoin-traders-arrested-in-florida-238060.html

http://www.dnaindia.com/world/report-three-arrested-in-florida-over-bitcoin-money-laundering-charges-1960172

http://www.theverge.com/2014/2/7/5390782/three-bitcoin-traders-arrested-in-florida-on-money-laundering-charges

Summary of those links is that the in Florida, the state decided to go after some localbitcoin traders for money laundering after setting up a live in person exchange.

Bitcoin is not cocaine. Bitcoin is not crack. It is not cannabis. It is not stolen guns with the serial numbers filed off.

There are a variety of forces that fear technology they do not understand.
There are a variety of forces that fear any technology that breakdowns international borders and barriers.

We, the people who support bitcoin, need to come out in the defense of the guys who were arrested in Florida and support bitcoin.

New technology has always intrigued and scared government. In the end they win, by finding a way to regulate it and finally accept it under their own (winner takes it all) terms.

[ducatitalia]

If anyone finds updates or followups on these FL stories, please post so we can track progress and precedent. 

[CoinBrokers]

I live pretty close to Miami and this was big news for anyone involved, especially the LocalBitcoins crowds that do alot of local business. I can't believe such a victimless-crime is being prosecuted, and now I'm sure they seized all his assets under the money laundering laws.

Found a more in-depth description of what they alleged happen...

According to court documents, the two men met again on February 4, with Kramer telling Reid that he wanted to convert $30,000 that he claimed to have earned by using credit card numbers obtained via the Target breach into bitcoins.

At that point, "Reid pulled out his Chrome (brand) laptop computer in order to observe the current bitcoin exchange rates," according to the charging documents, after which Kramer showed him a "flash roll" of $30,000 -- composed of $100 bills -- which Reid inspected for authenticity, before selling Kramer $25,000 in bitcoins, minus about $5,000 for his 20% commission. Reid allegedly also expressed interest in purchasing fake US passports and Florida driver's licenses from Kramer. Reid was arrested two days later.

According to court documents, Espinoza's bust went down the same way, with a Miami detective posing as the buyer, except that the suspect didn't believe the proffered roll of $100 bills was real. Instead, he requested that the buyer return with $20 bills. But the detective allegedly talked Espinoza into agreeing that if a Bank of America ATM accepted $2,400 of the cash for deposit into an account to which Espinoza had access, then he would convert the $30,000 into bitcoins. Less than an hour after first meeting the detective, Espinoza was arrested.

Source: http://www.informationweek.com/security/security-monitoring/florida-sting-nabs-alleged-bitcoin-money-launderers/d/d-id/1113767

 

[odolvlobo]

Found a more in-depth description of what they alleged happen...
-- snip --
Source: http://www.informationweek.com/security/security-monitoring/florida-sting-nabs-alleged-bitcoin-money-launderers/d/d-id/1113767

There is no reason to read articles about the court documents when you can read the court documents directly:

http://www.scribd.com/doc/205808113/Def-Espinoza
http://www.scribd.com/doc/205808118/Def-Reid

[CoinBrokers]

True, but some people don't speak legalese nor do they want to spend an hour reading it.

Found a more in-depth description of what they alleged happen...
-- snip --
Source: http://www.informationweek.com/security/security-monitoring/florida-sting-nabs-alleged-bitcoin-money-launderers/d/d-id/1113767

There is no reason to read articles about the court documents when you can read the court documents directly:

http://www.scribd.com/doc/205808113/Def-Espinoza
http://www.scribd.com/doc/205808118/Def-Reid