US DOJ Calls Bitcoin Mixing ‘a Crime’ in Arrest of Software Developer

[figmentofmyass]

I'm not that fluent in English as you can see, that's why I was posted this here, I not sure if DoJ are considering illegal all type of coin mixers in general, or this is only for this particular case, where it is clear that those mixed coins were involved in money laundering?
How you guys getting this?

this case relies on very specific facts to justify the money laundering charge. mixing outputs is not itself a crime. knowingly mixing coins from a DNM is also not a crime since it doesn't prove the mixer knew the underlying financial transaction involved criminal proceeds.

a "conspiracy to launder money" charge has very specific requirements:

A conspiracy is an agreement between two or more people to join together to attempt to accomplish some unlawful purpose. It is a kind of "partnership in crime" in which each member becomes the agent of every other member.

https://www.justice.gov/archives/jm/criminal-resource-manual-2167-jury-instruction-conspiracy-18-usc-1956h

the charge requires both explicit agreement among the accused and willful intent to commit a crime. importantly, guilt by association alone is not incriminating:

One does not become a member of a conspiracy through an association with members of the conspiracy or by the mere knowledge that a conspiracy exists.

....so merely transacting with DNM admins/users in the ordinary course of business (even knowingly) does not meet the requirement for a conspiracy charge.

the partnership with alphabay and other DNMs showcases the explicit agreement required for the conspiracy charge. explicit advertisement as a money laundering service fulfills the "willful intent to commit a crime" requirement.

that's how the DOJ made this case.

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[pixie85]

I'm not that fluent in English as you can see, that's why I was posted this here, I not sure if DoJ are considering illegal all type of coin mixers in general, or this is only for this particular case, where it is clear that those mixed coins were involved in money laundering?
How you guys getting this?

I think this was connected to the case of money laundering via mixers. It's not mixing that is illegal but mixing illegal funds is. I know it may look weird but the law is weird in this way.

Hiding someone in your house is legal. Hiding a criminal can be illegal depending on the crime and your knowledge of it. Hiding a fugitive whose face is in the news is illegal and they won't even ask if you knew or not. They'll assume that you knew.
This mixing case is similar.

[fiulpro]

For all the people still wondering what is Bitcoin mixing.

Bitcoin tumbling, also referred to as Bitcoin mixing or Bitcoin laundering, is the process of using a third party service to break the connection between a Bitcoin address sending coins and the address(s) they are sent to. ( Taken from Google)

Now there are certain things that can go wrong with that :-

*People dealing with something illegal can hide their address because now a days most of the addresses are linked with the real identity , PAN card and all , so I'm case of a fraud the government won't be able to track the person .

*Government may be even trying to track the non tax payers who are hiding from the eyes of the law and trying to hide the money they are making using bitcoins.

*Or the government of US actually made bitcoins in this other world senario and they are now just trying to avoid such problems [[ Government might be smart but people are smarter at the end of the day (they always find a way) ]]

[Abiky]

To me it's clear this declaration is about this one particular case.

I'm sure centralised mixers will eventually have more pressure put on them, but this guy created his system only for the purpose of hiding illegal earnings and nothing else. It would be the same if he had founded a bank to do that one job.

It might mean in future they will regard any mixer that handles problematic funds to be enabling crime and so they'll be fully liable. They probably do already. This guy made it easy to stop.

With the recent crackdown on centralized Bitcoin mixing services, I believe that non-custodial solutions will rise like never before. We already have non-custodial mixers such as Wasabi Wallet, JoinMarket, and NTumbleBit (under development). This could render government efforts on taking down mixing services useless over time. The fact that most people still rely on centralized Bitcoin mixers, gives governments the opportunity to "punish" the central operator. Their main excuse is that mixers are used for money laundering and tax evasion. But the truth is that criminals still use Fiat over Bitcoin for this. After all, Bitcoin's price is volatile while that's not the case with Fiat.

This recent event of the US DOJ tells us that more decentralized solutions are necessary in order to provide censorship-resistance to the crypto space. It was easy for the US government to take down the mixing service in question because it was centralized. After all, fees were collected by the central operator. This is just the beginning of the end as I believe that the US and other countries of the world will crackdown on other Bitcoin mixing services in the crypto space. The only path for true censorship-resistance would be to use decentralized/non-custodial mixers for obfuscating Bitcoin transactions.

Nonetheless, I believe that all centralized Bitcoin mixers will fall within the crypto space. Only decentralized/non-custodial mixers will be able to resist government's intervention in the long run. There's no central operator in charge of the mixer, so everything is handled in an automated and decentralized way. Once governments realize it's near impossible to shut down a non-custodial mixer, they might consider banning crypto in its entirety (I hope not). Maybe governments will prosecute developers working on decentralized solutions for the BTC blockchain? If that happens, then Bitcoin and other cryptocurrencies will be "doomed" as they'll be unable to keep up with their value proposition of eliminating third parties from the system. Just my thoughts

[gentlemand]

Maybe governments will prosecute developers working on decentralized solutions for the BTC blockchain? If that happens, then Bitcoin and other cryptocurrencies will be "doomed" as they'll be unable to keep up with their value proposition of eliminating third parties from the system. Just my thoughts

Bittorrent has caused untold billions of losses to content producers, in their and the government's mind at least, yet the the founder and developers are doing just fine out in public.

I can't see any software developer ever being held liable for what's done with what they create by others.

[avikz]

It is illegal if the money is obtained illegally.
I can take my wage money, withdraw some from an ATM,  deposit on a different bank, load my PayPal account, buy a paysafecard with it, buy some game credits for a friend, receive 20 euros cash from him, deposit that on my bank account...
Anything illegal in it?

Let me reiterate the definition again with two bolded statement-
Money laundering is the illegal process of concealing the origins of money obtained illegally by passing it through a complex sequence of banking transfers or commercial transactions.

In the above scenario given by you - the money is not obtained illegally! So one of two parameters is invalid here! Hence it is not illegal! Money laundering process is far more complex in nature. People create shell companies, fake subsidiaries, fake invoices to hide the origin of the illegally obtained money. They invest in real estate in the name of the shell companies and then sell it to their own subsidiary company. There are a lot of things they do. Wage money is not illegal and money launderers don't really launder a small amount of money!

You should come to Indian political parties (especially the ruling one) to learn the art of money laundering! They have achieved supremacy in all sorts of illegal wrongdoings!

[aarons6]

seriously tho, what legit reason do you need a mixer for if its not to "illegally" hide the origin of the bitcoin you are mixing?

whether it was obtained legally or not, the act of hiding it is illegal.

[davis196]

Here are my 2 cents about this topic.
Bitcoin mixer services are just a tool.It can be used for illegal purposes or good purposes.The tool itself can't be illegal,but the person who uses it for illegal purposes breaks the law and have to be punished somehow.
If the USA bans bitcoin mixers,the effectiveness of such ban is questionable.The BTC mixer services and their users will just move to other jurisdictions and continue working.I was expecting mixers to be attacked by the authorities,sooner or later.Almost everyone who is using the darknet marketplaces uses mixers as well.

[Wind_FURY]

I thought this topic was about Wasabi Wallet, Samourai Wallet, and the JoinMarket, and that nopara73, and the other developers got arrested! Hahaha.

Mixing 1s,and 0s is not a crime. I believe, FIRST, the DOJ should declare, and fight in court, that Bitcoin is a form of "money".

[hv_]

Doing bad stuff / code shit for bad purpose

is

a


crime

[Slow death]

the guy had no mercy:

Gary said the authorities have already confiscated all of his brother’s hardware wallets and Margot doesn’t have any more bitcoin at home.

and that also made me think about the following: how was it possible to take all hardware wallets? because are supposed to hide somewhere very safe

Bitcoin Core contributor Matt Corallo tweeted that if this accusation was upheld by the federal court in Washington, D.C., it would be “the beginning of the end.”

it reminds me of this:

Hi all!
Despite the huge profit we earn, we are closing our activity. Let me explain why.

I'm bitcoin enthusiast since 2011. When we started this service I was convinced that any Bitcoin user has a natural right to privacy. I was totally wrong. Now I grasped that Bitcoin is transparent non-anonymous system by design. Blockchain is a great open book. I believe that Bitcoin will have a great future without dark market transactions. You may use Dash or Zerocoin if you want to buy some weed. Not Bitcoin.

I hope our decision will help to make Bitcoin ecosystem more clean and transparent. I hope our competitors will hear our message and will close their services too. Very soon this kind of activity will be considered as illegal in most of countries.

Cheers,
Bitmixer.IO

he already knew that the authorities were hunting the mixers. it seems to me that it will not end well for mixer owners. Unfortunately governments will not accept mixers due to their nature

Bitcoin mixer services are just a tool.It can be used for illegal purposes or good purposes.The tool itself can't be illegal,but the person who

when it comes to laws, things get complicated, why do you think there is kyc? and how would mixers obtain a license and comply with KYC? I like a mixer, I like it a lot, I've used it a few times and to be honest whenever necessary, I'll use the mixers, but I don't see how the mixers won't be illegal

[gentlemand]

seriously tho, what legit reason do you need a mixer for if its not to "illegally" hide the origin of the bitcoin you are mixing?

whether it was obtained legally or not, the act of hiding it is illegal.

Imagine if the conventional banking world introduced a system that ran along the same lines as Bitcoin. Every time you bought a barbed wire dildo the place you bought it from would be able to see how much money you had, where else you spent it and what you spend in future.

It would take about ten minutes for the nearest banker to be dangling from a lamp post.

Wanting to keep your business to yourself is a perfectly sensible and necessary desire.

[Wind_FURY]

the guy had no mercy:

Gary said the authorities have already confiscated all of his brother’s hardware wallets and Margot doesn’t have any more bitcoin at home.

and that also made me think about the following: how was it possible to take all hardware wallets? because are supposed to hide somewhere very safe

Bitcoin Core contributor Matt Corallo tweeted that if this accusation was upheld by the federal court in Washington, D.C., it would be “the beginning of the end.”

it reminds me of this:

Hi all!
Despite the huge profit we earn, we are closing our activity. Let me explain why.

I'm bitcoin enthusiast since 2011. When we started this service I was convinced that any Bitcoin user has a natural right to privacy. I was totally wrong. Now I grasped that Bitcoin is transparent non-anonymous system by design. Blockchain is a great open book. I believe that Bitcoin will have a great future without dark market transactions. You may use Dash or Zerocoin if you want to buy some weed. Not Bitcoin.

I hope our decision will help to make Bitcoin ecosystem more clean and transparent. I hope our competitors will hear our message and will close their services too. Very soon this kind of activity will be considered as illegal in most of countries.

Cheers,
Bitmixer.IO

he already knew that the authorities were hunting the mixers. it seems to me that it will not end well for mixer owners. Unfortunately governments will not accept mixers due to their nature

Bitcoin mixer services are just a tool.It can be used for illegal purposes or good purposes.The tool itself can't be illegal,but the person who

when it comes to laws, things get complicated, why do you think there is kyc? and how would mixers obtain a license and comply with KYC? I like a mixer, I like it a lot, I've used it a few times and to be honest whenever necessary, I'll use the mixers, but I don't see how the mixers won't be illegal

What about Wasabi Wallet, JoinMarket, or some other, not yet invented, peer to peer/decentralized mixing? How would that be "illegal"? Why/how can the obfuscation of OUR UTXOs be illegal?

[20kevin20]

I feel like we still live in an approximately okay present, but the future looks horrific. Any attempt of having more privacy will most likely be seen as a crime..

You know, it's funny how I am literally able to hand a complete stranger a paper with the private key to some illicit-sourced Bitcoins and get them in big trouble because of it.

We live in a God damn shit world. Transparency apparently comes with its big cost too. It was somehow forseeable they'll count this as a crime though, all fun BTC-related stuff doesn't last very long anyway.

[Linkkoin]

I feel like we still live in an approximately okay present, but the future looks horrific. Any attempt of having more privacy will most likely be seen as a crime..

Yes, the most forms of privacy in regards to the financial matters will be outlawed. This is why cash is slowly being removed in many countries (see Sweden), in business transactions in Europe you have limits for paying in cash (above some threshold you can legally pay only by a bank transfer).
As well FATF with its recommendations which are basically obligatory aims for outlawing privacy solutions like private coins, mixers and make each owner of wallet fully identifiable (just as bank account owners).

[pawanjain]

"This indictment underscores that seeking to obscure virtual currency transactions in this way is a crime"

That's what stands out to me. He was actively facilitating money laundering. That was his whole raison d'etre. He'd be just as nailed for doing the same thing in any other form.

It's a rather different proposition to some average person doing a Coinjoin type thing.

Good that you cleared it out because if bitcoin mixers were to be considered as illegal then I guess they should have termed TOR as illegal too.

[squatter]

What about Wasabi Wallet, JoinMarket, or some other, not yet invented, peer to peer/decentralized mixing? How would that be "illegal"? Why/how can the obfuscation of OUR UTXOs be illegal?

The mere act of mixing your outputs (decentralized or not) isn't money laundering because there is no proof of unlawful intent. This is true of cash, bitcoins or anything else. The issue isn't that output mixing is illegal. On its own, it is not.

Regarding money transmission law, US regulators have drawn a clear distinction between decentralized mixing protocols like CoinJoin and centralized mixing services. That issue is about who is a money transmitter and therefore is supposed to comply with MSB regulations, and who is not:

a person operating as the administrator of a centralized CVC payment system will become a money transmitter the moment that person issues anonymity-enhanced CVC against the receipt of another type of value

vs.

a person that develops a decentralized CVC payment system will become a money transmitter if that person also engages as a business in the acceptance and transmission of value denominated in the CVC it developed

[Abiky]

Bittorrent has caused untold billions of losses to content producers, in their and the government's mind at least, yet the the founder and developers are doing just fine out in public.

I can't see any software developer ever being held liable for what's done with what they create by others.

That's certainly true, mate. But we cannot discard the possibility of governments prosecuting cryptocurrency developers in the future, once they believe crypto and Blockchain tech to be a threat against the current monetary system. Expect to see a massive crackdown into Bitcoin if people begin using decentralized solutions on top of centralized ones.

Considering that people are still acquainted with centralized exchanges and mixing services, I doubt governments will become interested in making software developers liable anytime soon. We'll have to see how everything unfolds in the future as governments continue to shut down centralized mixers. After all, their excuse is that mixers are used for money laundering and tax evasion. Even if a mixing service hasn't done anything wrong, the central operator could be held liable for any illegal activities done on it. The only way the mixer operator can be relieved is if he enforces KYC/AML laws on people using its service. But this will greatly defeat the purpose of a mixer which is to provide privacy over one's crypto transactions.

Nonetheless, with the advent of non-custodial mixers, anyone can confidently obfuscate their Bitcoin transactions without governments being able to disrupt the service. Centralized Bitcoin mixers will eventually die because of the massive crackdown from worldwide governments. This recent event from the US DOJ shutting down a centralized mixer is just the beginning. First it was bestmixer, and now this one. The trend will continue until all centralized exchanges are shut down for good. Luckily, people will still be able to mix their Bitcoin using non-custodial solutions or even exchanging BTC to a privacy-oriented coin (like Monero) of their choice. At least, there's nothing to worry about. Just my thoughts

[Wind_FURY]

What about Wasabi Wallet, JoinMarket, or some other, not yet invented, peer to peer/decentralized mixing? How would that be "illegal"? Why/how can the obfuscation of OUR UTXOs be illegal?

The mere act of mixing your outputs (decentralized or not) isn't money laundering because there is no proof of unlawful intent. This is true of cash, bitcoins or anything else. The issue isn't that output mixing is illegal. On its own, it is not.

Regarding money transmission law, US regulators have drawn a clear distinction between decentralized mixing protocols like CoinJoin and centralized mixing services. That issue is about who is a money transmitter and therefore is supposed to comply with MSB regulations, and who is not:

a person operating as the administrator of a centralized CVC payment system will become a money transmitter the moment that person issues anonymity-enhanced CVC against the receipt of another type of value

vs.

a person that develops a decentralized CVC payment system will become a money transmitter if that person also engages as a business in the acceptance and transmission of value denominated in the CVC it developed

Read bolded. JoinMarket "market-makers" are actually "liquidity-providers", that ask for a fee in exchange for providing liquidity. Is that considered a money-transmitter?

[squatter]

a person operating as the administrator of a centralized CVC payment system will become a money transmitter the moment that person issues anonymity-enhanced CVC against the receipt of another type of value

vs.

a person that develops a decentralized CVC payment system will become a money transmitter if that person also engages as a business in the acceptance and transmission of value denominated in the CVC it developed

Read bolded. JoinMarket "market-makers" are actually "liquidity-providers", that ask for a fee in exchange for providing liquidity. Is that considered a money-transmitter?

I don't think so. To qualify as a money transmitter in the second scenario, one would need to both develop the mixing platform and also profit from the associated money transmission.

It's arguable that a market-maker does neither. They are profiting from the bid-offer spread, not the mixing activity:

A market maker or liquidity provider is a company or an individual that quotes both a buy and a sell price in a financial instrument or commodity held in inventory, hoping to make a profit on the bid-offer spread, or turn.

You would see the same distinction with an exchange. A market-maker on an exchange doesn't pocket trading commissions whenever trades are made -- the exchange operators do. That's who FinCEN is targeting, the ones who build the platform and are profiting from it.