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Author Topic: Discussion of Leaked FBI Report on Bitcoin- April 2012  (Read 6092 times)
benjamindees
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May 13, 2012, 12:34:20 AM
 #41

I worked on more than one of those: (INSERT TOPIC HERE) for dummies - Defense Agency Edition.

Did you put old testament quotes on the cover?  It's not really a DoD report if it doesn't include quotes about smiting one's enemies.   Lips sealed

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Stephen Gornick
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May 14, 2012, 11:23:23 PM
 #42

Adrianne did her homework, ... says the FBI confirms the report is theirs:

 - http://www.betabeat.com/2012/05/14/fbi-that-bitcoin-report-was-authentic-but-it-wasnt-leaked-by-us/

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May 15, 2012, 12:20:19 AM
 #43

Adrianne did her homework, ... says the FBI confirms the report is theirs:

 - http://www.betabeat.com/2012/05/14/fbi-that-bitcoin-report-was-authentic-but-it-wasnt-leaked-by-us/

That girl has got the brains. She saw all those morons publishing the report, especially the report that wasn't even the originally leaked one but the one SgtSpike typed, and prepared the jab Wink
And now: Jab successfully delivered! Well done, Adrianne!



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May 15, 2012, 02:11:34 AM
 #44

Excellent information!

I stand corrected and glad to know the truth.

Good reporting, Adrianne. Kudos!  Smiley
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May 30, 2012, 04:19:46 AM
 #45

Seriously? There is anybody who accepts this pile of nonsense as real?

How about 10 quick hallmarks of a sloppy fake?

1.  The FBI does not watermark their "internal documents" with a badly shaded, homemade Seal of LEO authenticity.
2.  A quick search of the entire database of the Directorate of Intelligence indicates that the phrase "bitcoin" has never been used in any official document, and the only positive links to a press release from March 18, 2011 about von NotHaus and NORFED.
3.  No US agency identifies Classified status by the paragraph, especially not any document that would have For Official Use Only status. The entire document would be identified as such on the cover, only.
4.  No US agency would use a cut and paste graphic on the cover of the document, especially not when that cover is a template from Word '95.
5.  No US agency would ever give attribution for a graphic below the graphic, and especially not ever do so on the cover. Attributions would be in the notations and citations, basic Strunk and White. They have entire libraries devoted to the correct style of document production.
6.  Distribution lists come at the beginning of official documents, so that any official considering disseminating the document can check quickly if it can be shared.
7.  An official document of this sort would not be released as an attempted slick looking report, it would be very straightforward text blocks, and almost always block-justified.
8.  No self-respecting FBI Junior G Man would ever sprinkle phrases like "vendor acceptance", "actors" , "malware" or "botnets" in a report that would ever be read by a superior. It would probably cost them their job.
9.  A real report would not mis-identify the entity that money transmitters must register with. They are not legally required to register with "FinCEN", that is where reports are filed by Law Enforcement, and advisories developed to coordinate the efforts of Law Enforcement to combat financial crimes, not as a registry for money exchangers. They would be far more likely to be required to register with their respective Secretary of State, or Corporate licensing agency on a state by state basis, licensing of financial institutions is done on a state level, not on a Federal one.
10.  The language is wrong.

Compare this word structure:

This is the FBI’s first Criminal and Cyber intelligence assessment related to Bitcoin.
In January 2012 the Counterterrorism Division disseminated an intelligence bulletin that
explored the potential to conduct illicit financial transactions using Bitcoin. Disseminated FBI
intelligence products on other virtual currencies include: (U) Cyber Criminal Exploitation of
Electronic Payment Systems and Virtual Currencies, dated 23 February 2011and (U) Cyber
Criminal Exploitation of Real-Money Trading, dated 8 June 2011, both of which discuss cyber
criminal misuse of virtual currencies for money laundering. While Bitcoin is a distinct virtual
currency, the overarching analytic judgments in this intelligence assessment about the use of
virtual currencies by criminal entities are consistent with these previous intelligence products.


With actual FBI testimony in a prepared statement before Congress:

In some countries, people eschew formal banking systems in favor of informal value transfer systems such as hawalas or trade-based money laundering schemes such as the Colombian Black Market Peso Exchange, which the Drug Enforcement Administration estimates is responsible for transferring $5 billion in drug proceeds per year from the United States to Colombia. Hawalas are centuries-old remittance systems located primarily in ethnic communities and based on trust. In countries where modern financial services are unavailable or unreliable, hawalas fill the void for immigrants wanting to remit money home to family members, and, unfortunately, for the criminal element to launder the proceeds of illegal activity.

There are several more formalized venues that criminals use to launder the proceeds of their crimes, the most common of which is the United States banking system, followed by cash-intensive businesses like gas stations and convenience stores, offshore banking, shell companies, bulk-cash smuggling operations, and casinos. Money services businesses such as money transmitters and issuers of money orders or stored value cards serve an important and useful role in our society, but are also particularly vulnerable to money laundering activities. A recent review of Suspicious Activity Reports filed with the Financial Crimes Enforcement Network (FinCEN) indicated that a significant number of money services business filings involved money laundering or structuring.

The transfer of funds to foreign bank accounts continues to present a major problem for law enforcement. Statistical analysis indicates that the most common destinations for international fund transfers are Mexico, Switzerland, and Colombia. As electronic banking becomes more common, traditional fraud detection measures become less effective, as customers open accounts, transfer funds, and layer their transactions via the Internet or telephone with little regulatory oversight. The farther removed an individual or business entity is from a traditional bank, the more difficult it is to verify the customer’s identity.


Note how the FBI uses crisp, clear statements. Criminals are NEVER qualified, they are criminals not "malicious actors", "cyber-criminals", or "predators". Things are written in the present tense, a statement of now, rather than a future imperative where something "might" happen, the FBI doesn't do analyses about might happens, an assessment would be about what is happening right now, and what could or should be done to stop it. And a real assessment would never list areas where they are not going to trouble themselves to investigate, they would demarcate very clearly the scope of the issue at hand and what actions are impacted by this issue, not a meandering "we are looking at this, but we are not going to look at how this funds these other criminal elements" sort of approach.

Sorry kids, as juicy as this may sound, the myth is completely and irrevocably busted.

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May 30, 2012, 02:37:01 PM
 #46

It's interesting that the FBI would contact a reporter to "confirm" the leak, but it could of course have been someone posing as an agent.

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May 31, 2012, 08:37:12 AM
 #47

Commenting as an interested individual, taking company hat off.

As someone who has worked in related industries in the past, I can confirm that the document is either an extremely well put together fake written by someone with extensive knowledge of government writing style and organisations, or real.

Honestly, going off experience I believe it's real. The fact that it has spelling / grammatical errors or doesn't use the sort of language you'd expect an employee of the government to use is irrelevant - whoever wrote it was human, and I've come across more than my share of spelling and grammatical errors in official government documents. Taking it as a given that the document is real, its contents are pretty bog-standard boring stuff - a general overview of Bitcoin, possible tie-ins to organised crime and the like. It doesn't include any actionable items, which would be contained in a more highly classified report anyway.

Overall impact to Bitcoin and Bitcoin community: zero

Not saying that won't change in the future, but for now it's just an interesting look at another perspective on Bitcoin.

As for LoupGaroux's refutations, to disassemble them quickly:

1.  The FBI does not watermark their "internal documents" with a badly shaded, homemade Seal of LEO authenticity.

You'd be surprised how much of a pain it is to get your hands on department templates sometimes.

2.  A quick search of the entire database of the Directorate of Intelligence indicates that the phrase "bitcoin" has never been used in any official document, and the only positive links to a press release from March 18, 2011 about von NotHaus and NORFED.

Not everything discussed internally makes it onto public sites. This doesn't even have anything to do with classifying documents, (although I believe this one was "for official use only") but more to do with the fact that the guys responsible for posting up documents publicly are far fewer and slower than the people producing the original internal documents.

3.  No US agency identifies Classified status by the paragraph, especially not any document that would have For Official Use Only status. The entire document would be identified as such on the cover, only.

I can't comment on FBI policy, but this depends on the document - particularly for overview documents, it can help people to gauge how classified certain topics are considered to be within the department.

4.  No US agency would use a cut and paste graphic on the cover of the document, especially not when that cover is a template from Word '95.

Ref point 1.

5.  No US agency would ever give attribution for a graphic below the graphic, and especially not ever do so on the cover. Attributions would be in the notations and citations, basic Strunk and White. They have entire libraries devoted to the correct style of document production.

True, but again whoever wrote it was human. For the average analyst who has a list of documents he needs to write longer than his arm, most of them far more important / interesting than Bitcoin, I can believe that a little sloppiness would come through.

6.  Distribution lists come at the beginning of official documents, so that any official considering disseminating the document can check quickly if it can be shared.

This is true, but does not preclude the inclusion of a distribution list later on, particularly because these things get re-forwarded like crazy on a regular basis.

7.  An official document of this sort would not be released as an attempted slick looking report, it would be very straightforward text blocks, and almost always block-justified.

I can't comment on the FBI's particular style of documents. This could be true, but on the other hand I have seen some very nicely put-together packages before.

8.  No self-respecting FBI Junior G Man would ever sprinkle phrases like "vendor acceptance", "actors" , "malware" or "botnets" in a report that would ever be read by a superior. It would probably cost them their job.

Depends on the audience.

9.  A real report would not mis-identify the entity that money transmitters must register with. They are not legally required to register with "FinCEN", that is where reports are filed by Law Enforcement, and advisories developed to coordinate the efforts of Law Enforcement to combat financial crimes, not as a registry for money exchangers. They would be far more likely to be required to register with their respective Secretary of State, or Corporate licensing
agency on a state by state basis, licensing of financial institutions is done on a state level, not on a Federal one.
This is untrue. MSBs must also register with FinCEN - http://www.fincen.gov/financial_institutions/msb/

10.  The language is wrong.

Again, regardless of what you might think of the FBI, it is primarily composed of humans, not robots. The kind of kid who's likely to get the junk assignment of doing a writeup on Bitcoin probably isn't going to be that entrenched in the style guide yet.

IMHO.
galambo
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May 31, 2012, 12:56:53 PM
 #48

3.  No US agency identifies Classified status by the paragraph, especially not any document that would have For Official Use Only status. The entire document would be identified as such on the cover, only.

http://epic.org/privacy/airtravel/EPIC_DOJ_FOIA_NoFlyList_09_13_11_CT_Guidance2.pdf
http://www.fas.org/irp/eprint/rightwing.pdf

9.  A real report would not mis-identify the entity that money transmitters must register with. They are not legally required to register with "FinCEN", that is where reports are filed by Law Enforcement, and advisories developed to coordinate the efforts of Law Enforcement to combat financial crimes, not as a registry for money exchangers.

31 CFR §1022.380(a)-(f)

They would be far more likely to be required to register with their respective Secretary of State, or Corporate licensing agency on a state by state basis, licensing of financial institutions is done on a state level, not on a Federal one.

Yes. MSBs are required to be properly licensed with the states they operate in, in accordance with the laws of those states.

Sorry kids, as juicy as this may sound, the myth is completely and irrevocably busted.

Roll Eyes
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May 31, 2012, 07:13:10 PM
 #49

Yankee there is a simple and painless solution for all this problems
you can easily open a company in Seychelles or Cyprus to handle the licenses etc
look at the major exchangers on the market right now and see they have companies situated offshore

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May 31, 2012, 09:22:05 PM
 #50

Yankee there is a simple and painless solution for all this problems
you can easily open a company in Seychelles or Cyprus to handle the licenses etc
look at the major exchangers on the market right now and see they have companies situated offshore

It's not necessarily a simple solution.  Users generally want to be able to use their funds locally at some point and transactions to and from certain offshore financial centres are subjected to much greater AML/KYC scrutiny.  A lot of people using Bitcoins make small transactions and aren't going to want to bear the cost of running them through an offshore banking system.

All I can say is that this is Bitcoin. I don't believe it until I see six confirmations.
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June 01, 2012, 02:54:08 AM
 #51

this is not about offshore transactions... your capital it's located offshore.. i can give you one good example wm-center.com and many other big exchange companies that are based offshore. you just need to figure it out a way to avoid taxes and other legal stuff from US.
ask around and you can avoid this problems for sure  Wink

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June 01, 2012, 06:21:09 AM
 #52

this is not about offshore transactions... your capital it's located offshore.. i can give you one good example wm-center.com and many other big exchange companies that are based offshore. you just need to figure it out a way to avoid taxes and other legal stuff from US.
ask around and you can avoid this problems for sure  Wink

Look, we are not trying to 'avoid taxes and other legal stuff from US', and we already have a Cyprus corporation fyi.

The point is to legally operate within the USA.

I've not been updating you all on most recent info, but I've been in lawyers meetings the past few weeks dissecting this document and Bitcoin as a whole.

We're working on a legal framework, at the same time working on a funding round which including federally licensed, state licensed, and dep't of banking licensed investment banks, check cashing companies and a few other financial institutions.

My point in starting this thread was not to debate the authenticity of this thread which I clearly pointed out, rather discuss the legal aspects within it.

We all agree that wether or not the document is real/fake the 'author' obviously did his homework. The information is correct and properly cited.

The fact of the matter is, Bitcoin still exists within a very legal grey area.

However

Companies within the Bitcoin ecosystem may or may not be MSB's, MTB's, banks, financial service company, ect.

Wether you are or are not is dependent on your specific business model.

Yes, exchanges operate as both money service business', currency exchanger, and transmitter.

Specifically, Bitinstant's business model was built using certain legal channels and methods. We had all these laws in mind and on a day to day basis analyze if how we do business has changed. We operate within a legal framework.

I assure you, a decent amount Bitcoin business' operate illegally, even in the countries they are based in.

However, the companies that have been doing their due diligence and actually seeking legal channels and representation are the ones who will succeed and are already succeeding. I know this because I speak to many of them every day.

As much as you should be nervous with Bitcoin, you can sleep well at night knowing we are working day to day to change that.

Cheers,

Charlie




Bitcoin pioneer. An apostle of Satoshi Nakamoto. A crusader for a new, better, tech-driven society. A dreamer.

More about me: http://CharlieShrem.com
repentance
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June 01, 2012, 09:11:25 AM
 #53

However, the companies that have been doing their due diligence and actually seeking legal channels and representation are the ones who will succeed and are already succeeding. I know this because I speak to many of them every day.

As much as you should be nervous with Bitcoin, you can sleep well at night knowing we are working day to day to change that.

Cheers,

Charlie

Let's be honest, there are an awful lot of Bitcoin users who would like the major Bitcoin businesses to operate offshore so that the users could have all the advantages of offshore banking/trading without any of the the expense and little of the risk.  They could easily set up Nevis corporations and Panamanian bank accounts themselves for relatively little cost, but they want someone else to do the work and bear the cost for them.

Many of the larger businesses see their future growth and continued profits being best assured by operating legitimately and "as if" they were already regulated even if it's not entirely clear yet that it's "necessary".  They realise that at some point it almost certainly will be necessary so plan for that from the start.

Much as users complain about AML/KYC compliance, they complain even louder when access to their funds is restricted due to the bank accounts of the Bitcoin businesses with which they deal being frozen. 

For those who are looking for tax havens and less transparency, persuading the many offshore businesses which already offer such services to include Bitcoin would be an option - although I suspect that the average Bitcoin user looking to evade taxes doesn't move the amounts of funds which would make them an attractive client to existing off-shore service providers.

Personally, I don't think that the Bitcoin economy is yet big enough for large scale money laundering - it's too small for anyone to launder tens of millions of dollars through it without detection and it's difficult to purchase high value items like luxury cars, real estate, expensive jewellery etc with Bitcoin.  I do think that it's large enough for the reverse though - to obscure the destination of funds rather than their origin.  That can be done with relatively small, regular transactions without arousing much suspicion.

All I can say is that this is Bitcoin. I don't believe it until I see six confirmations.
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June 01, 2012, 04:55:40 PM
 #54

i'm good Charlie but my point was not intend to debate the bitcoin company you administrate and the legitimacy of your business

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