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Author Topic: MtGox Extortion  (Read 5189 times)
strider007
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June 07, 2012, 02:52:27 AM
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At the end of May I sent a $100 transfer from Dwolla to MtGox and after 5 days of the deposit not showing up, contacted them. I was unaware that MtGox had changed their policy and now require photo ID verification for Dwolla transfers. I was never notified about this by mail or any other method and so my funds were frozen until I verified.

I sent them a utility bill and a driver's license with the DL number edited out and stated that I simply cannot trust them to hold my license on their servers with my DL number exposed like that. I asked for them to cancel the transaction and send the money back to Dwolla. They say they cannot do that until I upload photo ID with no edited of the DL number.

This is plain and simple, extortion...but with a bizarre twist, they are holding my money hostage for personal information. But it is still considered extortion under US consumer law. My next step is to file a former complaint with my State Attorney General's office so if they make a pattern of this abuse, a case can be made for other companies to sever ties with them. If their behavior gets worse than my mere $100 and they steal a hell of a lot more, a civil case will be much easier to pursue with a trail of formal complaints at the state level.

Anyone have any advice for a situation like this other than what I've done? Is there another method to get MtGox to release funds to which they have no right?

Lastly, what are the best exchange alternatives right now?

Thanks for any input!
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June 07, 2012, 03:22:56 AM
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At the end of May I sent a $100 transfer from Dwolla to MtGox and after 5 days of the deposit not showing up, contacted them. I was unaware that MtGox had changed their policy and now require photo ID verification for Dwolla transfers. I was never notified about this by mail or any other method and so my funds were frozen until I verified.

I sent them a utility bill and a driver's license with the DL number edited out and stated that I simply cannot trust them to hold my license on their servers with my DL number exposed like that. I asked for them to cancel the transaction and send the money back to Dwolla. They say they cannot do that until I upload photo ID with no edited of the DL number.

This is plain and simple, extortion...but with a bizarre twist, they are holding my money hostage for personal information. But it is still considered extortion under US consumer law. My next step is to file a former complaint with my State Attorney General's office so if they make a pattern of this abuse, a case can be made for other companies to sever ties with them. If their behavior gets worse than my mere $100 and they steal a hell of a lot more, a civil case will be much easier to pursue with a trail of formal complaints at the state level.

Anyone have any advice for a situation like this other than what I've done? Is there another method to get MtGox to release funds to which they have no right?

Lastly, what are the best exchange alternatives right now?

Thanks for any input!

Gox is not located in the US and what they are doing is not considered extortion. 

Extortion would be if gox threatened to report you to the authorities if you did not pay them a sum of money or other thing that gave them real benefit.  Verifying  your license does not give them that kind of benefit that would be considered for extortion.


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June 07, 2012, 03:29:19 AM
 #3

At the end of May I sent a $100 transfer from Dwolla to MtGox and after 5 days of the deposit not showing up, contacted them. I was unaware that MtGox had changed their policy and now require photo ID verification for Dwolla transfers. I was never notified about this by mail or any other method and so my funds were frozen until I verified.

I sent them a utility bill and a driver's license with the DL number edited out and stated that I simply cannot trust them to hold my license on their servers with my DL number exposed like that. I asked for them to cancel the transaction and send the money back to Dwolla. They say they cannot do that until I upload photo ID with no edited of the DL number.

This is plain and simple, extortion...but with a bizarre twist, they are holding my money hostage for personal information. But it is still considered extortion under US consumer law. My next step is to file a former complaint with my State Attorney General's office so if they make a pattern of this abuse, a case can be made for other companies to sever ties with them. If their behavior gets worse than my mere $100 and they steal a hell of a lot more, a civil case will be much easier to pursue with a trail of formal complaints at the state level.

Anyone have any advice for a situation like this other than what I've done? Is there another method to get MtGox to release funds to which they have no right?

Lastly, what are the best exchange alternatives right now?

Thanks for any input!

Gox is not located in the US and what they are doing is not considered extortion. 

Extortion would be if gox threatened to report you to the authorities if you did not pay them a sum of money or other thing that gave them real benefit.  Verifying  your license does not give them that kind of benefit that would be considered for extortion.



Whatever it is its not good to tell someone after they have deposited then require them to hand over personal info and hold their money hostage....

strider007
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June 07, 2012, 03:36:29 AM
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Just because they aren't in the US does not make them immune. Immune from criminal prosecution, yes. But if a civil suit against them was successful, they could have any funds or assets in the US frozen and companies that do business with them could be sanctioned which would hurt them pretty bad.

Regarding extortion, under US law forcing another to do something against their will or face repercussions is called coercion which is codified under extortion. I would not have to prove this in a court of law as I am not suing them. But I do intend to file a formal complaint with the Attorney General of my state and with the emails they have sent me repeatedly asking for my personal ID for my $100, that is enough to get the formal complaint to stick with extortion in the record.

It is my hope that others will do the same so that in the future, in the event of a more broad act of malfeasance on the part of MtGox, a civil case will be much easier on the side of the consumer.
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June 07, 2012, 03:42:09 AM
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Seems weird that they would need AMl documents over the measly sum of $100 doesnt it ?

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June 07, 2012, 03:45:56 AM
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Extortion.   "You keep using that word. I do not think it means what you think it means."

Mt.Gox failure to disclosure their identification policies in advance may be shady, hell it may even be illegal (doubtful) but under no possible interpretation of any law is it extortion. Even if it WAS extortion that is a criminal matter.  You can't seek civil damages for a criminal charge.  Even if a judge ruled that MtGox can't ask for your ID you have suffered no damages (legal sense of the word).  You can't seek redress for damages never suffered.

Under the totally implausible scenario that anyone took your case seriously, and you made it to court, and survived motions to dismiss, and ended up winning at best you would get your $100 back (maybe with some interest and no not that 1% per day interest in the lending forum the 1.5% APR interest you could claim as damages).  So in a year you might get $101.50.  Well no you won't but that is under the most asininely optimistic scenario you could possibly hope for.
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June 07, 2012, 03:49:32 AM
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Yes, it does. The funny thing is that they said they Dwolla is the company that made them require this new policy. I told them that with Dwolla, I just had to submit a utility bill (and no photo ID) and then MtGox changed their reason. They said since they do international business, they need more information.

Their behavior is really bizarre in this matter and though I'm not one to buy into conspiracies, it's as if they are using this policy as a cover to farm data from users. SS #s and DL numbers could come in handy and could fetch a pretty penny if MtGox would ever to decide to pull a mybitcoin.com, "get hacked" and disappear with everyone's personal info. I know that may sound outlandish but how else to explain such stubborn and bizarre behavior over a simple $100 transfer?
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June 07, 2012, 03:51:52 AM
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Sorry friend, but consumer protection laws do not include extortion clauses. You entered into an agreement with them, and if you read the fine print, that agreement included language that they can and will take whatever actions, and make whatever changes, they feel necessary to run/improve/stay legal with their business.

The chances of your State Attorney General doing anything other than filing your complaint in the round file are exactly zero. It's a company based in Japan, doing business through the internet exchanged hypothetical tokens of value that have no corporeal existence. They are offering at least as secure a protection scheme for your documents as your state driver's license agency, probably safer, they have a stronger vested interest in protecting your data than either your state or federal taxing authorities, and have less than a fraction of a percent of the exposure that your bank, your doctor and dentist, stock broker, credit card company, landlord, school, mortgage lender, selective service bureau, post office automobile dealership where you purchased a car or any police department that has stopped you for a moving violation; yet every one of those entities saw, and probably photocopied your identification documents. And most of them are keeping them in electronic form, on servers that are about as secure as Paris Hilton's virtue.

Send them your id. Add a specific statement that you will hold them liable for any data loss of breach of the security of your information, and demand that they destroy all traces of that document when you stop doing business with them.

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June 07, 2012, 03:54:04 AM
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MtGox publicised the new Dwolla AML/KYC requirements both here and on their website when Dwolla changed their user policy.  There were multiple threads about Dwolla changing their ToS around the same time.

Even prior to Dwolla deciding to make Bitcoin-related transactions difficult, there have been plenty of threads on here over the last 9 months about MtGox enhanced AML/KYC compliance requirements as well as multiple announcements on their website.

It says right in MtGox ToS that they may freeze transactions pending satisfactory identity verification and that you agree to supply them with accurate, up to date and complete information about yourself.  Redacting the number from your driver's licence would definitely make the information you've provided incomplete.  Do you honestly think that the A-G is going to find your refusal to adequately verify your identity in accordance with AML/KYC requirements reasonable?  Do you really believe that they're going to view MtGox enforcing those requirements as "abuse"?

I'm tempted to tell you to read the ToS before you sign up for services, but given how far off the mark your understanding of "extortion" is, it's highly possible that you did read the ToS and somehow convinced yourself that they don't apply to you.

You seriously have no idea of what the terms "extortion" (which isn't a tort, by the way, but a crime) and malfeasance actually mean.

You have no case for your $100 lawsuit because you are required to mitigate your damages and the only thing stopping your from accessing your funds is your refusal to supply MtGox with satisfactory ID.  Not only would MtGox win such an action, you'd likely have costs awarded against you.

All I can say is that this is Bitcoin. I don't believe it until I see six confirmations.
strider007
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June 07, 2012, 04:00:07 AM
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Extortion.   "You keep using that word. I do not think it means what you think it means."

I am certain your day job isn't law and I would recommend you not give up your day job any time soon.  Mt.Gox failure to disclosure their identification policies in advance may be shady hell it may even be illegal (doubtful) but under no possible interpretation of any law is it extortion. Even if it WAS extortion that is a criminal matter.  You can seek civil damages for a criminal charge.


Yes, extortion is a criminal act but "coercion" is a type of extortion. In this case perhaps I should have just stuck with coercion. And you can certainly get civil damages for financial coercion.  Regarding civil damages for a criminal act, you can sue as a victim of a crime and you can get damages. Just google "Civil action for damages for criminal act" and click any of the links on the first page for a variety of state code on the matter.
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June 07, 2012, 04:02:29 AM
 #11

Agreement or agreement, laws or no laws, extortion or coercion, seeing shit like this (unaddressed by MtGox no less) is enough to raise serious questions about MtGox.

People like me read threads like this and make decisions to keep a $0 / 0BTC balance at MtGox.  I speak as someone who has done a decent amount of business with MtGox, shaken their hands and met them face to face, and who has stood up for them and their actions numerous times.

AFAIK, this is inexcusable on its face simply for the amount.  ID or no ID, there is absolutely no good reason an untouched $100 cannot be refunded to the known account from which it originated.  This should be the default action taken if the customer fails to provide ID upon request.

Companies claiming they got hacked and lost your coins sounds like fraud so perfect it could be called fashionable.  I never believe them.  If I ever experience the misfortune of a real intrusion, I declare I have been honest about the way I have managed the keys in Casascius Coins.  I maintain no ability to recover or reproduce the keys, not even under limitless duress or total intrusion.  Remember that trusting strangers with your coins without any recourse is, as a matter of principle, not a best practice.  Don't keep coins online. Use paper wallets instead.
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June 07, 2012, 04:05:13 AM
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Extortion.   "You keep using that word. I do not think it means what you think it means."

Mt.Gox failure to disclosure their identification policies in advance may be shady, hell it may even be illegal (doubtful) but under no possible interpretation of any law is it extortion. Even if it WAS extortion that is a criminal matter.  You can't seek civil damages for a criminal charge.  Even if a judge ruled that MtGox can't ask for your ID you have suffered no damages (legal sense of the word).  You can't seek redress for damages never suffered.

Under the totally implausible scenario that anyone took your case seriously, and you made it to court, and survived motions to dismiss, and ended up winning at best you would get your $100 back (maybe with some interest and no not that 1% per day interest in the lending forum the 1.5% APR interest you could claim as damages).  So in a year you might get $101.50.  Well no you won't but that is under the most asininely optimistic scenario you could possibly hope for.


I don't think you read my post above when I said:

"I would not have to prove this in a court of law as I am not suing them. But I do intend to file a formal complaint with the Attorney General of my state and with the emails they have sent me repeatedly asking for my personal ID for my $100, that is enough to get the formal complaint to stick with extortion in the record."

Before getting all high and mighty on me like I'm the idiot for suing for $100, please note that I explicitly state above that I am not going to sue them.  Why would I say that I am not suing them? Because that would be an asininely optimistic thing to say. The point was to convince others to file a formal complaint with the state Attorney General that MtGox stole $100 with this same method.
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June 07, 2012, 04:11:52 AM
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Sorry friend, but consumer protection laws do not include extortion clauses. You entered into an agreement with them, and if you read the fine print, that agreement included language that they can and will take whatever actions, and make whatever changes, they feel necessary to run/improve/stay legal with their business.

The chances of your State Attorney General doing anything other than filing your complaint in the round file are exactly zero. It's a company based in Japan, doing business through the internet exchanged hypothetical tokens of value that have no corporeal existence. They are offering at least as secure a protection scheme for your documents as your state driver's license agency, probably safer, they have a stronger vested interest in protecting your data than either your state or federal taxing authorities, and have less than a fraction of a percent of the exposure that your bank, your doctor and dentist, stock broker, credit card company, landlord, school, mortgage lender, selective service bureau, post office automobile dealership where you purchased a car or any police department that has stopped you for a moving violation; yet every one of those entities saw, and probably photocopied your identification documents. And most of them are keeping them in electronic form, on servers that are about as secure as Paris Hilton's virtue.

Send them your id. Add a specific statement that you will hold them liable for any data loss of breach of the security of your information, and demand that they destroy all traces of that document when you stop doing business with them.

Thanks for the excellent info. I appreciate you taking the time to respond. Made me feel a little better but knowing what a big target everything bitcoin related is, seems spooky to send my DL number to a foreign entity that I know nothing about.  You are correct though that my info is plastered on servers across the country so I should relax a little about it. Sure hope you don't work for them or consult for them...I'd hate to have to throw out that second paragraph in the bias bin, it was pretty good.

I will file the complaint with the Attorney General's office though. I think MtGox deserves at least that for being jackasses and not emailing this change to users but rather relying on forums and their website when I don't visit the forums often and only visit their website AFTER transfers are initiated from Dwolla.
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June 07, 2012, 04:16:32 AM
 #14

One more thing. To the second part of my original post, are there any BTC exchanges that are a decent alternative to MtGox? With Tradehill gone, does MtGox have exchange business all wrapped up to themselves? Like the poster above, I have no intention of keeping a balance with the exchange, only to buy and sell. I am not worried about the security of stored bitcoins but do value my privacy.
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June 07, 2012, 04:17:49 AM
 #15

If you dont want to hand over your ID why cant they just give you back the money ?

This is the ethical thing to do.

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June 07, 2012, 04:24:54 AM
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If you dont want to hand over your ID why cant they just give you back the money ?

This is the ethical thing to do.

I think the problem is that Dwolla won't let them without compliance. The interesting thing is that MtGox states that they have this policy because of Dwolla (they stated this exactly to me in an email) but Dwolla only required a utility bill with a current address on it. So MtGox points to Dwolla as the bad guy but then requires way more than Dwolla and says "dwolla is making us do it".

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June 07, 2012, 04:28:56 AM
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Dwolla is equally involved in this identity thing, the difference is that they are cloaking their approach in the "isn't it cool that we can now interact with you through Facebook" line of bullshit. Same intrusive back-rape, same demand for access to your privacy without justifiable cause other than to make them a better buyout target, and to provide them with data to whore out to other companies for big paydays.

And no, I don't work for Gox, or Dwolla, or any other entity that has been described in this community. Or consult for them. It's just pure my attitude and experience in the world talking.

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strider007
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June 07, 2012, 04:32:41 AM
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Dwolla is equally involved in this identity thing, the difference is that they are cloaking their approach in the "isn't it cool that we can now interact with you through Facebook" line of bullshit. Same intrusive back-rape, same demand for access to your privacy without justifiable cause other than to make them a better buyout target, and to provide them with data to whore out to other companies for big paydays.

And no, I don't work for Gox, or Dwolla, or any other entity that has been described in this community. Or consult for them. It's just pure my attitude and experience in the world talking.

In that case, a sincere thanks for the info.
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June 07, 2012, 04:37:04 AM
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Yes, extortion is a criminal act but "coercion" is a type of extortion. In this case perhaps I should have just stuck with coercion. And you can certainly get civil damages for financial coercion.  Regarding civil damages for a criminal act, you can sue as a victim of a crime and you can get damages. Just google "Civil action for damages for criminal act" and click any of the links on the first page for a variety of state code on the matter.

None of this applies to you because they are requiring you to comply with the law.  There is no crime being committed by MtGox and nor are they committing any tort.  Asking you to identify yourself in accordance with AML/KYC requirements is not coercion or extortion.  Nonetheless, I really hope that you do make a complaint to the A-G and file a civil action.  You'll give the lawyers some free entertainment and likely end up with your financial accounts being investigated for possible tax evasion.

Quote
ID or no ID, there is absolutely no good reason an untouched $100 cannot be refunded to the known account from which it originated.  This should be the default action taken if the customer fails to provide ID upon request.

This may or may not be true.  Many jurisdictions have a minimum level of identity verification which must be applied to all accounts no matter how small the balance/transactions and funds can and will be held indefinitely if the customer does not satisfactorily identify on request.  Certain types of transactions trigger ongoing and enhanced due diligence requirements and providers can ask you to re-verify at any time.

Dwolla has put some very onerous KYC requirements on merchants with little or no notice.  In addition to their ToS now stating that neither merchants nor users will use Dwolla in association with any virtual currency without written consent (MtGox is still waiting on written consent and I suspect that you haven't sought it), starting 17 April Dwolla imposed the following conditions on users sending money to the accounts of merchants who've had reversals.

Quote
Have a bank deposit 30 days old
Enable a DWOLLA hub page
Verify SSN

All I can say is that this is Bitcoin. I don't believe it until I see six confirmations.
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June 07, 2012, 05:07:54 AM
 #20

Quote
ID or no ID, there is absolutely no good reason an untouched $100 cannot be refunded to the known account from which it originated.  This should be the default action taken if the customer fails to provide ID upon request.

This may or may not be true.  Many jurisdictions have a minimum level of identity verification which must be applied to all accounts no matter how small the balance/transactions and funds can and will be held indefinitely if the customer does not satisfactorily identify on request.  Certain types of transactions trigger ongoing and enhanced due diligence requirements and providers can ask you to re-verify at any time.

Very few jurisdictions in the world entitle anyone to take indefinite possession of somebody else's property.  That's because, if anything, whenever there exists funds floating around with nobody's name on it, those jurisdictions will want to "escheat" those funds for themselves!  If MtGox is acting on a purported obligation to hold someone's funds "indefinitely" for legal reasons, there's almost certainly a proper procedure that must be followed for turning those funds over to the proper authorities.

Only when MtGox can prove it has done so does it have any excuse to deny a refund.

MtGox is free to refuse to accept anonymous people as its customers, but it may not rightfully confiscate their money for their own benefit.  The only reason MtGox really gets away with it is the person has no recourse - they're probably anonymous for a reason.  MtGox is exploiting their disadvantage, no differently than a mugger exploiting my solitude in a dark alley as he takes my money.  It is not right.

Letting people legally be the judge, jury, and executioner to arbitrarily convert someone else's property on a whim would be a serious moral hazard anywhere, and I'll bet you'll be hard pressed to name a single jurisdiction anywhere in the world that would allow MtGox to just choose to keep the funds "indefinitely", let alone one that has MtGox's offices within its borders.

Companies claiming they got hacked and lost your coins sounds like fraud so perfect it could be called fashionable.  I never believe them.  If I ever experience the misfortune of a real intrusion, I declare I have been honest about the way I have managed the keys in Casascius Coins.  I maintain no ability to recover or reproduce the keys, not even under limitless duress or total intrusion.  Remember that trusting strangers with your coins without any recourse is, as a matter of principle, not a best practice.  Don't keep coins online. Use paper wallets instead.
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