man sentenced to 4 years for illegal bitcoin operation

[redsn0w]

why is that illegal to run bitcoin exchange? its not real money

It's being exchanged for real money. Therefore, according to the law in Illinois, you have to have a Money Service Business license or face felony charges.

This is insane , really insane . So without it can you sell bitcoin face-to-face privately or not ?

[galiano_tiramani]

barely any info in this indictment https://www.scribd.com/doc/249786589/show-temp-pdf

[ChuckBuck]

why is that illegal to run bitcoin exchange? its not real money

It's being exchanged for real money. Therefore, according to the law in Illinois, you have to have a Money Service Business license or face felony charges.

This is insane , really insane . So without it can you sell bitcoin face-to-face privately or not ?

This guy was exchanging Bitcoin for fiat in the multi millions, so I'm sure you'll be okay if it's a few hundred/thousands etc.

People sell stuff on Ebay and marketplaces for thousands all the time.  I think it was just the huge amount of dollar signs without the proper paperwork and licensing that did this man in.

[Gavin Andresen]

why is that illegal to run bitcoin exchange? its not real money

It's being exchanged for real money. Therefore, according to the law in Illinois, you have to have a Money Service Business license or face felony charges.

I am not a lawyer, but...
... the money transmission laws and regulations are written very broadly. They almost certainly apply even if you are exchanging one crypto-currency for another, and no "real money" is involved.

The only saving grace is that the laws only apply if you are operating "a business" -- so occasional lowish-value person-to-person exchanges done as a favor to friends at no markup from the current exchange rate is probably perfectly legal.

[galiano_tiramani]

I would really like some details on this case to understand if this really was just a bitcoin exchanger or if their is more to the story... he was also charged with marijuana, that could have been the motivator in the prosecution or just a coincidence.

[ChuckBuck]

^^^^^^^ @Gavin Andresen


Wow, I feel like I'm in the presence of royalty for some reason!  

Guy that basically created our favorite Crypto (along with Satoshi) posting amongst the peeps.

Now I know how Lebron, Jay Z, and Beyonce felt when they met with the Royals at the Nets game.

[RodeoX]

Oh $#!T, I think I know who that is.  

I'm certain he would not want me to name him, but I know a guy in that area with a sick mine. If it is who I think, there could be more to this story than a mine.

It says he was running an exchange.

It's not the guy I thought. He did not run an exchange, he had a few buyers to work with directly. But his mine was impressive when I saw it a few years back.

I'm in northern Illinois (quite a bit north of the Bloomington-Normal area where this guy was from)...

OMG, I wonder if it's you? Danny, I'm going to PM you initials of the person I'm thinking of. If it's you, ...well hey bud!

[DannyHamilton]

... the money transmission laws and regulations are written very broadly.

Agreed.  And I've been working with my State Representative to try and clarify this a bit.

They almost certainly apply even if you are exchanging one crypto-currency for another, and no "real money" is involved.

Absolutely.

It just annoys me when people try to say "but it's not real money" when they know very well that the other half of the transaction was the very thing that they like to call "real money".

The only saving grace is that the laws only apply if you are operating "a business" -- so occasional lowish-value person-to-person exchanges done as a favor to friends at no markup from the current exchange rate is probably perfectly legal.

Perhaps, but that's a very arbitrary line, and it is impossible to know just how much volume you have to move or how much profit you have to take for the jury to decide that you are a business after all.

If I am doing a person-to-person exchange with my father and I charge him a 10% markup, is it a business?

If I am charging no markup according to the BitStamp rate, but compared to other exchanges it is marked up, and I'm selling to a Facebook friend of a Facebook friend, is it a business?

The net result is to discourage those that are trying to behave from doing anything at all, so that the only people that remain are those that don't care if they are engaging in illegal activity or not.

[DannyHamilton]

It's not the guy I thought. He did not run an exchange, he had a few buyers to work with directly. But his mine was impressive when I saw it a few years back.

I'm in northern Illinois (quite a bit north of the Bloomington-Normal area where this guy was from)...

OMG, I wonder if it's you? Danny, I'm going to PM you initials of the person I'm thinking of. If it's you, ...well hey bud!

No. It's not me.  I know who you're talking about though.

I thought I knew who most of the bigger players are here in the northern Illinois area, but I didn't know this John D Powell.

By the way, my initials (in case it isn't obvious) are D.H.

[RodeoX]

It's not the guy I thought. He did not run an exchange, he had a few buyers to work with directly. But his mine was impressive when I saw it a few years back.

I'm in northern Illinois (quite a bit north of the Bloomington-Normal area where this guy was from)...

OMG, I wonder if it's you? Danny, I'm going to PM you initials of the person I'm thinking of. If it's you, ...well hey bud!

No. It's not me.  I know who you're talking about though.

I thought I knew who most of the bigger players are here in the northern Illinois area, but I didn't know this John D Powell.

By the way, my initials (in case it isn't obvious) are D.H.

Ah, well in that case; are you Satoshi Nakamoto? 

[DannyHamilton]

OMG, I wonder if it's you? Danny, I'm going to PM you initials of the person I'm thinking of. If it's you, ...well hey bud!

No. It's not me.  I know who you're talking about though.

I thought I knew who most of the bigger players are here in the northern Illinois area, but I didn't know this John D Powell.

By the way, my initials (in case it isn't obvious) are D.H.

Ah, well in that case; are you Satoshi Nakamoto? 

Who me?  Nah. 

[leopard2]

So the fascist beasts have incarcerated a human being for doing no harm at all, just exchanging perfectly innocent money for perfectly innocent cryptocurrency? 

He is clearly a political prisoner.

It is the sort of thing that makes me wonder if another civil war would be desirable or not.

[commandrix]

Gee whiz, that's not far from where I live (and am moving away from in a couple of weeks). I don't know the guy, though. I want to give him the benefit of the doubt and say that maybe he wasn't aware of that particular law.

[TKeenan]

I am not a lawyer, but...

We need to hear from Marco on this one.  Marco?  Can you please comment?  This is crazy BS if true.  OK - if the guy was actually doing a heavy money laundering scheme - throw him away for a few years.  But if this is a simple crackdown on a bitcoin exchange for no other reason than failure to get money transmitter license then "Holy shit!".  I have to believe his deals were with some bad actors and he knew it.  Something like that.

[DannyHamilton]

We need to hear from Marco on this one.  Marco?  Can you please comment?  This is crazy BS if true.  OK - if the guy was actually doing a heavy money laundering scheme - throw him away for a few years.  But if this is a simple crackdown on a bitcoin exchange for no other reason than failure to get money transmitter license then "Holy shit!".  I have to believe his deals were with some bad actors and he knew it.  Something like that.

He pleaded guilty, so I'm just guessing that this was part of a plea deal.  If so, then the details of what actually happened might be difficult to come by.

[Blazr]

We need to hear from Marco on this one.  Marco?  Can you please comment?  This is crazy BS if true.  OK - if the guy was actually doing a heavy money laundering scheme - throw him away for a few years.  But if this is a simple crackdown on a bitcoin exchange for no other reason than failure to get money transmitter license then "Holy shit!".  I have to believe his deals were with some bad actors and he knew it.  Something like that.

He pleaded guilty, so I'm just guessing that this was part of a plea deal.  If so, then the details of what actually happened might be difficult to come by.

Yep, he was also charged with possession of less than 50 kilos of marijuana with intent to distribute but that charge was dropped as part of the plea deal, so I'm assuming there is more to this case.

[moriartybitcoin]

i wonder if this guy was a high volume localbitcoins exchanger or if he operated a real online exchange website?

Because you would think we would have heard about the exchange suddenly disappearing, funds in peoples' wallets gone, etc.

Who is this dude and what exchange did he run??

[jonald_fyookball]

why is that illegal to run bitcoin exchange? its not real money

It's being exchanged for real money. Therefore, according to the law in Illinois, you have to have a Money Service Business license or face felony charges.

This is insane , really insane . So without it can you sell bitcoin face-to-face privately or not ?

This guy was exchanging Bitcoin for fiat in the multi millions, so I'm sure you'll be okay if it's a few hundred/thousands etc.

People sell stuff on Ebay and marketplaces for thousands all the time.  I think it was just the huge amount of dollar signs without the proper paperwork and licensing that did this man in.

Is this a statistic or an assumption?
The Government is truly cracking down.

Obviously it is the huge amount of money he was dealing with.  The odds that you will be prosecuted for
trading $200 worth of Bitcoin here without a lisence are very low.

[franky1]

purchasing bitcoins directly does not need a money exchange license. but if you are operating a system which holds FIAT for future use for customers or movement between people, then you need a license.

basically if your business model includes a users balance denominated in dollars. get a license!

for instance localbitcoins holds no fiat and all transactions are for direct bitcoin purchases. then users or webmasters of localbitcoins do not need a license.

and also anyone working as a fiat escrow needs a license.

[DannyHamilton]

purchasing bitcoins directly does not need a money exchange license. but if you are operating a system which holds FIAT for future use for customers or movement between people, then you need a license.

basically if your business model includes a users balance denominated in dollars. get a license!

for instance localbitcoins holds no fiat and all transactions are for direct bitcoin purchases. then users or webmasters of localbitcoins do not need a license.

and also anyone working as a fiat escrow needs a license.

I suspect that each jurisdiction has its own rules regarding this and that such a blanket statement is likely to be mistaken in many jurisdictions.