man sentenced to 4 years for illegal bitcoin operation

[junglist.massive]

there will be a lot of martyrs before mass adoption

[KeyJockey]

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.

I'm not so sure about that... been wondering about this specifically myself for awhile now.

This guy's "offense" amounted to $3 million exchanged over 18 months?

Divide that up into just a reasonable per-day business volume:

3,000,000 / 18 = $167,000 per month
  167,000 / 4 = $42,000 per week
   42,000 / 5 = $8,400 per day, assuming 5 day working week (guy's not even doing any weekend trading, LOL)

If you figure a typical "quick trade" type deal for an average bitcoin buying customer on LocalBitcoins is maybe for $500, then this amounts in total to under 20 customers a day.

Granted, yes, that's a pretty brisk business, if he was working this kind of volume day after day, month after month, consistently for a year and a half, to accumulate $3 million in total.  It's clearly not a casual or part time business effort.

But on the other hand, it doesn't sound so impressive if his "crime" is described as "trading with 20 buyers a day for five hundred bucks each" now, does it.   

The Prostitutor in this case likely aggregated his "total business volume" UPWARDS into this more formidable sounding number... so that it sounds more like they've "taken a dangerous felony money launderer" off the streets, thus protecting innocent mothers and children in America for the glory and honor's sake of apple pie, rainbows, and unicorns that shit Skittles...

Let's hope this case is just a fluke, anomaly, one-off unfortunate plea-bargain this guy had to accept... and not the beginning of any kind of crack-down trend against simple & honest person to person bitcoin exchange.   

[exoton]

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.

I would say that more jurisdictions would require people to have some kind of money transmitter license to sell bitcoin for cash/fiat then would require some kind of license to buy bitcoin for cash/fiat

[bornil267645]

Whoever he is, hope the punishment stays as an example to the Bitcoin community.

[elvizzzzzzz]

Whoever he is, hope the punishment stays as an example to the Bitcoin community.

I read recently that you should never pass a law unless you were prepared to see people die as a result.

The thinking was that the State is authorised to use lethal force to enforce its laws, and
eventually that will happen.

[judah]

Just a thought, what if I sell some stupidly large random number (private key) or corresponding QR picture.  Mere coincidence, perhaps, that a bitcoin is sitting on that private key in a "blockchain" -- whatever that is    The customer can place ~$350 on the table and I hand over the qr code.  What the customer does with that number has no concern to me.  In this case I believe sales tax would have to be charged for the QR code as a consumer good.  Probably only works for in-person trades.

[Blazr]

Just a thought, what if I sell some stupidly large random number (private key) or corresponding QR picture.  Mere coincidence, perhaps, that a bitcoin is sitting on that private key in a "blockchain" -- whatever that is    The customer can place ~$350 on the table and I hand over the qr code.  What the customer does with that number has no concern to me.  In this case I believe sales tax would have to be charged for the QR code as a consumer good.  Probably only works for in-person trades.

They'd probably try and nail you by saying that you funding the address was the "money transmission" and that the qr code was a payment instrument.

[elephantas1]

I'm guessing dude didn't have one of these:

http://moneytransmitterlaw.com/state-laws/illinois/

Hey, if it you want to run a business, you have to abide by the state or government's laws.  His fuck up alone, not Bitcoin's.

So couldnt he go to another state to live and avoid the punishment?

[DannyHamilton]

So couldnt he go to another state to live and avoid the punishment?

Not according to Article 4, Section 2, Clause 2 of the U.S. Constitution:

A Person charged in any State with Treason, Felony, or other Crime, who shall flee from Justice, and be found in another State, shall on demand of the executive Authority of the State from which he fled, be delivered up, to be removed to the State having Jurisdiction of the Crime.

Law enforcement individuals in the state that he goes to live in would be obligated to detain him and deliver him to Illinois (the state that has charged him with the crime).

[thejaytiesto]

Jesus fuck what? Can someone put what happened in layman terms?

[KeyJockey]

Just a thought, what if I sell some stupidly large random number (private key) or corresponding QR picture.  Mere coincidence, perhaps, that a bitcoin is sitting on that private key in a "blockchain" -- whatever that is    The customer can place ~$350 on the table and I hand over the qr code.  What the customer does with that number has no concern to me.  In this case I believe sales tax would have to be charged for the QR code as a consumer good.  Probably only works for in-person trades.

I understand what you're getting at with this idea, but it's kinda still missing the point.

The buyer is still handing you "FIAT MONEY" cash, which is the stuff that these fascists are so concerned about controlling, hence their claims to be authorized to "regulate" your use of it.

What you'd need to do to accomplish what I *think* you're getting at here, would be something along the lines of an exchange of your printed QR code on paper for something like a 1 ounce gold coin, when the current dollar value of that gold coin was, say, $1225 and that QR code just happened to correspond to an address that was holding $1225 worth of bitcoin.

This, then, would be a simple barter exchange of one physical object (printed piece of QR code "artwork"...?) for another physical object (the gold coin). 

If you could abstract it even further from "money" by using something like a rare collectible baseball card or something like that, instead of a gold coin, so much the better.

Of course, this is ridiculous... and one would HOPE that we will never be reduced to playing such stupid GAMES to have to "get around" the increasingly draconian laws that it seems like "they" MIGHT begin to try to prop up around bitcoin, in a vain attempt to fence it in.

But if it comes to that? 

Before they'll ever be able to KILL bitcoin, I'd expect some stupid nonsense like this scenario might just become reality... but let's hope not.

[DannyHamilton]

Jesus fuck what? Can someone put what happened in layman terms?

Layman's terms?

A man was arrested and charged with a crime.
Rather than hire his own attorney, he was assigned a public defender.

He plead guilty to operating a "money transmitting business which affected interstate commerce, and such business was operated without an appropriate money transmitting license as required by the State of Illinois".
He also plead guilty to operating a "money transmitting business which affected interstate commerce, and such business failed to comply with the money transmitting business registration requirements".

Because of these admissions of guilt, he has been sentenced to 4 years imprisonment followed by three years of supervised release.

Anything more than that is speculation or unverified news reports, since there is not additional information in the indictment.

According to unverified news reports:

"Investigators found Powell received more than $3 million in Bitcoins from individuals over an 18-month period ending in Feb. 2014. By law, he was required to register as a money service business with the state of Illinois or the United States."

[moriartybitcoin]

i wonder why a guy who processed $3mil in transactions couldn't afford to hire an attorney?

and WHAT THE HECK exchange was he running?

[DannyHamilton]

i wonder why a guy who processed $3mil in transactions couldn't afford to hire an attorney?

Blew it all on drugs, gambling, and hookers?

and WHAT THE HECK exchange was he running?

My best guess was that he was meeting people from localbitcoins, but there aren't any details.  He could have had a black market hidden TOR site of some sort. He could have been trading here at bitcointalk in the Currency Exchange forum. He could have been on the OTC IRC channel, he could have been communicating with people on Reddit.

[KeyJockey]

Blew it all on drugs, gambling, and hookers?

My best guess was that he was meeting people from localbitcoins, but there aren't any details.  He could have had a black market hidden TOR site of some sort. He could have been trading here at bitcointalk in the Currency Exchange forum. He could have been on the OTC IRC channel, he could have been communicating with people on Reddit.

I'd guess that, yeah, it's any and possibly ALL of that... since -- as enumerated above -- his $3 Million total in a year and a half works out to "only" about $8,000 per day trading, just working Monday thru Friday.

With an average per-sale deal of $1000 that's only 8 daily customers or so... even at $500 max-limit it's less than 20 sales.  Pretty busy for a one man band operation, sure, but with even 1 or 2 co-worker employees it wouldn't even rank as full-time work.

Also remember that he "transacted" or "exchanged" $3 million: that doesn't mean he EARNED $3 million! 

At typical LBC rates he'd probably net something like 5-6% *MAX* on his trades.  That means over the 18 months in question he likely made about $165,000 in total, or about $9100 per month... $458 per day approximately.

$500 bucks a day ain't much fuel for a drugs, gambling, and hookers lifestyle.
$500 bucks a day also ain't so good risk/return on giving up 4 years of your life, rotting in some shitty jail cell 

[Q7]

Sounds more like an article written for April's fool joke. By all means that couldn't have been true. I mean there is totally no basis for that person to get charged in court. For operating exchanges?? Come on...gimme a break

[Blazr]

i wonder why a guy who processed $3mil in transactions couldn't afford to hire an attorney?

$3million at a 5% fee (which is fairly large) works out at $150,000, not a whole lot really.

[AGD]

This smells like some kinda fake.

[QuestionAuthority]

This sounds like total BS. Where are the news reports of his arrest? Where are the news reports of his trial? Did they fingerprint him and immediately offer him a plea deal? Where are the indictments of all the people he was selling to/buying from? What department of the government ran the investigation/made the arrest? Arrest records are easy to verify and public record. Did they watch him for 18 months then one day say, "ok, that's enough evidence, let's wrap it up and arrest him"?

Something Awful is getting more clever.

[AGD]

http://qntra.net/2014/12/additional-information-on-a-normal-man-aka-john-d-powell/

Additional Information On A Normal Man AKA John D Powell
Posted on December 12, 2014 by cazalla   

As John D Powell took a plea deal and plead guilty to two charges of operating an unlicensed money service business, few court documents are available. The documents that are available depict an articulate man who experienced a run of misfortune prior to his involvement with Bitcoin.

In a letter to Judge Shadid, Mr Powell cites the break down of his marriage and stress of surviving an aortic dissection as explanation for his decision to operate an unlicensed Bitcoin exchange. One could be forgiven for mistaking Powell's letter as one penned by a murderer who is remorseful for his crimes and if as claimed by the State, Powell did process USD $3 million in Bitcoin, it's clear it was a beacon of light for him despite yielding to the court in his apology letter.

Powell's letter also shows that he lost an amount of coins when Mt.Gox collapsed.

He writes:

    Judge Shadid –

    It's a well known adage that none of us know how much time we have left, and I may be more acutely aware of that than the average person. My heartbeat is not as dependable as it once was, and surviving an aortic dissection a few years ago intensified the mid-life crisis I was struggling with. I was indeed very lucky to still be alive, but to what end?

    My marriage of twenty five years was being exposed as a sham, stretching back many years, coming to light. I realized I had a far less than satisfactory relationship with my only son because of mindless neglect on my part. I began a personal inventory of how I'd spent my life and it bothers me still, for I haven't yet had the time to make up for my self-centered, career-focused romp.

    While recovering from my illness and reeling from the loss of my comfortable suburban lifestyle, I had time to think. And I had to admit to myself that I wasn't very happy after all.

    It's no stretch to say that I'm far more ashamed of wasting my life in pursuit of materialism than for anything that has brought me to the attention of your court.

    Change has come slowly, but I'm happy to recount how I've found deep contentment by turning attention to community, and away from self-centered endeavors. I have found redemption and renewal by devoting a large portion of my energy to helping those far less fortunate than myself.

    I realize this presents a new and ironic challenge for me, since I'm now in a position where it's harder to provide for my own basic needs. But I can truly say that nothing else provides the joy and satisfaction of things like volunteering at the local homeless shelter or food panty.

    This recovering sensation junkie has finally found his happy place. I just wish this epiphany had come to me earlier in life.

    I know this may sound like some "jail house conversion", but I began to chronicle this new direction in a personal blog several years ago. It is date-stamped and published online at sharethezing.blogspot.com. I look forward to many more positive posts.

    That is the good. Now for the bad and the ugly. I am truly sorry for the actions that have brought me before your court. I didn't take seriously my responsibilities with the business.

    I already knew what I was going to do with any profits, but ended up losing even the original capital used to get it started. I had lost 20k when the Japan-based broker called Mt.Gox suddenly folded, and lost another 25k to market fluctuations over time, so the "business" was fundamentally idle when law enforcement came to see me.

    I'm still happy to note that no one was ever cheated or shorted because my primary goal was to maintain a stellar reputation for fair trading.

    I then had what is now easy to see as a foolish notion to eventually sell the business to one of the many much larger brokers in that realm.

    Having said all that, I accept sole responsibility for my actions and lack of oversight.

    My only request is that as part of my punishment, I be sent somewhere I can be of use – somewhere I can be of service and value to others, I still have a lot to give.

    Thank you for taking the time to read this.

    Respectfully,

    John D. Powell

Other documents which were filed include:

    The Bitcoin wikipedia page.
    The Defendant's commentary on sentencing factors.
    The indictment.
    An exhibit and witness list which only includes a "group of photos".
    The Judgement.

Upon completion of his prison sentence, the conditions of Powell's supervised released include:

    Undertaking cognitive based therapy at his own cost, if financially able.
    Participation in psychiatric services or a mental health program as directed by the US Probation Office.
    Participation in a substance abuse treatment program which includes drug testing.
    Forbidden to operate a business or obtain employment which involves management of cash, credit, other financial instruments including "cyber-based currency" without prior approval of the US Probation Office. Powell must also disclose his conviction to potential employers.

Powell's inmate number is 72740-083.