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Bitcoin Exchange CEO Charlie Shrem Arrested On Money Laundering Charge
An anonymous reader writes "Charlie Shrem, the chief executive officer of bitcoin exchange BitInstant, has been arrested and charged with money laundering. 'In the federal criminal complaint, the Southern District of New York charges Shrem, the 24-year-old CEO of BitInstant, with three counts, including one count operating an unlicensed money transmitting business, one count of money laundering conspiracy and one count willful failure to file suspicious activity report. Robert Faiella, a Silk Road user who operated under the name “BTCKing,” was charged with one count of operating an unlicensed money transmitting business and one count money laundering conspiracy.'"
No SHIT Sherlock !!
The beginning of the end?
I'm sure that the HSBC executives will also be arrested for their money laundering soon. Any time now.
Here is how the banks get their competition shut down.
It's a competing currency. The marketplace says "we have no faith in your dollars." Government says "so?" The marketplace says "we will replace the dollar." Government says "no."
I just wonder how it took so long.
“Charlie wears the [passwords] to his bitcoin account imprinted on a ring around his finger"
Now, that's the most stupid thing I've ever seen. Adverticing your services on SilkRoad, and letting the government know how to seize your money.
Isn't money laundering just another form of anonymous speech and therefore a protected activity?
Historically, the claim of consensus has been the first refuge of scoundrels.
NSA, FBI and fiat, sadly.
I recommend reading the full complaint before quickly firing off a reply comparing Shrem to HSBC. Shrem was deeply involved in avoiding AML controls.
Full complaint here:
http://www.justice.gov/usao/nys/pressreleases/January14/SchremFaiellaChargesPR/Faiella,%20Robert%20M.%20and%20Charlie%20Shrem%20Complaint.pdf
WINNI...
Nevermind.
Never answer an anonymous letter. - Yogi Berra
Indeed.
When BofA and HSBC, etc. screw you over, they do it by the book.
The book they helped to write.
Never answer an anonymous letter. - Yogi Berra
Perhaps I just don't understand what "money laundering" means, but I don't really see how bit-coin is of any use whatsoever for money laundering.
Money-laundering, as I understand it, means to disguise the true origin of ill-gotten funds, so as to make the income appear legitimate.
I think there's confusion in the two different means of the word "disguise". In one sense, it means simply to hide or obscure. In another sense, it means to make something or someone appear to be something else.
Bank robbers wear a disguise in the first sense. A bank-robber doesn't wear a Richard Nixon mask because he wants people to think Richard Nixon robbed the bank. He just doesn't want to be identified in a line-up. This is the same kind of disguise that bit-coin offers. And even in that, it doesn't really stand up.
But I think people interested in money-laundering are using the other sense of the word: they want to be able to actually spend their ill-gotten gains without arousing suspicion. They need to make it look like legitimate income. That is why Walter White bought a car-wash.
Merely obscuring the true origin of your money is useless. If the government is even a tiny bit curious about the true origin of your money, you're already well and truly fucked, whether or not they can ever figure it out.
It's a competing currency. The marketplace says "we have no faith in your dollars.
Nonsense. The marketplace has mostly yawned and ignored bitcoin - and rightfully so. There is plenty of evidence that the market has lots of faith in dollars and very little in bitcoin.
"thou shalt not do anything someone with power over you disagrees with"
everything else is a facade covering up this truth
this guy was handling money and not giving the right people a cut, government is no different than any other kind of protection racket
The law, in its infinite wisdom, forbids both rich and poor alike from panhandling, digging through trashcans, and sleeping under bridges.
Equality under the law, fuck yeah!
I thought this was about Charlie Sheen. FUCK, what a waste of time
This is about normal for Bitcoin exchanges. All of them are flaky. Most of them don't even have a legit business address. About half of all Bitcoin "exchanges" so far have failed. The problem is that they're not just exchanges, they're also deposit-taking institutions holding customer funds. With no regulation. A sizable number of Bitcoin "exchanges" just took the money and ran. With the arrest of the CEO, "bitinstant.com" dropped offline.
Right now, the formerly biggest Bitcoin exchange, Mt. Gox, in Tokyo, is tanking. They stopped US dollar withdrawals back in June 2013, then EUR withdrawals slowed down, then JPY withdrawals, and now Bitcoin withdrawals. There's much discussion over whether they're broke, crooked, or merely incompetent. Right now, Bitcoins on Mt. Gox are priced 25% higher than on the other exchanges, because if you sell Bitcoins on Mt. Gox, you can't get the money out, and that spread has been climbing rapidly for the last few days.
Irrevocable anonymous remote transactions are the scammer's dream. Scammers can rip people off without ever meeting the marks and with a low chance of getting caught. That's Bitcoin's big problem. It takes ten honest people to support one crook, and Bitcoin's ratio of crooks is much higher than that.
..has been proposed or enacted by the federal government on bitcoin.
The problem is that this marketplace doesn't want a competing currency, they want a way to electronically move money around "anonymously".
The government is saying no to sidestepping financial regulations and other laws. You're right about one thing. I seemed to take much longer than expected.
Because "AML controls" are specially crafted to suppress new business and reinforce monopolies. They never were about stopping money laundering. Money laundering is necessary to the relationship between politician and the corporate/criminal ruling class that make the decision behind close doors.
Bitcoin can not be stopped
Bitcoin doesn't have to be stopped. It just has to be ignored which is what most people are doing. For 99%+ of people out here in the real world, bitcoin does not solve any real world problems for them. Bitcoin does not allow me (or anyone I know) to do any transactions I currently do easier, cheaper, faster or safer. Most people who use it are either doing so for ideological reasons (hate the Fed, etc) or because they are looking to avoid legal scrutiny of their transactions (money laundering). It's probably of some minor interest to economic academics.
It's a competing currency. The marketplace says "we have no faith in your dollars." Government says "so?" The marketplace says "we will replace the dollar." Government says "no."
I just wonder how it took so long.
There are a finite number of bit coins. You can only get more by getting them from other people. Let me guess - you're one of those gold standard people too, right? The dollar is in no danger of being replaced by bitcoin, as if such could ever happen. Shrem seems to have believed that he could act as an intermediary for transactions that he knew were in violation of US law and not be held responsible. He can test that assertion in a court of law. When bitcoin exchanges that don't have ties to Silk Road start get closed down on trumped up charges you might have a point, but right now your "evil government took them down because it feared them" hypothesis isn't strong.
Should have had Charlie Sheen as CEO. The business would've been running on tiger's blood!
They arrest this guy on money laundering, but let HSBC http://www.bloomberg.com/news/... off the hook.
The real reason why this happened was that he did not purchase the detergent with bitcoin. Apparently there was a slight misspelling and he used bitcon.
GREED IS GREED and it will lead to a state of affairs that will make the dirty thirties look like good times. As long as economies can be effected by a few controlling a growing majority of the wealth then there will intentional economic down turns to lower wages. This time around because the obvious stampede of the rich to get their capital out of the economy of the US and Canada the ensuing depression will be catastrophic. Starvation for some is only a few pay checks away as it is and the majority of the population realizes this fact. Bitcoin is not the answer to this. Now we have the rich accusing the poor of being prejudiced against them and creating an economic holocaust for them by design when the truth is, it is their manipulation of the economy that is causing the chaos in the first place.
This message was not sent from an iPhone because Peter Sellers really was a deviated prevert without a dime for the call
The banks were very upset by this insidious event because they like bitcoin a lot.
It has no real backing behind it, no metals, nothing of value, the only thing backing it is past tense, history, computation time.
What is to prevent CLONING (copying) bitcoins?
What we need is what Colnl Kadaffe was promising before they offed him too, A GOLD CURRENCY (MADE FROM GOLD NO LESS).
Or gems, or silver. something with real tangable value.None of this digital fake shit.
The banks were very upset by this insidious event because they like bitcoin a lot. Now the banks are worried because their money might also be laundered by the bad criminal elements.
Seriously, read the fucking complaint.
They were operating fine with "AML controls", and would be still operating fine - just like any other fucking Bitcoin service that is not shut down by "jackbooted thugs stomping on little man" and all despite boldly operating in Totally-Sticking-It-To-The-Man currency - but they didn't even try to pretend they didn't know they're dealing with Silkroad.
Yes, it's in there, with all the subpoenaed emails about how it's ok working with drug dealers, just tell them to keep it under reportable limit.
What is wrong with silkroad? Oh right, the war-on-free-market. I had forgot about those fascist..
The US government is profiting from drug trafficking, I guess that make them drug dealers. By using the US dollar you are accessory to money laundering.
The US Govt. literally Does Not Care what currency you use to transact your daily life. You can use USD, EUR, JPY, Gold, Seashells, whatever, or yes, BitCoins.
As long as you pay your taxes, and, if operating a money transfer business (like a bank or currency exchange) you comply with a very long list of money laundering laws, you are in good shape. Ignore those laws at your peril.
And complying with these laws is hard. Banks have entire large departments that do nothing but shuffle that particular bit of paperwork; it's not a trivial task, and .com entrepreneurs setting up shop from scratch are rather unlikely to get it right (Mt. Gox didn't), if they pay attention at all.
There are all sorts of companies that issue their own currency. IE Canadian Tire gives away Canadian Tire Dollars that can be used to make purchases in their stores. Wouldn't these store dollars be counted as unlicensed money transmitting? BitCoin is not all that different. Seems like a witch hunt to me.
This is just a shot over the bow to all of you who voted for "Hope and Change" Hope is gone. But the changes are here and they are not very pretty.
You're supposed to become CEO of a billion-dollar bank and then start money laundering. The government's fine with it if you do it that way.
At first, I thought "What?! Charlie Sheen deals with Bitcoin?!"..
"Despite the fact that HSBC admitted to laundering billions of dollars for Colombian and Mexican drug cartels (among others) and violating a host of important banking laws (from the Bank Secrecy Act to the Trading With the Enemy Act), Breuer and his Justice Department elected not to pursue criminal prosecutions of the bank, opting instead for a "record" financial settlement of $1.9 billion, which as one analyst noted is about five weeks of income for the bank".
Banks Launder Billions of Illegal Cartel Money
Royal Bank of Scotland fined £5.6m for failing to properly report over a third of transactions
EU fines Royal Bank of Scotland £324m over Libor rigging
first: sorry I made your acquaintance. u are a intersting person. Unfortunately I am myself a person of index. whatever I touch automaticallybturns to shit. secondly I onow u will probably not read this comment trying to release me from my atlatian chains of goverment surveillance. thirdly can 8 just say that deal8ng with money laundry for lawless 3 letter goverment agencies will always fail. better luck next time. and do try to avoid me. : ) - urs truely midas donkey.
Other banks are equally guilty of money laundering. CITIbank (among others) is involved with money laundering as well. To start with, read Charles Bowden's 'Down By The River' and ''Murder City: Ciudad Juarez and the Global Economy's New Killing Fields'. This is also interesting: http://www.youtube.com/watch?v... In the land of many laws, many laws are broken.
"SO we bide our time, waiting for a purer kick to bloom and the future is still bleak, uncertain and beautiful" -GSYBE
so what if they are allowed to teach it? i bet if you looked through all those green ones and saw how many ACTUALLY TEACH it, you would find that the numbers are much much smaller
So, they can't be involved in money laundering.
Did anyone else see that as Charlie Sheen?
In NJ its all about who you know. For example, John Corzine, a close political ally of President Obama. "Former New Jersey governor and U.S. Sen. Jon Corzine, whom President Obama once hailed as an “honorable man” and one of his “best partners” in the White House, has been subpoenaed to testify before Congress about his role in the collapse of the investment firm MF Global." http://abcnews.go.com/blogs/po... [go.com]
As time goes by, the significance of $10,000 is changing.
20 years ago, $10,000 meant more in buying power than it does today. More so 30 or 40 years ago.
If the magic number of "$10,000" doesn't change then eventually more and more people will be required to report transactions to governments - and it isn't only the US government that has "10,000" as a magic number.
Cheaper because you don't have to pay money transfer fees.
In the U.S. consumers don't pay the transaction fees on credit and debit cards, and in many states merchants are prohibited from adding a surcharge to cover this fee or offering a discount for a cash transaction.
Bitcoins only allow merchants to avoid the credit/debit transaction fee and receive a greater profit margin. Note merchants tend to convert bitcoins to USD immediately upon receipt, the fee for this conversion is usually far far lower than the credit/debit card fee. Sometimes even a flat fee for the month.
If they're being charged with Money Laundering, doesn't that mean the BitCoin is now considered "Money" by the Feds?
I don't know what you think "the market place is showing interest in bitcoin" would look like, but hopefully it would not require the complete replacement of the dollar to reach this threshold.
What would it look like? Investment banks would set up divisions to speculate in bitcoin. Banks (real banks) would start taking deposits and lending in bitcoin. Retail transaction infrastructure similar to the credit card industry would be set up en-masse. Companies like Amazon and Walmart would start taking payment in bitcoin. Currency exchanges would commonly trade bitcoin for other currencies. Commodities would be bought and sold in bitcoin.
It's not question of replacing the dollar. That will never happen.
The market currently says 1 bitcoin is roughly worth 1000x 1 dollar with a ~$10 billion market cap.
Snicker.
So let me get this straight. An illiquid and volatile currency that barely anyone accepts and that relatively few people even know about has a frothy beenie-baby bubble like valuation among a bunch of wannabe finance geeks and you think that somehow implies an enormous valuation? This is nothing more than a game of "who's the bigger fool". This is the sort of pump and dump asset that boiler room salesmen can only dream of.
didn't even try to pretend they didn't know they're dealing with Silkroad.
Before Silkroad was shut down? So the fuck what? Until charges are brought and a court decision is handed down, Silkroad is a business just like Walmart. Are we asking banks to make extralegal moral judgments about the sorts of businesses they or their customers do business with? Do they have a list of people they don't like, who they expect the banks to rat out? Who controls it? To whom must I make a campaign contribution to keep my name off or put my competitions on? You can see where this is going.
After the judgment, continuing to do business with them is a moot point. So just use the legal process to stop criminal activity and stop expecting private citizens to report their neighbors. That went out with the Soviet Union.
Have gnu, will travel.
If you want freedom you need to make a country. I'd suggest one in orbit. Then those countries that don't want to be smoking craters will leave you the hell alone. Then colonize the moon.
I'd go on a Vegan diet but the delivery time from Vega is too long. --brownkitty
The law, in its infinite wisdom, forbids both rich and poor alike from panhandling, digging through trashcans, and sleeping under bridges.
The law also forbids rich and poor alike from trading stocks during certain periods of time, and from insider trading, and from failing to correctly account for profits of their corporations, and from failing to pay inheritance taxes, and from speeding in their Ferraris, and from paying less than minimum wage to their employees...
Canadian Tire "Money" is technically classed as a coupon
- My question is: Can Slashdot be Slashdotted? -
When the government refuses to recognize bitcoin as legal tender...
He shoulda made like a thief and scram
didn't even try to pretend they didn't know they're dealing with Silkroad.
Before Silkroad was shut down? So the fuck what? Until charges are brought and a court decision is handed down, Silkroad is a business just like Walmart.
The law, it does not work the way you think it does. They do not need a separate case to show that Silk Road was a den of iniquity, they just need to show that transactions linked to Charlie Shrem were part of criminal activity and that Shrem knew about it.
Are we asking banks to make extralegal moral judgments about the sorts of businesses they or their customers do business with?
Why yes, we (where by "we" I mean the United States of America) do ask banks to make judgements (not moral, but factual) about the people they're doing business with. If you want to run a financial services business in the USA, you must hire a compliance officer, one of whose jobs it is to watch for potentially illegal transactions and report them to the relevant legal authorities for investigation. It's not extralegal either, because, y'know, it's the law. Has been for decades, probably longer than you or I have been alive.
If you'd bothered to read the legal documents that have been posted, you would know that the Feds would appear to have an open-and-shut case demonstrating that Charlie Shrem (the compliance officer) was fully aware that transactions with "BTCKing" were very likely laundering of drug money. His emails with a superior discuss this pretty much openly. But instead of doing his legally required duties as a compliance officer in a financial institution, Shrem told his boss that they were banning BTCKing (note: not actually enough), then tore even that feeble excuse to shreds by going behind his boss's back to give BTCKing private advice about how to avoid raising further red flags inside BitInstant, such as splitting transactions into small amounts and using many fake identities so that no one of them was doing too much business with BitInstant. He became BTCKing's inside man, gave BTCKing discounts, and he and BTCKing all but openly discussed what they were doing.
Unless the jury decides the government's evidence is bad Shrem is likely going to do some jail time. What they've put into the arrest warrant is an open and shut case, and they usually have even more for the trial. I've read highly questionable justifications for arresting defendants before. This is not an example of that kind of problem.
Do they have a list of people they don't like, who they expect the banks to rat out?
Nope, dummy, they expect the banks to rat out anyone whom they suspect of money laundering, handling drug money, and so on.
After the judgment, continuing to do business with them is a moot point. So just use the legal process to stop criminal activity and stop expecting private citizens to report their neighbors. That went out with the Soviet Union.
This is not expecting "private citizens" to report their neighbors for thoughtcrime ala [i]1984[/i], it is expecting a specific employee in a well defined type of financial corporation to watch for specific red flags often associated with illegal financial activities and report them so that they can be investigated.
Stop with the stupid overdramatic libertarian WAAAAAH WAAAH MY FWEEEEEDOMSSSSS act and think for once in your life. Where to draw the privacy line is an important debate for a free nation to have, and to have continually rather than being complacent, but the place you looney libertarians want to draw it is extremist because basically you want to the law to have absolute certainty before even beginning to investigate. Which is obviously dumb. So just stop, and grow up a little, okay? Requiring banks to minimally participate in the enforcement of anti-corruption laws is not a harbinger of jackbooted oppression, it's a practical ap
And the message being "Democrats are taking your money and giving it to niggers! Vote Republican for a True America(tm)!".
I've been waiting 2 MONTHS
Please keep on them about this!
Z
No one got arrested in HSBC for doing just this.
People scoff and say there is no legitimate use for bitcoin.
on the same measure, there is no legitimate use for mainstream banking and financial instituions.
think about that one seriously for a second, the latter had the same reputation as bitcoin for centuries.,
In the U.S. consumers don't pay the transaction fees on credit and debit cards, and in many states merchants are prohibited from adding a surcharge to cover this fee or offering a discount for a cash transaction.
Ohh I assure you that the consumers pay the fees even if they aren't aware of it. The merchants aren't going to eat a 2-4% fee. That gets passed on through an increase in the price of the product which is shared by everyone even if they don't use a credit card.
Note merchants tend to convert bitcoins to USD immediately upon receipt, the fee for this conversion is usually far far lower than the credit/debit card fee.
Conversion prices are relatively low because otherwise no one would bother. There is certainly no advantage in using an alternate currency if you don't have to. Bitcoin benefits from not having any meaningful transaction infrastructure in place (like credit card machines) which doesn't come cheap. Clearing and accounting for all the transactions also has a big cost that hasn't been fully realized. Sure the credit card processors are taking a cut as a middle man but if you think the same thing won't happen with bitcoin you are being naive. Bitcoin is avoiding fees because the middle men cannot charge them, not because they will not.
Same deal as gift cards: You've already paid them the real money, now you just have a voucher you can choose to redeem at a different date.
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