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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.'"
I'm sure that the HSBC executives will also be arrested for their money laundering soon. Any time now.
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.
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
Not really. he allegedly did some shady deals which he failed to report. So business as usual in financial circles except he got caught.
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
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.
What you need to understand is very simple: financial privacy is illegal in the United States. If you run a bank, or any other form of money-transmission service, then you are legally required to report all transactions over a certain amount (I think it might be $10,000, but I'm not sure) to the U.S. government. You are also required to obtain and keep personally-identifiable information on all of your customers, and to report if someone is "structuring" transactions to get in under the limit.
If you don't do these things, you can get arrested even if you knew nothing about the illegal activity your customers were involved in.
..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.
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.
Should have had Charlie Sheen as CEO. The business would've been running on tiger's blood!
since bitcoin isn't a currency so much as it is a ledger where everything is tracked and traceable, it does not seem like the ideal venue for illegal transactions. The "paper trail" is going to be out there.
One article I recently read described Bitcoins as "prosecution futures". I think they might have been right.
Death and taxes...
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.
If they treat him the same as HSBC, he'll be OK. Slap a minor fine on him (5 weeks-worth of profit) and the government take their cut of the proceedings.
Now, the government wouldn't treat individuals charged with wrongdoing differently to multi-million/billion dollar businesses, would they?
Corporation, n. An ingenious device for obtaining individual profit without individual responsibility. - Ambrose Bierce
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.
Death and taxes...
Yep. If they suspect you should be taxed and aren't paying any taxes, they'll not like it one bit.
Further, if you are operating in a sphere outside policy makers (the ol' boys club) they don't like it they can't manipulate or borrow against your assets (interest free).
Lastly, those b*tards in the banking sector, the ones who whine and complain about too much government restriction on their smoke-n-mirrors games resent like heck anyone operating outside those restrictions. Honestly, BitCoin could be playing hedge fund, derivatives or other weaselly pastimes where they can't get in and rig the LIBOR or such.
A feeling of having made the same mistake before: Deja Foobar
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.
Some people think bitcoin is deflationary because there is a cap to the supply. That's naive of course - the money supply has little to do with the amount of physical currency, and everything to do with fractional reserve banking. But then, people make the same mistake about gold. For bitcoin to "go mainstream" there would need to be BTC-denominated savings accounts and CDs, meaning fractional reserve banking would be happening (well, 0-reserve banking would be happening, but USD is the same way).
Socialism: a lie told by totalitarians and believed by fools.
At first, I thought "What?! Charlie Sheen deals with Bitcoin?!"..
We did pretty much exactly that, with the Sedition Act of 1918. It was just about as bad as you make it sound, and was eventually repealed, but before that it was upheld. The logic used to pass it was that expression was still free, but it had to be done nicely during wartime, so as to not undermine the American war effort.
You do not have a moral or legal right to do absolutely anything you want.
"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
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
The market currently says 1 bitcoin is roughly worth 1000x 1 dollar with a ~$10 billion market cap. I would hardly call that a yawn. This is without any exposure on the traditional exchanges, which is the typical method for the average investor to buy.
Once ETFs come out we will see what the broader market does, but it can only increase the money flowing into bitcoins. I doubt is it a coincidence that they took out the guy associated with the first bitcoin ETF that is trying to come to market. (Winklevoss twins' BITCN fund)
Did anyone else see that as Charlie Sheen?
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.
were intended to be used to promote and support unlawful activity, to wit, narcotic trafficking on the "Silk Road" website.
It doesn't say what evidence they have make this assertion, but I can't imagine not having to prove intent.
Simply because a hunting rifle can be used in a murder, it is not likely I would be charged for selling your homicidal brother my 30-06.
Happiness in intelligent people is the rarest thing I know.
Ernest Hemingway
You completely bypassed the point I was making.
The money supply has almost nothing to do with the amount of physical currency, because of fractional-reserve banking (and other games without handy names). Do you think inflation in America has anything to do with the umber of printed dollar bills in circulation?
For bitcoin to be mainstream, used by ordinary people for shopping, there will need to be BTC-denominated savings accounts, CDs, and credit cards (and likely insurance policies as well). In other words: fractional-reserve banking.
Socialism: a lie told by totalitarians and believed by fools.
Knowing the way the law works, failing to file suspicious activity reports will be the crime with the most jail time. It's piss easy to prove, where's your activity report, needs no intent and tends to make a lot of the other fraud harder to accomplish.
Bitcoin will eventually be deflationary because of the limited supply cap. The fact that we have things like fractional reserve banking increases the amount of time it could theoretically remain non deflationary, but there comes a point where if you made any more imaginary money the whole system will collapse and you need to make some more real money which bitcoin doesn't do.
The major problem with bitcoin however is that a fairly small number of people already have the vast majority of coins that can ever be mined. If you stuck the entire world onto bitcoins the few thousand people who currently own bitcoins would become richer than anyone who currently exists on earth while everyone else would be third world poor. Except of course that most of the people who had all those bitcoins would be incredibly asset poor and a lot of the people who didn't would be incredibly asset rich. You'd have extremely poor people who owned multi billion dollar companies and extremely rich people who didn't even own their own home. That's insane and won't work.