Bitcoin Exchange CEO Charlie Shrem Arrested On Money Laundering Charge

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Bitcoin Exchange CEO Charlie Shrem Arrested On Money Laundering Charge

Posted by samzenpus on Monday January 27, 2014 @07:48AM from the paying-the-price dept.

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.'"

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HSBC by The+Atog+Lord · 2014-01-27 07:52 · Score: 5, Insightful

I'm sure that the HSBC executives will also be arrested for their money laundering soon. Any time now.
1. Re:HSBC by lgw · 2014-01-27 07:57 · Score: 5, Insightful
  
  You were sarcastic, but that is the whole freaking point of the rule of law: a list of rules such that, if you follow those rules, you won't be arrested. It makes for a far better society than one where you can be arrested whenever you annoy someone important, regardless of the rules.
  
  --
  Socialism: a lie told by totalitarians and believed by fools.
2. Re:HSBC by viperidaenz · 2014-01-27 08:00 · Score: 5, Insightful
  
  You are under arrest on suspicion of treason!
  What did I do that amounts to treason?
  What ever the king decides!
3. Re:HSBC by Ralph+Wiggam · 2014-01-27 08:05 · Score: 3, Informative
  
  HSBC was not a party to the money laundering. They were fined for insufficient oversight, which allowed other people to launder money.
  In this case, the guy is being charged with direct involvement in the money laundering.
4. Re:HSBC by Anonymous Coward · 2014-01-27 08:06 · Score: 4, Interesting
  
  The problem is that the formulation of the rules enable them to be arbitrarily interpreted, which means that the rules don't really matter. It's up to the persons doing the interpretation. The recent revelations about NSA highlights this pretty well I think. The government clearly disregards the constitution but nothing happens.
5. Re:HSBC by pla · 2014-01-27 08:21 · Score: 5, Insightful
  
  "Sorry, matter of national security. No, you can't see the evidence against you. No, we don't have to physically present you to the court to stand trial".
  
  And if you disagree with that... Better stay out of sight of the sky 24/7 or we might spot you "associating" with a terrorist leader and you know how that collateral drone damage works on you and your whole village... Er, neighborhood.
6. Re:HSBC by pla · 2014-01-27 08:24 · Score: 5, Informative
  
  Cute, but did HSBC: Conspire to launder money? Willfully fail to file Suspicious Activity Reports(SAR)?
  
  Yes, actually, they did; and further, they actively conspired with Iran to circumvent international sanctions.
  
  And yet, we don't see any of their executives behind bars as a result...
7. Re:HSBC by lgw · 2014-01-27 08:34 · Score: 3, Insightful
  
  Yes, all quite true. I was merely highlighting that the rule of law is a good ideal to aspire to, not claiming that we had it today in America. The growing trend under by current and former presidents to simply ignore or change laws by "executive order" was proof enough of that, even before the NSA scandal.
  You should be able to get away with doing something bad "merely" by following all the relevant laws, because the other way of doing things leads inevitably to dictatorial control of the state (what power has the legislative branch when laws don't matter?).
  
  --
  Socialism: a lie told by totalitarians and believed by fools.
8. Re:HSBC by Dahamma · 2014-01-27 09:18 · Score: 5, Insightful
  
  Stop trying to pretend this is a used car deal ("don't worry about the total, it's just $179 a month!"), let's just put the actual numbers out there - they were fined $1.9B for laundering $680B. The government isn't punishing them by "taking their future profits", it's giving them a massive break by forcing them to give up a small fraction of the profits they already made on illegal activities.
  If you were fined 5 weeks of income (and no jail time) after having made a shit-ton of money in the last 4 years doing something illegal, it wouldn't sting at all. In fact, you'd almost be motivated to try it again...
9. Re:HSBC by CodeArtisan · 2014-01-27 09:29 · Score: 3, Insightful
  
  Except the king can't decide it, because ex post facto laws are forbidden, and the king can't override that because of rule of law.
  Except the ones regarding telecoms companies and illegal wire tapping you mean?
10. Re:HSBC by vux984 · 2014-01-27 13:45 · Score: 3, Informative
  
  That's the inverse case. The government can take something illegal and make it legal retroactively and then let you get away with it. This is what happened with the telecoms. And while it wasn't all that good in this case, it is a good thing in general.
  The "bad" case is the opposite, where they make something legal illegal retroactively and then charge you for it. This would not be a good thing.
I was wondering when that would happen by erroneus · 2014-01-27 07:57 · Score: 3, Insightful

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.
1. Re:I was wondering when that would happen by jratcliffe · 2014-01-27 08:01 · Score: 5, Interesting
  
  If they were doing what they are alleged to have been doing using Yen, or Dollars, or Pounds, or whatever, it would still have been money laundering. Bitcoin doesn't change that.
2. Re:I was wondering when that would happen by Ralph+Wiggam · 2014-01-27 08:07 · Score: 3, Insightful
  
  Those money laundering rules apply to any currencies handled by US businesses, including casino chips. The government is not trying to shut down the casino industry. They just require you to record information from your customers.
3. Re:I was wondering when that would happen by bloodhawk · 2014-01-27 08:09 · Score: 3, Insightful
  
  Actually what they have done is the opposite of what your claiming, they are treating it just like any other currency. If you move currencies around there are very strict reporting and tracking rules that apply to transactions and breaching those rules results in what you see happening here. You get charged!
4. Re:I was wondering when that would happen by Anonymous Coward · 2014-01-27 08:21 · Score: 3, Informative
  
  Who the fuck is modding this moron up?
  Do you even realise this action agaist specific people who provided Bitcoin exchange services for Silkroad, not Bitcoin per se? Did you even read the complaint?
  It's not some vague accusation, the guy - who was in charge of money-laundering laws compliance - and his boss had pretty much literally talk like this: "Hey, this guy's from Silkroad, shall we ban him again?" - "He brings a lot of business" - "Maybe we should just drop an advertisement at Silkroad?" - "Just leave it like that".
  P.S.: It fucking says "Bitcoin is not inherently illegal and has many legitimate uses" as a part of explanatory paragraphs, FFS. OMG GUBMINT HAETS BITCOINS
  P.P.S: Read the complaint - it's plain English and quite readable.
5. Re:I was wondering when that would happen by phantomfive · 2014-01-27 08:44 · Score: 4, Informative
  
  I'm not sure this is an attack on bitcoin itself, it looks like this is related to the Silk Road dragnet. We can expect to see more arrests related to Silk Road as the FBI goes through documents they've confiscated.
  
  All the same, if I were operating an exchange, right now I would be looking through and making sure I'm complying with the law exactly. Just like bankers do.
  
  --
  "First they came for the slanderers and i said nothing."
6. Re:I was wondering when that would happen by TsuruchiBrian · 2014-01-27 09:05 · Score: 3, Funny
  
  I guess there is no point in actually knowing anything when you have a bullshit detector. Nothing in life is ever counter-intuitive.
Re:And so it begins... by lxs · 2014-01-27 08:07 · Score: 5, Informative

Not really. he allegedly did some shady deals which he failed to report. So business as usual in financial circles except he got caught.
Re:Read the full complaint before comparing to HSB by funwithBSD · 2014-01-27 08:10 · Score: 3, Insightful

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
Bitcoin exchanges are run by flakes. by Animats · 2014-01-27 08:20 · Score: 4, Interesting

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.
1. Re:Bitcoin exchanges are run by flakes. by Anonymous Coward · 2014-01-27 08:46 · Score: 3, Insightful
  
  Exactly - bitcoin is always talking about how it is anonymous blah blah blah - well, what do you think happens when people can start moving money around, across international borders, with anonymity? It doesn't take a rocket scientist to predict who is going to flock to it. And since when is it a good idea to put ones money into completely anonymous 'banks' (read - 'bitcoin exchanges') which are who knows where, run by who knows whom with no oversight or recourse for fraud? When the sheep decide to go sleep in a wolf den because they are afraid the trees may drop acorns on them, how surprised can you be when they become dinner?
Re:Money Laundering? by JDG1980 · 2014-01-27 08:20 · Score: 4, Insightful

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.
Not one single action... by gatfirls · 2014-01-27 08:22 · Score: 4, Interesting

..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.
1. Re:Not one single action... by Animats · 2014-01-27 08:46 · Score: 5, Informative
  
  Mod parent up. A U.S. Senate commitee held a hearing on Bitcoin a few months ago. All the regulatory agencies were there.
  FinCen: We're watching it, no big deal.
  DEA: the big cartels aren't using it, the street dealers aren't using it.
  FBI: We took down Silk Road, which was using Bitcoin, and Bitcoin didn't make it harder to do that.
  Secret Service: No big deal.
  Homeland Security: terrorists don't seem to be using it.
  IRS: Taxable income is taxable income; we'll deal with it.
  SEC: Trading Bitcoin is just like trading anything else. We busted one guy running a Ponzi scheme with Bitcoins and the judge agreed that using Bitcoins didn't make it special.
  Conclusion of the Senate committee: no need for special Bitcoin legislation.
  All the US law enforcement action involving Bitcoins has been for doing routine crook stuff. Now, China is cracking down on Bitcoins, but they have exchange controls; you have to get permission to swap yuan for dollars or euros. The US has an open market in foreign currencies; you can swap dollars for yen without asking anyone's permission. There are reports to make to FinCen, but they just log the info.
2. Re:Not one single action... by Eskarel · 2014-01-27 15:00 · Score: 3, Insightful
  
  Our big challenge isn't to get the 1st and 4th amendments applied to the internet. The problem we have to resolve is how to expand our 1st and 4th amendment protections to cover all the information that can now be collected without making it illegal to walk down the street.
  What the NSA is doing for the most part is collecting all the information that sits outside of what is actually protected by law, most of it has always been legal because it wasn't possible to use that mass of information to actually determine anything, now it is.
  It's always been perfectly legal for the police to follow you everywhere you go on public property and write it down, it just wasn't cost effective to do it and the cops stuck out like a sore thumb, today we've all quite happily placed GPS tracking devices in our pockets so the police can get all that information without having to actually do any work and with modern computers they can actually process it.
Doesn't scratch any itches by sjbe · 2014-01-27 08:22 · Score: 3, Insightful

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.
1. Re:Doesn't scratch any itches by melchoir55 · 2014-01-27 08:44 · Score: 4, Informative
  
  It actually does let you do stuff cheaper, faster, and safer. Cheaper because you don't have to pay money transfer fees. It is WAY faster than most forms of sending payment. It is also much safer insofar as a business cannot arbitrarily reverse the transfer.
  Crypto currency is clearly better. The problem is that bitcoin is abstract. Most people don't realize that the money system they are using has no underlying foundation. Those pieces have paper are valuable because people agree they are, not because they are backed by any product or valuable ore. Bitcoin is no different in that respect. Only, it is very clearly abstract while people are able to lie to themselves (or just be ignorant) about the US dollar. People are uncomfortable with bartering using stuff they thing is "worthless" (not backed by anything). Bitcoin hasn't hit the threshold of adoption which most people require to believe something is safe.
  This is entirely separate from all the other problems such as volatility, the 51% exploit, and etc.
Re:And so it begins... by tripleevenfall · 2014-01-27 08:29 · Score: 5, Interesting

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.
Re:And so it begins... by Blue+Stone · 2014-01-27 08:52 · Score: 4, Funny

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
Wrong. They don't care. by sirwired · 2014-01-27 09:22 · Score: 3, Informative

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.
Re:Tin foil hat time by lgw · 2014-01-27 12:02 · Score: 4, Insightful

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.