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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.
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.
Not really. he allegedly did some shady deals which he failed to report. So business as usual in financial circles except he got caught.
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.
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.
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.
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."
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
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.