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Comment by fpgaminer | Hacker News Reader

So, how does this work legally? Bitfinex isn't a U.S. based company and doesn't work with U.S. citizens. The article says where it's based is unknown. Does the CFTC have the authority to subpoena them? Is it because they're claiming Tether is USD pegged, so they gain authority because of their use of the dollar?

Honestly just a curious question. (I'm not looking for snarky answers to the effect of "world police".)

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There are two parts - one is the authority to request something (issue a subpoena) and the second is the ability to enforce penalties if the request is not satisfied.

They have the authority to issue a subpoena because Bitfinex had US-based customers.

The ability to enforce it is a bit trickier, but there are two things - first, it's plausible that they can get cooperation from local authorities; and second, they are able to seize USD transfers to/from them.

They claim to have the USD in a bank somewhere which means the US can come after them. This is why Wells Fargo dumped them (which is saying something!).

No. A foreign bank can hold USD without any US oversight.

> A foreign bank can hold USD without any US oversight

If they hold it as hard cash, practically, sure. If they want to be allowed to send or receive wires and generally not get sanctioned by the United States, no. The U.S. Treasury claims international jurisdiction over U.S. dollars [1].

[1] https://cblr.columbia.edu/the-u-s-jurisdiction-over-transfer...

Definitely have suprising powers. I once sent a wire payment in USD from my Hong Kong company’s HSBC business bank account directly to my China company’s bank inside China, where my bank in China would convert it to renminbi. I was shocked to find out the bank wire was somehow held up in NYC! Blew my mind. Nothing to do with the USA in this transaction, except the USD. The reason the wire was held up? I had wrote the word “Grenade” in the notes field of the bank wire. The payment was a materials deposit for an action camera mount product we make at my factory called “Grenade Grip”. I regularly write the product name in the notes field for my accountants. Mistake.

Looks like I've got a new special alternative to "for a good time" to use in the memo field of all the checks I don't write anymore.

That's where SWIFT is located, afaik.

There is no such thing as a non-US bank holding electronic USD. All non-US banks hold USD via a US “correspondent bank”, and a USD transfer from one non-US bank to another amounts to the sender telling their correspondent US bank to transfer to the other bank’s correspondent (US) bank, and credit the account of the receiver.

I was under the impression that all of those transfers at some point ended up on an FTP server at the federal reserve before they were cleared.

... because actual illegal arms dealers would write "Grenade" in the notes field of a bank wire? :)

some contractor sold some an artificial intelligence predictive crime product to catch baddies somewhere in that pipeline

Tether is looking a lot like Liberty Reserve, and that ended in seizure of assets.

https://en.wikipedia.org/wiki/Liberty_Reserve#2013_seizure

Seems like the local government can still make it difficult for them to enforce the subpoena, but I imagine Hong Kong will be pretty amenable. [1]

[1] https://webcache.googleusercontent.com/search?q=cache:vl90MA...

Disclaimer: I'm not a lawyer, just found this from a cursory search.

I think of Edward Snowden. HK helped him.

Did the gov there actually help him? Or just not hinder him?

To not hinder is quite a lot of help. Considering it's going to piss off the superpower.

Well the way I understood it, HK doesn't really need to care who they're pissing off, since they're kind of used to pissing off their big brother.

Among many other reasons, due to the listing of Bitcoin futures on CBOE and CME the CFTC now has some oversight on the spot market.

If you touch United States dollars, then you are captured by United States regulators. The United States dollar system is only accessible via the federal reserve system, which is regulated by United States regulators.

Well, they definitely had many US customers until about a year ago, fwiw.

In 2014, As I recall, they were based in Hong Kong. I registered a business account with them for my own Hong Kong company back then.

no snark: if you wanna get into YC, and a YC partner calls you up and says Good news, You're in! Oh but we'll need you to cut ties with that local accelerator, theyre suing us and we don't want you to testify but no big deal now right? you're part of the YC family now!

Glendower: I can call spirits from the vasty deep. Hotspur: Why, so can I, or so can any man; But will they come when you do call for them?

William Shakespeare, Henry IV, Part I

There are actually two issues here: Firstly, on what basis, under US law, does the CTFC have the authority to issue a subpoena, and secondly, whether, under international law or treaty, it has any power to compel compliance. The link in sna1l's post has something on both issues.

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