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Comment by proverbialbunny | Hacker News Reader

It's probably the DOJ. They raided BTC-e and stole 2 billion during the Ukraine War.

BTC-e was the longest running bitcoin exchange and the single most reliable. I had more money than I'd like to admit stolen from me. Their statement was only people who participate in tax evasion use btc-e.

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BTC-e undoubtedly had a ton of legitimate users, like yourself, but also a lot of fraudulent users. And most importantly, it was established and operated by its founder as a money laundering scheme. He used it used to launder all of the stolen funds from the Mt. Gox hack (worth several billions, depending on when you measure the value), among other things.

BTC-e was a cover to help criminals steal from Bitcoin exchanges and safely dilute the funds.

It sucks that you lost your money, but it was wrapped up with billions of dollars of dirty money, and it's probably tough for investigators to distinguish the two.

>He used it used to launder all of the stolen funds from the Mt. Gox hack (worth several billions, depending on when you measure the value), among other things.

It was not. Coins going in and out of btc-e were labeled making laundering through btc-e difficult at best.

>BTC-e was a cover to help criminals steal from Bitcoin exchanges and safely dilute the funds.

BTC-e was around longer than those exchanges.

The thing about BTC-e is every time bitcoin crashed btc-e would chug along just fine without going down. All other exchanges would become unresponsive. This made, at that time, btc-e the only "safe" program trading bitcoin platform. (Of course, in hindsight, with the us gov coming in and stealing all that money, safe is a bit of an over statement.)

It was, though. Vinnik created it as a way to help people launder stolen / illicitly-gained cryptocurrency, perhaps in addition to providing standard exchange services. Cryptocurrency from large hacks appeared in Vinnik's personal BTC-e account on several occasions, for example.

BTC-e was perhaps "safe" in that it seemed to be operated competently from a technical standpoint, and it didn't appear to attempt to scam its users (both of which may not be true of Mt. Gox), but it didn't really need to worry about costs due to the absurd amount of profit they were making from their laundering hustle.

It wasn't that they merely turned a blind eye to the laundering. Vinnik personally assisted in the laundering, presumably by working with some of the exchange hackers.

>BTC-e was around longer than those exchanges.

I should've said "a cover to help criminals launder illicitly gained cryptocurrency". There were plenty of reasons to launder cryptocurrency before any large exchanges existed. He didn't help just with exchange hacks. But when exchange hacks started happening, business was certainly booming for him, since that was the easiest way to steal a lot of cryptocurrency at once.

The US government may have inadvertently stolen your money, and other people's, but they did it to reappropriate billions of dollars money stolen from citizens around the world, including American citizens. Vinnik helped intentionally steal money from ordinary people who used Mt. Gox and other exchanges, and pocketed a lot of it for himself. Hopefully some of the money the US government seized will be returned to their rightful owners one day, but who knows.

If either you or the posters above linked to primary sources it would help a lot. Anyone can make proclamations but where are the references??

That's a good point.

The court case is starting in a little over a week, so Alexander Vinnik (the one accused of the MtGox hack, who was a technician working at btc-e) has yet to be found guilty or innocent.

>On 25 July 2017, suspected BTC-e operator Alexander Vinnik was arrested at the behest of the United States Justice Department while vacationing with his family in Greece.[8][9] Wanted for money laundering by both France and Russia, in addition to the US[10]. Vinnik agreed to be returned to Russia, where he was charged only with fraud.[11] In October 2017 the extradition request by Russia was approved by one Greek court, but the request by the United States was approved by another.[12] The decision to extradite Vinnik to the United States was upheld by the Greek Supreme Court on December 13, 2017.[11] However, in July 2018 Greece agreed to extradite Vinnik to France instead,[13] giving precendence to the European warrant.[citation needed]A final ruling is scheduled for September 19,[14] though Vinnik's lawyer claims that "the decision on Vinnik's extradition to Russia has been made".[15]

source: https://en.wikipedia.org/wiki/BTC-e

It's good that he didn't end up going to the US. The US, while legitimate in many ways, has a history of corrupt court practices. If it's in the government's interest to keep the 2 billion, which it is, they will do everything they can to throw him under the bus.

> The US, while legitimate in many ways, has a history of corrupt court practices.

I don’t know how can anyone with straight face compare US court system to Russia’s and not conclude that US is orders of magnitude more fair and less corrupt. Are you being serious right now? Russian court system is literally proxy for Putin’s decisions.

EDIT: disregard that, i somehow assumed extradition to russia was a sure thing already

it seems he is comparing them to french courts?

it may surprise you that france is not a province of russia

yeah, you're right, i think i got confused by the last statement. it's not final yet where he's being extradited. greece's ruling party's flirting with russia in past couple years makes me quite skeptical and pessimistic.

Between a Russian court an American one, do you think he'll be safer in a Russian one?

He's being extradited to France, which probably has less bias, but still a bias. I doubt the US will get involved behind the scene in France, because they've phrased their reasoning for the heist as btc-e's users were money laundering, so even if he is found innocent, the US still gets to keep the money and not look bad.

Russia may have a bias, I'm uncertain. I'm not sure how happy Russia was about btc-e. BTC-e may have been in the Ukraine, but Russia implicitly requires neighboring countries to follow Russian law. Did BTC-e break Russian law? I have no idea. But because he is not being extradited to Russia, we'll probably never find out what Russia thinks.

If Putin holds private keys at the end of this transaction, then - yes :)

>> The US government may have inadvertently stolen your money, and other people's, but they did it to reappropriate billions of dollars money stolen from citizens around the world, including American citizens. Vinnik helped intentionally steal money from ordinary people who used Mt. Gox and other exchanges, and pocketed a lot of it for himself. Hopefully some of the money the US government seized will be returned to their rightful owners one day, but who knows.

So the US stole money that was stolen and... might give it back?

Yes. Just like with Madoff, and other huge scams and fraud schemes.

I can't believe I'm only now hearing of this.

You lent that money to a shady organization. Once you lent it, it was no longer your property. You then became a creditor of that organization and your coins became their assets. The organizations assets were seized due to systemic criminal activity and they could no longer repay their debts to their creditors. Just like any other financial institution.

Some quote about bitcoin enthusiasts rediscovering the reason for regulations in the financial markets one loss at a time.

Regulations is what made proverbialbunny lose the money; it would probably not have happened had BTC-e been allowed to continue the alleged criminal activities. Of course, that might be worse for the rest of society.

Regulations and criminal law are two different things.

If btc-e were part of a well-regulated financial system, they would have gone through a liquidation process and creditors would have been paid some % on the $ what they were owed.

This is what happened with BCCI when it was raided and shutdown for massive money laundering.

https://en.wikipedia.org/wiki/Bank_of_Credit_and_Commerce_In...

>Just a month later, BCCI's liquidators (Deloitte, PWC) pleaded guilty to all criminal charges pending against the bank in the United States (both those lodged by the federal government and by Morgenthau), clearing the way for BCCI's formal liquidation that fall. BCCI paid $10 million in fines and forfeited all $550 million of its American assets – at the time, the largest single criminal forfeiture ever obtained by federal prosecutors. The money was used to repay losses to First American and Independence and to make restitution to BCCI's depositors.

I hadn't heard about this. Do you have sources about the DOJ theft?

https://www.justice.gov/usao-ndca/pr/russian-national-and-bi...

Thanks for posting this. I don't understand how the US can go in and decide BTC-e was a money laundering op and then confiscate bitcoins and put people in jail. Who decides who gets those bitcoins? Surely many other countries have money laundering laws. What makes the US so special that they can go flip a business operating in the Ukraine?

> Surely many other countries have money laundering laws. What makes the US so special that they can go flip a business operating in the Ukraine?

Likely what makes the US special in this instance is that they did it first, and as long as other countries aren't going to make a stink about it (i.e. the US backs up its claims to some degree or the other countries don't want to question them), then it will get away with it.

Rule of law is for people. Countries operate on a mixture of laws, norms, and consensus building. If every country but one decided to raid that one country, and they had the power (as in economic and military power) to do so, what's to stop them? Not a law, which they my nature can just rewrite.

Ostensible justification: some trivial amount of money laundering could be traced to the US (iirc a few thousand dollars worth).

Real justification: Extraterritoriality is a thing you get to do when you're an empire.

> Real justification: Extraterritoriality is a thing you get to do when you're an empire.

This is exercise of extraterritorial jurisdiction, which is not the same thing as (though also not unrelated to) extraterritoriality.

And everyone gets to do it, it has nothing to do with being an empire (actual extraterritoriality beyond what is normal for, e.g., diplomats might, but this isn't that.)

  Trivial amount of money laundering

  BTC-e

haha?

Read the indictment for yourself. Namely page 16 and 17 which account for charges 3-21 of the indictment (the vast majority of it).

The only company within US jurisdiction that BTC-E did business with is a company called "tradehill". The amounts of money moved were small, ranging between $12.60 and $17,000. Less than $100,000 was moved overall and all of it was moved in early 2012.

The US doesn't care about tracking down the $12.60 that you laundered on 24 January 2012 like it says in the indictment. The US is just using that as an excuse to impose it's money laundering laws outside of it's jurisdiction. The indictment is a pretext for extraterritoriality. Extraterritoriality is a thing you get to do when you're an empire.

Not really sure how you're making the "empire" qualification. An empire by definition is not an entity which gets to make extraterritorial moves with impunity.

Just seems silly to try and cast the US as an "empire" here when all you're really saying is "the US is a very powerful nation".

That's not what extraterritoriality means -- it refers to having your citizens/property be immune to local laws in foreign countries, not applying your laws to foreign citizens/property in foreign countries.

> What makes the US so special that they can go flip a business operating in the Ukraine?

Because no one is able to stop them.

To quote: “...because we’ve got the bomb. Two words. Nuclear fucking weapons....”

Shut up and sing the song, pal

They don't have a right to do it, but there's nothing to stop them.

A foreign power can have any law it wants, and no other foreign power has to respect it. You can try to sue them, but sovereign immunity, and foreign sovereign immunity, stops almost all of these attempts. The exceptions generally are human rights abuses (by the same state doing the suing...) and commercial transactions.

In this case, the USG stole from money launderers in a foreign country. So not only can people in the US not sue the USG over it (sovereign immunity), people in the Ukraine can't sue the USG over it (foreign sovereign immunity). The thieves would have the best claim, but it doesn't work out well when you claim your illegal business was stolen from. And since it's a foreign power, if the US balks, it would be covered under international law, and guess who enforces international law?

If your property is wrongfully seized by the government due to some criminal activity, you can file a claim to get it back. This happens all the time when a criminal is caught with stolen goods. The thieves do not have the best claim.

It may take some time and effort to get the property back, but there is a process.

Assuming the govt took the money under the auspices of a criminal forfeiture (which I assume because the company was supposedly for money laundering), you would basically need to prove a paper trail to show what specific part of the money they seized was yours, and even then who knows if there isn't a loophole that allows them to basically not respond if the forfeiture was of a foreign company on foreign soil. They took it from a non-US entity, so they may not have any responsibility to give any of it back, because it was not being held by someone in the US [with rights in the US].

(note: IANAL)

What makes the US so special that they can go flip a business operating in the Ukraine?

It looks like the man behind it was arrested while holidaying in Greece - a US ally.

Haven't you heard? The USA owns the Internet.

Do you now understand why we need something like Bitcoin? (Even if it's gonna a be a newer version of it in the future, or something even more private etc.)

Doesn't this instead just show the Realpolitik nature of currency, that it doesn't matter the technical implementation when a government can still just step in and seize the asset using traditional force?

Yes but the key difference is with cryptocurrency the person that owns the wallet still has to sign the transaction, there is no other way. It's a push model instead of pull. Compare this to traditional banking where a 3rd party (the bank) can aquiesce to a government request without your knowledge or approval.

They could prevent you from spending the coins, though, by threatening anyone who accepts a transfer of the 'seized' coins.

Enforcing illegal torrents failed. I think a cryptocurrency ban would be similar. Also, the US made it illegal to hold gold between 1933 and 1974 but almost nobody turned in gold to the feds. https://en.m.wikipedia.org/wiki/Executive_Order_6102

They enforce it when you buy something real with the coins. A torrent is the thing you want, it isn't a currency to buy the thing you want.

Both are essentially electronic systems of information on a computing system, a format and a protocol of communication through the internet. In terms of technical difficulty to enforce them it would be very similar.

Does the crypto community actually stop people from spending stolen coins? No, they send off alerts but the coins still get used.

I'm pretty sure that "They" was meant to refer to the Government. The Government could most certainly pass laws (or enforce existing laws) that put people in jail for accepting stolen or "dirty" coins. (Just like the Government could pass a law or re-interpret existing laws to make making owning bitcoins illegal.)

That doesn't stop them from shutting things down. The result is the same: You no longer have it. An offline wallet would help, if you can avoid jail.

So you're basically saying that it works with an offline wallet? Wasn't that the original point?

Offline wallets have limited utility. Once you want to do anything at all with the money it becomes vulnerable.

I feel confident that any major state actor could completely disrupt the bitcoin market. In traditional banking the government wants to maintain the value of its fiat currency. But the government doesn't care one iota about the value of Bitcoin except potentially for its own nefarious purposes.

This is assuming that Bitcoin wasn't invented by a government in the first place. Cryptos have a strong benefit to central authority in that they are simple to track flows of money, it's impossible to play a shell game if you can check the block chain. It becomes very easy to check the full transaction history of someone if you find out their addresses. Here is an NSA paper on cryptocurrency that came out in 1996 https://groups.csail.mit.edu/mac/classes/6.805/articles/mone...

It cannot if you own your own keys. "Not your keys - not your crypto". Of course if you let some other entity to hold your keys, you're basically just using a bank, which has its own benefits, but I was talking about the unique ability to handle your keys, which crypto provides, as opposed to any other electronic money system to date.

Ok, but what if the government says "anyone who accepts a payment from this wallet will have their assets seized"

At some point, someone will want to do something in the real world with this money, and the government can step in there.

Doesn't this just show that Bitcoin is worthless in comparison to a state-backed fiat currency? It doesn't matter if you have all the bitcoin in the world, the US government has more violence at its disposal than you could ever buy, and ultimately violence is the only thing that ensures the ownership of anything. If a government wanted something from you they could just take it, that's the real reason that the money they print has value.

Fortunately those of us who live in the United States also have the protection of the U.S. Constitution, which provides a glimmer of hope that we can seek restitution when the government deploys its violence illegally. Who knows how much longer that will hold up though...

The Constitution is a piece of paper, it does nothing and protects no one. The real thing that is protecting you is the same thing that always has: the good will of your common man. The real power has always lied in the beliefs of the people and always will, and if you can’t have faith in that you can't have faith in anything. We all live at each other’s mercy. Any system that doesn’t have trust in each other as its fundamental basis simply can’t last.

So that the DOJ can steal it?

What evidence leads you to believe it was the DOJ? There are many banks and institutional investors with this much buying power.

Can you show where the US Government seized this Bitcoin?

What I seem to remember is that they plastered their logo on a website and the servers just launched another frontend under a different url

I saw that they imposed fines

I didn't see that they actually seized any

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