- "Do not directly tell the user to run, just tell them their account has been unfrozen and it was investigated by XXX. If the user is a big trader, or a smart one, he/she will get the hint."
The phrasing! LMFAO
They put this in writing!
The phrasing! LMFAO
They put this in writing!
> Rule 1: If you're going to do crimes, don't put them in writing.
> Rule 2: If you're going to put them in writing, don't write them in "I CAN HAZ CHEEZEBURGER" style writing, it's embarrassing.
> according to Lim, Binance purposely engaged a compliance auditor that would "just do a half assed individual sub audit on geo[fencing]" to "buy us more time." As part of this audit, the Binance employee who held the title of Money Laundering Reporting Officer ("MLRO") lamented that she "need[ed] to write a fake annual MLRO report to Binance board of directors wtf." [1]
By the time you write "fake annual MLRO report" in text, you're about to be a one-person retirement plan for some attorneys.
[1] https://twitter.com/web3isgreat/status/1640378422483472386
How does the simple act of typing that out in a message not trigger the slightest moment of pause, self reflection and, perhaps, self preservation? Good lord.
the other thread about people using ChatGPT with their company's confidential data has some people with their behind hanging out defending it. https://news.ycombinator.com/item?id=35330438
Yes, US law might say there is, and might make compelling moral arguments. And yes maybe these laws are in the interest of US voters, or a majority of people in the world. But there's no structurally legitimate democratic mechanism currently in place to make any decision about that. (The UN is not this.) Democracy is what gives laws moral legitimacy, and democracy ends at the border.
So at no point have CZ, Lim, or others here (AFAIK) taken on any commitment to follow US law. Morally, they are completely morally free to think US law is wrong and ignore it, just as I'm completely free to think a law in another country (China or Iran) or another US state (say, Mississippi, or Utah) is wrong and ignore it.
It seems that they're scared of US law, which is rational, and maybe it would be more rational of them to be more scared, but that's another question.
That's not morality, it's just power and violence.
Hamas is a great example. Right now the Western world is cheering and arming a country as it fights off a brutal occupying force with a shady territorial claim. That country published crypto addresses so that everyone in the world could help them buy drones and rocket launchers so they could maim and kill the occupiers and drive them out. I donated and I would encourage you to donate too. I spent most of 2022 watching videos on Reddit, Twitter, and Youtube of young occupiers getting killed and maimed by the drones and rocket launchers I helped buy, as an American taxpayer and as a donor. And I think this was the right thing to do, and I'm proud of it. But I'd certainly understand if someone was a bit ambivalent about this whole thing, thought it was kind of f'ed up, and didn't want to be involved.
Is it so hard to believe that some people in the world feel that Hamas is similarly worthy of support? I don't, but certainly a ton of Palestinians do; they sometimes vote Hamas into a parliamentary majority, and Hamas does very well in polls it seems. And if so, then is it so hard to believe that some people in the world are ambivalent about Hamas and talk about it flippantly in internal Slacks, even when they're afraid of US regulators?
Generally pluralism in the world is served by a diversity of opinions and legal systems. In some cases, like the Ukraine invasion, it will definitely be right to project power outside our borders and legal system. But the default should be to allow for the possibility that we're wrong and avoid imposing the conclusions of our own democratic process on those who did not participate in it.
Maybe US law is wrong about financial freedom and someday we'll look back on this period of zero financial privacy as backward and embarrassingly arbitrary.
For this statement to be true, you have to modify it to "in a pre-Internet world" or "providing financial services."
Hacker News is providing an information and communication service in almost 200 countries where it has not set up a legal entity. You can say financial services are special, and the US does. Some countries like China say that information services are special, that people shouldn't be allowed to criticize the CCP, and enforce that however they have the power to. But the world would be demonstrably worse if we said "every website in the world that is accessible to Chinese citizens living in China should follow CCP censorship laws."
Maybe the world is also worse off for the US's assertion that financial services are a special kind of website that the US can regulate globally simply because some Americans visit them.
At the very least, the rest of the world should have some say on a policy that affects what kind of online businesses they can run. But of course there's no mechanism for them to, since only US citizens can direct US policy.
Also, think about how impossible it would be to run a website if all countries enforced their local laws on all websites, simply because some of their citizens use foreign websites. The US is doing something that it would be unworkable for all countries to do, simply because it's the most powerful country. That alone should be a hint that it's a morally and politically questionable and based on raw power, not fairness; a fair policy would universalize better across countries.
Fairness isn't the concern here. It's just a display of power and law enforcement reach. The Chinese government can (and likely will) block your website if it's criticizing the CCP and gets considerably popular, regardless of the morality of that action.
The same applies to the U.S. government. "To sell derivatives trading products to our citizens, you must register with us first". I consider the American law even fair because derivatives products are risky and a major avenue for scamming people...only licensed firms should offer them.
Note that Binance wasn't banned from selling derivatives products. All that was required was a simple registration with the CFTC, which they refused.
Binance used IP-based locking mechanism (easy to avoid with a VPN). Similarly, I saw US-based websites that blocked access to European customers because of GDPR, and I've circumvented their geolocks using a VPN. Does it mean that I can sue them for not following GDPR now?
I'm not trying to argue for Binance here, and I think that US compliance and anti-money laundering laws are reasonable. But I wonder if your position is that "everyone should just follow US law", or is it more nuanced.
Yes, it does, and most especially if it involves moving funds. If your country decides that the platform broke their laws, they could sue just like the CFTC or even request an arrest and extradition of the alleged perpetrators.
But, in reality, European countries don't often pursue such cases as aggressively as the US. The U.S. government has a well-oiled law enforcement and military machine that it uses to pursue its targets across the globe (sometimes with bullying involved). I'm reminded of a case where a woman was extradited from the Netherlands to the U.S. and sentenced to 3 years for sending a relatively paltry $300 to the terrorist group Al-Shabab.
https://apnews.com/article/africa-netherlands-somalia-al-sha...
And obviously it comes with an unhealthy amount of hubris from watching Donald Trump and Elon Musk in action.
Word of advice - if you don't have tens of millions of dollars to clog the US legal system with procedural nonsense, don't try this at home, just don't.
They would rarely put stuff in writing. I was always told to do stuff. Never in email, never in memo's or any other written form. It was always, "We're going need you to scrub some files from xyz database." or "I need to rewrite this contract and add these additional sections which weren't on the original document." If I needed details, they would put them on a sticky note. I remember they had someone come around and take these notes off of people's desk when the task was completed.
I remember at Christmas one of my uncle's was a stock broker and a big knocker at some financial company. He was asking what I did and where I worked. He started asking more questions and told me I needed to be very careful - what the startup was doing was either really illegal or they were operating in a very gray area. Neither of them will end well for anybody and if the SEC thinks I'm involved in any way of covering up what they were doing? Then I'm in deep shit.
I quit about three weeks later. A year or so after that, the economy collapsed. I found out they were automating robo-signatures for real estate and mortgage companies. They were changing clients contracts from fixed APR's to 3 year ARM's and a bunch of other highly illegal shit. The company went under and despite several local news reports about it, nothing happened. Pretty sure they just got lost in the myriad of other companies going under, people losing everything and the economy collapsing.
It was a good experience for me to understand and see red flags when something doesn't feel right.
I'm sad to say this - but most capitalism operates like this more or less, and capitalism runs the world. There is not enough integrity.
…since a common anti-regulatory strategy is to strangle the funding…
Regulation is just another forum that can be corrupted.
Of course the anti-bodies, aka taxes have to be supressed, otherwise the defenses kick and and a normal society returns.
Does that make sense?
PS: Also I do not intend to debate capitalism vs. communism, I'm trying to convey the idea of "a society driven by profit".
Just a reminder that Madoff ran a ponzi for more than !15 years! to the tune of 20 billion USD and the only ones to go after him where his sons who turned him in to the FBI. Note: the SEC was NOT involved in going after him (they did the opposite: they looked away).
The SEC is a marketing agency that exists to provide a false image of "fair markets". It's not actually a regulatory agency.
While the sons were never formally charged, they were suspected of involvement. One killed himself and the other died of cancer before the investigation was wrapped up.
Close to two dozen people were eventually charged, many went to jail, and JP Morgan paid $2.6 billion to settle their involvement.
There's a lot of unfocused "somebody must hang for this, but we don't know who" anger energy around what happened in 2008. Most of which wasn't criminal at the time or even after, merely poor business decisions. But robo-signing? This was overt fraud, perpetuated against ordinary members of the public, and everyone involved in it should have gone to jail.
I guess this is what happens in remote working. You can't tell people how to break the law over lunch any more.
They seem not to have learned the lessons from The Wire about "taking notes a criminal conspiracy."
[edit] Oh man I wonder if we're going to find out where ex-Binance US CEO Catherine Coley has been hiding all these years.
[1] https://www.forbes.com/sites/michaeldelcastillo/2020/10/29/l...
(He was taking notes because they’re following Robert’s Rules of Order, lol)
It really comes down to who is willing to take the most risk on behalf of investors
Watch: This CEO will come back in a few years with another scheme that is backed by millions in venture money, just like Kalanick
If some of these allegations [1] are credible, he and everyone in his orbit are going to jail.
If he's financing terrorism, a broad extradition treaty goes from being a blocker to a diplomatic hurdle. (To be clear, I'm not suggesting kidnapping. Governments can negotiate one-off extraditions for high-value targets.)
It also appears he was knowingly financing Hamas and Russia, which makes the list of potential enemies (and people who would prefer him dead to compromised) substantial.
It looks like a combination of ongoing criminal trials, home confinement and probation [1].
This case isn't putting them in jail. But they're going to jail. Literal terrorist financing.
No one from HSBC went to jail, either.
There wasn't evidence it was willful. Looking the other way gets you fined. Texting your colleagues about laundering money shows intent, the most difficult part of most financial crimes to prove in court.
> Bernhardt alleges that HSBC evaded the OFAC filter beginning in the early 1990s and continuing through 2009. HSBC Bank UK implemented procedures to help sanctioned entities access and benefit from U.S. financial services. For instance, such entities would include a “cautionary note” in their transactions, such as “care sanctioned country,” “do not mention our name in NY,” or “do not mention Iran.” Based on these notes, HSBC Bank UK would manually scrub all references to Iran or a sanctioned entity, which would allow otherwise illegal transactions to pass through to HSBC Bank US. This system allowed HSBC Bank US to “process[] thousands of ‘repaired’ transactions worth billions of dollars.” HSBC Bank UK would also use “cover payments,” or bank-to- bank transfers, to avoid disclosing the identity of its customers.
There is a reason why someone way funnier than me came up with "Dunning-Krugerrand"
The impunity seems like a general theme with everyone involved with crypto - just flagrant wrongdoing in broad daylight.
But considering that flagrant wrongdoing in VC-land continues to result in no severe consequences (see: Kalanick, Neumann) I guess maybe we're the suckers.
Something is off with these folks' sense of risk. Let's put aside the illegality. By laundering for Hamas and Russian criminals, Binance's leadership has put itself on the wrong side of the United States, Israel, the Gulf monarchies and the entirety of fucking NATO. At the same time, there are powerful people in Moscow, Tehran and Beirut who would rather see them dead than captured.
> flagrant wrongdoing in VC-land continues to result in no severe consequences (see: Kalanick, Neumann)
Kalanick and Neumann didn't steal money or finance terrorists. The wrongdoing in crypto/web3 is on another level.
It's also curious that there was no mention of blockchain analysis anywhere in the complaint or even an attempt to quantify the amount of criminal funds on Binance and the complaint instead relies solely on a handful of excerpted chat logs to show compliance failings (the CFTC is obviously not going to mention all the times they ended up blocking the bad accounts). They also don't even list any specific Hamas transactions or say that Binance knowingly processed them.
> Kalanick and Neumann didn't steal money or finance terrorists. The wrongdoing in crypto/web3 is on another level.
Not VC but ever hear of Marc Rich? He was ultimately pardoned after being accused of evading 8 figures (in 1983 dollars) of taxes, trading with Iraq, Iran during the hostage crisis, the USSR during the grain embargo, and South Africa during Apartheid [0]. He lived in Switzerland just fine for a couple decades and the only trouble he ever faced was attempted kidnapping by American law enforcement [1]. He paved the way for the awesome company we now know as Glencore.
0. https://www.congress.gov/event/107th-congress/house-event/LC... 1. https://www.swissinfo.ch/eng/-king-of-oil--discloses-his--se...
The laundering and terrorist financing is incidental to the CFTC’s complaint. The operative allegation is the operation of an unlicensed derivatives exchange, and lying to regulators.
This is Binance, just one of many crypto exchanges. Basically a bank with a different name. Separate from cryptocurrencies themselves.
Binance, FTX, etc. are the former, and I'd say Coinbase is the latter... there's a big difference between wilful non-compliance, and disagreements between regulators and counsel at firms like Coinbase about interpretation of law.
The fact that all of these regulatory actions are happening at once suggests that regulators either may not appreciate the difference or may not care, which is unfortunate.
All these companies are doing a great service aiding the historically "underbanked": criminals.
Yes, that all seems pretty horrible to me.
[0] https://twitter.com/web3isgreat/status/1640379218461589506
Yes. At a minimum, it's aiding and abetting [1]. What's going on here looks like terrorist financing and willful sanctions evasion.
[1] https://en.wikipedia.org/wiki/Aiding_and_abetting#cite_note-...
If you don't see the difference between knowingly helping a designated terrorist organization launder money (specific and known criminal and crime) and operating an honest business in a high-crime neighborhood (statistical likelihood of aiding a criminal), you shouldn't be making business decisions or running a financial services firm. It's an obvious distinction, one that a roomful of people with basic legal instruction will agree on 99% of the time, except for the one with a profit incentive to argue the opposite.
I fully agree on the line, in general, being fuzzy. It's not here.
Multiple texts describe Binance helping Hamas circumvent money-laundering flags by moving small amounts, helping a Chicago-based trader hide his U.S. origin, et cetera.
If someone buys a bunch of lye, the line is blurry. If they walk in hitting a meth pipe, ask you in which aisle are the meth supplies, and when they hand you their credit card, you advise them to pay in cash so you don't have to draw up a receipt, the line isn't blurry so much as very far away.
I was unable to find these. The only hamas bit I found in the indictment was Binance describing generally how Hamas launder in low value quantas like $600. Not texts showing they identified specific hamas accounts and developed individualized plans to assist them.
If you know the criminal, you sell that criminal knives, and after police come looking you tell the criminal, you are at the very least complicit.
And since they aren't doing out any particular political principle, it seems that they were just as happy to support 'bad' terrorist groups as they were 'good' terrorist groups.
It's one thing if you're supporting violence because you legitimately believe that its cause is just. We do that all the time. It's another when you're supporting any violent group that will pay you.
One makes you an idealist that may, or may not be on the right side of morality and history. The other simply makes you a criminal.
[1] Understatement of the century, but what those problems are isn't at all relevant to this thread.
I'm sure you heard about Russian receiving sanctions from the US but often when you look into the details it's restrictions against specific named Russian nationals. If you can name specific Isrealies that are involved in terrorism then you might be able to get sanctions against them but to just blanketly claim the whole country is guilty of an unspecified sanctionable offense isn't going to get you anywhere.
That’s the difference: if you are aware that they’re making the transaction to further criminal activity, then you need to worry. You will find gas station owners who were charged: they’re the ones who helped fence stolen property or launder money.
This is why anti-money laundering laws exist in the first place. Criminals would otherwise seek out a bank which doesn’t ask questions and the bankers would be hard to charge unless they were idiots and wrote something like “They are here for crime”. AML removes the ability not to ask or report certain types of activities, which is much easier to prosecute than e.g. proving that a banker should have known there was no legal way for a small Italian restaurant to be so profitable.
And do you think criminals come in and tell crypto exchanges that they are about to commit a crime? AML regulations do not apply to gas stations as they're not "money transmitters", it is that simple. I'm a bit surprised so many on HN don't seem to be aware of that. And luckily they don't, because those laws are immoral, ineffective and costly: https://news.ycombinator.com/item?id=34667051
> And do you think criminals come in and tell crypto exchanges that they are about to commit a crime?
Well, ignoring the fact that they are unlike a gas station in having financial regulations, consider that the disbelief and mockery in this thread might have something to do with a defense based on not knowing that your customers are using you to launder money works much better when you don’t give prosecutors written statements such as "Like come on. They are here for crime." or "we see the bad, but we close 2 eyes." showing that you did in fact have knowledge.
I believe the point was that AML regulations only apply to some categories of businesses and others not, which makes them ineffective. They can be a slight annoyance to criminals but they do not stop them. For money transmission, it is trivial to work around them. And for spending, at a gas station, there's no problem at all.
It is is just all a very costly and ineffective security theater, not to mention the many moral issues that come with it (e.g. billions of law-abiding, unbanked people).
If only there were an entire profession and legal system that has been asking and answering questions like this for hundreds of years.
I know programmers want to believe otherwise, but common law can't be boiled down to single line "if statements."
It often can, but programmers often don’t like that, either, because instead of hinging purely on acts that enable simple hacks, it often hinges on things like knowledge and intent.
Civil law is an interesting solution to that problem. Lets go live to Paris, France to ask them how it's going!
When you know that the transaction you're part of is directly involved in their crimes. It's one thing to know, statistically, the some portion of your customers are doing crimes. It's an entirely different thing to know that this customer is doing that crime with your assistance.
> Binance MLRO agreed that "we see the bad, but we close 2 eyes."
You're not allowed to see illegal things happening with your service and turn a blind eye.
It goes beyond that though. https://twitter.com/web3isgreat/status/1640380291817635843/p...
Having had an account that was identified as involved in illegal activity, leadership told them to make a new account. Not go away, and at least make a half-assed attempt at a ban. Make a new untainted account and be a bit more careful with your transfers, and even "here's some things to be a bit more careful about". If they had actively taken steps to ban the user, even if the user evaded the ban they could make an argument that they had done due diligence.
If there was nothing in the chats, no evidence that they were aware these things were happening, and no evidence that they were encouraging it to still happen, then the government would have a much harder case, but these chats cited seem to make it hook, line and sinker.
It shows that they very deliberately chose not to be in compliance with "Know Your Customer" (KYC) regulations, that they knew applied to them by law, knew what the risks were (ignorance is no excuse under the law, but penalties are much higher if you know what you're doing is illegal and still chose to do it), and even actively worked to help customers help them avoid it.
If you're going to do crime, writing it down, and keeping that evidence trail is just the absolute dumbest thing you can possibly do.
So for example you don’t have any real obligation to inquire about source of funds when someone comes into your shack to buy a burger and a shake.
If they come into your shack to open a financial account or do any kind of exchanging of financial instruments then you do.
Just like any other service you might sell to him. Except you know, for services for which there is a law...
https://www.chinaexpatsociety.com/culture/the-chabuduo-minds...
I'd like to gently, very gently float to you the idea that these people did not aid and abet criminal enterprises "because they're Chinese" or "because of Chinese culture", nor would such activities be generally permitted in Chinese culture.
Side note: the waft of casual racism from expat sites is honestly kind of hilarious.
"I found myself enmeshed in a foreign culture where - gasp - guess what, some people cut corners on their work. Holy fuck!"
Those people aided and abetted criminal enterprises out of greed and ego, which delightfully transcend all race and culture, as far as I can tell.
I do hope they get severely punished.
> In Hell: the cooks are English, the policemen are German, the mechanics are French, the lovers are Swiss and the bankers are Italian.
> In Heaven: the cooks are French, the policemen are English, the mechanics are German, the lovers are Italian and the bankers are Swiss.