US Secret Service rumbles into action against Bitcoin facilitators | Hacker News Reader

US Secret Service rumbles into action against Bitcoin facilitators

wired.com

57 pointsclamprecht46 comments

Amazingly daring:

55 million transactions virtually all of which were illegal

And then all the keywords:

credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and narcotics trafficking

How on earth can you honestly claim that fifty-five million transactions were illegal and at the same time not having acted before? I mean: it is not 'we are at war and we have to let some people die in order to win the great battle'.

But then again, the US is at war, is it not?

So complicated...

> But then again, the US is at war, is it not?

Against its citizens, lately.

"lately"?

I guess that by illegal transaction they mean transcation executed by illegal means namely by using unregistered money tranfer agent.

Are we talking about BTC or liberty reserve? The content and format of the article are very confusing. I find people are to not aware about what the possibility of anon tx entails when they argue the counterpoint. Of course the first people who are going to use it are criminals. One opportunity missed here to reflect on the issue.

I think the page is seriously broken -- the "article" as currently presented is incoherent. Maybe it is the author's notes?

The article is, IMHO, a press release from the secret service with annotations by the author.

As we learn more about Liberty Reserve and their alleged facilitations of money laundering the question I'll be asking myself is; Were the alleged actions of Liberty Reserve worse than the alleged actions of HSBC? HSBC got off with a fine by the US DOJ. So this question helps me to understand the real motivations behind the indictment of Liberty Reserve. Was the DOJ's motivation to actually thwart monet laundering, or was it motivated by something else like shutting down something outside of their regulatory control?

Well the settlement with HSBC was to pay a $1.9 billion fine -- it's unlikely that Liberty Reserve would be able to come up with something of that order of magnitude. Additionally, I think the prosecutors would make the case that Liberty Reserve was _primarily_ a criminal money laundering operation while HSBC was a large, multi-faceted organization which engaged in certain criminal acts.

And anyway, they still may face criminal prosecution -- the judge has yet to sign off on the deal: http://www.guardian.co.uk/business/2013/may/23/hsbc-court-th...

"HSBC was to pay a $1.9 billion fine -- it's unlikely that Liberty Reserve would be able to come up with something of that order of magnitude"

That was for $60 Trillion in un-monitored transactions. The fine is very roughly ~ 1/32,000th of the total transaction dollars. Perhaps rather than shutting them down, the feds could fine them 1/32,000th of all of LR's un-monitored transaction?

This "break the law to make money and pay the fine later on" is just part of the revenue model now. Fines are not a deterrent (in fact I think they are more appropriately called "bribes"), they are considered like insurance, or rent, or banking fees. All just part of the cost of making the most profit possible.

I think it's amazing, given the feds' apparent belief that the system was used to transmit illegal money only, they shut it down instead of just working with the owners to record all the transactions. Seems to me, this would have delivered some pretty easy law enforcement home runs for (almost) free.

After what happened to e-gold, there's fuck all chance anyone running a similar service would want to work with the feds.

LR and e-gold are the same people, in fact.

Similar things have been done before: http://www.npr.org/blogs/money/2012/11/20/165590860/episode-...

But there are risks involved, particularly when you're taking something over versus starting it yourself.

If LR operated as described in the indictment, it didn't really have information about its customers, so those records might not have been all that useful.

All it would take is a little bit of technological imagination.

The wait-and-collect-info strategy can fail too.

If they watch transactions happen, trying to trace the money of particularly promising ones, and something goes south, they end up like the Fast and Furious ATF scandal: http://en.wikipedia.org/wiki/ATF_gunwalking_scandal

Basically, by letting it go on, they become implicated in whatever happens.

Stupid article is a press release about liberty reserve, and comments about bitcoin.

Bitcoin is about as related to Liberty Reserve as it is to Mastercard. Namely not at all.

It is related as in the same case can be brought upon bitcoin facilitators.

It's like killing Napster but only after bittorrent was invented. They could not bother themselves and just wait till liberty dollars are obsoleted by bitcoins. And then just accept that from now on transactions are semianonymous and irrevokable and they can forget the whole antimoneylaundering crazy efforts. They might actually focus on better laws and preventing crimes that now they are just trying to disincentivise by going after criminals money.

For example credit card fraud is possible mostly thanks to stupid rules and even dumber application of technology.

Except in this case, shutting down the exchanges is all that needs to be done to discourage the vast, vast majority of digital currency use. That would pretty much quash them entirely.

Everybody can work as an exchange. You have to be very dedicated to shut down all the people that become exchange. Same way shutting bittorrent is possible but you have to be very dedicated. Far above the point where lots of people are gonna say "come on, you can't hide behind the claim that such measures are for our greater good"

Erm, how does everyone agree on an exchange rate? They would all have incentive to manipulate their exchange rate for arbitrage. That alone means that not everyone or even any meaningful number of people can become exchanges.

What's wrong with arbitrage? Arbitrage keeps exchanges in sync. You don't need single rate everyody agrees on. If you can successfully manipulate price at one exchange to gain more than usual from arbitrage and more then you spend on trying to swing the exchange then I congratulate you and wish you best of luck. Somehow this sounds like a perpetum mobile for me or at least some serious gambling. Investors know more then one exchange an check prices on all of them when deciding whether to place or cancel an order.

Okay, but that doesn't hold up at all when everyone is an exchange...

I'm not sure what you have in mind. Not everyone has to be an exchange. But everyone can. All you need is ability to take and give bitcoins and traditional currency and bit of honesty and trust. Traders can deal with many such exchanges keeping them in sync by arbitrage and doing the usual trades.

This article is just a draft, it cannot be the final version. It's basically a press release on the crackdown over Liberty Reserve plus a quote by someone (not mentioned!) about Bitcoin - that's it. So the title is either a work-in-progress or a click-trap.

Bitcoins are steadily trading at $129 now, if the article was true there would be important fluctuations.

> Bitcoins are steadily trading at $129 now, if the article was true there would be important fluctuations.

MtGox's BTC-USD exchange rate is currently trading at that price, and the price of BTC itself cannot be measured. The distinction is important, and hopefully in the future fiat currencies will be valued against BTC instead of the other way around.

Why is the distinction important?

In practice, a currency's only purpose (as far as I know) is using it to buy things. Calibrating against USD, or GBP, or JPY, or gold value, or any other major stable currency, is equally good and gives a way of understanding the current value of BTC. How would you suggest we currently understand the value of a single BTC?

Certainly BTC have been, and continue to be, much more unstable than any of these metrics.

> MtGox's BTC-USD exchange rate is currently trading at that price, and the price of BTC itself cannot be measured.

Yes, it can. The price of a thing is exactly what buyers and sellers agree to exchange for it in the marketplace.

You may be thinking of some value-related concept other than price, but price is very measurable.

"Global Illicit Financial Team" ie. GIFT wow, cool, these must be the good guys.

Thus begins the FUD storm to discredit BitCoin :

Implication : "if your using Bitcoin rather than a 'legitimate' currency, you must have something to hide. you must be an evil pederast/blackmarketeer/hacker/terrorist"

I am not quite sure what is happening here. There are two different ways to look at this, the first being that the federal government knew about the illegal transactions happening at LR, and was unable though incompetence to stop them. The second being that the government didn't have the technical or legal ability to stop them. Either way it does not paint the government in a good light.

Don't forget that investigators will sometimes let people do things for a while in order to establish a more solid case.

Ethical guidelines for this kind of bystanding typically allow crimes like fraud to proceed temporarily but not murder or assault and so forth.

> There are two different ways to look at this, the first being that the federal government knew about the illegal transactions happening at LR, and was unable though incompetence to stop them. The second being that the government didn't have the technical or legal ability to stop them. Either way it does not paint the government in a good light.

Due process protections in the US generally mean that there tends to be a gap between "government has a pretty good idea that something illegal is being done and a fairly specific idea of what it is" and "government has its ducks in a row regarding proof that will stand up in court to begin legal action with a reasonable probability of success".

I actually think this is the core of one of the best features of our government, so I don't think it paints the government in a bad light at all that it often knows about bad things happening considerably sooner that it has the practical legal ability to stop them (or, at least, before exercising that ability will jeopardize the ability to hold wrongdoers accountable under the law.)

Sooner or later, the federal government (and foreign governments as well) will attempt to crack down on Bitcoin, simply because they need to protect their monopoly on currency. Has nothing to do with right or wrong, or crimes that may be committed using Bitcoins. Hell, crimes are committed with cash all the time, but they aren't gonna crack down on THAT.

Yet.

Here is the problem guys: The FED has money issuance monopoly. And on the top of that it can manipulate interest rates (legally). It can also legally counterfeit money (because that's what money printing... sorry quantitive easing really means).

BitCoin is basically threatning that monopoly. It doesn't help when you want to 'revive' the world economy by scheduled printing from USA, through EU, to China -- when citizens can exit your inflation by going to assets like gold.

Or - even better - BitCoin. I have a few coins, it's difficult to shop around you know. It maintains the value, true. But it's cumbersome to oww, store, risky to exchange for cash, etc. BitCoin - this is XXI century folks!

So you have the biggest and most dangerous lie on the face of the planet where banks literally are in bed with governments - currency monopolies all over the world. Everything tied back to the USD. And then you have some smarta$$es right at your nose in Manhattan showing you big finger with their virtual currency.

There is no competition with currencies. It's not like before central banks were forced upon people's throats that you can choose currency to pay with or create your own. 300, 400 years ago, a prince, or just a merchant or a city could have issued their own currency. Have their own banks issuing it. That's competition folks. That's not why real powers running this world established central banks ages ago. They did it to have a total control over currencies, interes rates and economies.

You know how easy is to manufacture a crisis like the one we have had since 2007?

As easy as keeping interest rates artificially low for 15 years by a central bank issuing world reserve currency. Crisis, great money are made. War - even better. And then with war you get rid of all these issues like overpopulation, water shortages, other natural resources shortages.

In communist states the government regulates prices of everything. From a piece of bread to a car. At the end this causes the economy to suffer to much that there is no bread and no cars. Because by ignoring supply-demand curve for the products and just enforcing a price that seems 'fair' to the government, you make it too cheap for a producer to care to produce, or too expensive for folks to buy it. Pretty obvious, basic economics.

Ever wondered why somehow they never acknowledge this to work the same way for the most important price an economy has - the price of credit? It's not like the market forces, supply&demand, decide what the price of credit is (interest rates). This is decided by the Government - FED - Ben Bernanke decides what the price of credit should be. A buerocrat. Are you surprised there is a crisis? What type of capitalism is it anyway which has the most important price on the market - the price of credit - decided and manipulated by the Government?

BitCoin, gold, silver, all take it away from them. Hence they hatred.

Another example: if a bank wants to lend USD it has to adhere to the rate set by Mr. Bernanke.

But if I want to lend BitCoin, I can do it at whatever %/apr.

That's their monopoly broken right there.

If they print too much to 'help the economy' (their friends in big banks) it won't work if guys will start using BitCoin. to trade and do other transactions.

BitCoin isn't a "threat" to the money issuance monopoly any more than a ton of bricks at the bottom of the ocean is a threat.

What gives money value is demand for the money. Government primes demand by requiring that all payments to the government be made with that money. That is the root of value.

Everything else isn't currency - it's either a barter, a commodity, a ponzi scheme or a scam.

> BitCoin isn't a "threat" to the money issuance monopoly

You are mistaken. Look at what was done to Liberty Dollar.

Which had nothing to do with it being a real threat to the USD - firstly because it was never a real threat to the dollar, and secondly because it was demonstrably used for criminal transactions.

> it was demonstrably used for criminal transactions.

I'm sure you have proof of this.

Right, everyone using LR was using it for 100% legit transactions, no money laundering of any sort. Mhmm.

We had a mistake in communication. I thought you were referencing the Liberty Dollar topic I had raised.

I have no issues with people moving their money around as they see fit. Why not outlaw cash if "money laundering" is a concern?

not sure if you'll reply at im late 4 days with my reply.

Here is the definition of money that you can learn from any economics text book: - maintains its value - it's commonly recognized to do trade

GOvernment decree can't make money as it can't make summer in December. People need to recognize it as money. It needs to keep its value over time.

So money can be a commodity. Can be a virtual currency. Can be pretty much anything as long as people perceive it as such and as long it maintains its value in the long periods of time.

The problem with USD and any other fiat money is that they really never, never, never, ever meet the point 1 from the definition above - money printed by governments never keeps it's value over long time. Hence fake money. BTW, this is what lack of competition and central planning (via central banks) did to it. Read some financial history and give me just a sinle one example of fiat currency that survived long period of time. Forget maintaining value. I will make it easier for you - a fiat currency that survived more than 150 years. There is none in 3000 years monetary history. That's why gold is the ultimate money. Because it hold its value. And gold isn't really neccessary to have a solid currency. After hyperinflation in Germany in 1921 they tied the Mark to the German Land. Each mark represented certain amount of land. This stopped hyperinflation in its tracks. As long as these pieces of paper are supported by something more than politicians promises it is ok.

BitCoin has limited supply thanks to the algorithm. There are just these many bitcoins the world can have. This sounds like much, much, much more solid concept that US Government "promise" to repay (with counterfeit - that is freshly printed - money).

We're mostly in agreement. Government makes demand for money by requiring that debts payable to the government are only in that money.

If said rocks on the bottom of the sea were the only way to pay taxes, you bet they'd be considered valuable.

Without that primary demand, everything else is consumer whim. Perception only lasts so long but taxes are persistent.

I am in strong agreement with this comment. I had a comment on similar lines some time ago:

"Bit Coins represent trade in an Economy independent of the Rot Schild banks."

The Federal Reserve wrote off 16 Trillion Dollars off the banks, but did not write that off from the American people.

http://www.forbes.com/sites/traceygreenstein/2011/09/20/the-...

>Here is the problem guys:

Not all of us are guys.

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