Bitcoin Foundation Receives Cease And Desist Order From California
forbes.com
forbes.com
I have my own personal example:
I received a letter ordering us to cease and desist from doing online notarization through California notaries. We were not doing so, so in effect we sent back a letter stating: "We have not, and never have, conducted the activity you accuse us of." They basically responded saying "ok, we agree that you haven't done anything wrong but if you do anything we will prosecute you to the full extent of the law."
A few weeks later, they posted a "consumer warning" on their website saying that our company was in effect defrauding companies. Then, several other states copied that language without contact. I spoke with the government officials, I told them we were hurt by these baseless accusations, and they admitted that they really had no evidence of any wrongdoing. They basically said "we are too busy to update the website right now but we will do so shortly."
After months of effort, I was able to one by one get most of these ultimately removed or reworded to a reasonable position. California was the last holdout. I basically began the process of suing them for massive damages and that ultimately was the only thing that was able to get them to change the wording.
So overall, my learning is that it genuinely scares me what government agencies can do without any evidence or judicial process. I would guess that the Bitcoin Foundation can respond with "you are wrong, please provide evidence" and get away with it for now.
This is about as disappointing as when I heard that Nevada was first to legalize automated vehicles before us and it took lobbying from Google to push the approval here.
Actually, it's completely consistent with the way California behaves and works. Corrupt and anti-freedom.
The State isn't going to take the BitCoin Foundations word that they aren't doing anything wrong, just like they don't take the credit card processors or Treasury departments word that they are doing something wrong. So party A says "They are doing it wrong!" and the state tells party B, "Please stop what you're doing, unless you can show your not doing it wrong." That is how the system evolves its understanding and codification of things.
Sure, its obvious for something things (like murder and mayhem) but when its less obvious or more subtle then its unfair to take one side's view of the matter and declare it correct by fiat. You explore the subtleties and need to decide where to draw the line.
This is a good thing for the Bitcoin folks because it is the start of the process where the government develops a collective understanding of what Bitcoin is. That, if nothing else, validates that Bitcoin is "real" in the sense that the government must "understand" it in order to work with it. People who dislike the notions will argue its evil, and supporters will argue its beneficial and once we've talked through all the legal ramifications then its future will no longer be in doubt.
In these sorts of actions you aren't trying to prove a negative both parties are proving a positive, which is to say both parties are working to create a consensus understanding of the interpretation of the law. In one view what these folks do is legal, in one view it is not.
What generally happens though, and looking at the history of the same sex marriage effort is really a great analog here, is that one view or another comes up short in terms of written law, new law is written with what the consensus is thinking should be rather than perhaps what is.
Using same sex marriage as an analog, we started from "Homosexual activity is illegal" to a place where the consensus view was that you couldn't really legislate something which was innate, to "but marrying is illegal" to "well we recognize that your partnership is in many ways like a marriage" to what I expect tomorrow will be "You know, the state doesn't have any business defining the sex of the two people in a marriage." [1]
In each stage of this "conversation" (and I realize that term is not perfect but I don't have a better term for millions of people going through a process to reach consensus) we explored particular aspects of the problem. Was it the 'sex' that was wrong? Was it the 'people' who were homosexuals that was wrong? Is the definition of 'family' inextricably tied to offspring of mated individuals? Or is is broader than that? Are citizens harmed by this? Helped? How about their children? Other children? People around them? In every case one party says "It's wrong because 'reason'." and the the other party debates that reason or comes up with a different line of reasoning why its right. Jurists listen, they consider what has come before and will come after, and rule. Then we as a people consider whether or not that consensus was what we intended or want and then we create new law and the process continues.
It's slow, its ponderous, but it does converge and it allows things to move with the consensus as the consensus moves. FWIW this is the single most powerful 'feature' of our form of Government.
[1] I'll know tomorrow if I'm wrong I suspect but reading about the coverage at the Supreme Court I'm betting its going to come down on the side of same sex marriages.
Now civil court is another matter, but the state doesn't prosecute that, so it's not really relevant to this discussion.
The court (and particularly the supreme court) is involved in interpreting the law, but they don't get to ask people to prove they haven't broken the law unless they have some kind of evidence that they did in fact already break the law. Simply claiming they "think" someone is in violation of a law based on no evidence at all falls so far short of the legal requirements to bring a case it's laughable. If somehow the government did prosecute based on no evidence at all I'd imagine there's a whole horde of lawyers that would line up to get a chunk of the wrongful prosecution lawsuit that would come of that.
Using underhanded tactics, like publishing defamatory statements (like mchusma related in a separate comment
https://news.ycombinator.com/item?id=5928751
) or threatening expense-incurring legal action unless the innovator provides free education, is just as bad even if it's legal.
Actually, it should be.
Not really, The state knows what it needs to know about bitcoins in the sense that it knows it can stop them easily, which seems to be more than bitcoin supporters know.
But this statement demonstrates the ignorance and contradictions within bitcoin boosting; the idea that because bitcoin values have grown that bitcoins are a logical potential currency rather than one more speculative trend in the line with tulip is the most obvious example. There is also the confusion between whether bitcoins will succeed through the very force of encryption to end the state's control of currency or whether bitcoins will succeed because bitcoinists have a moral right create a system to destroy the state's control over its currency. But there's a further confusion - bitcoinists don't get that the dollar's value derives from the state's monopoly of force and violence. Indeed, bitcoinists somehow don't get that the dollar is ipso facto the best currency because people use it even though they want bitcoins to succeed on the same criteria. And there's the part how bitcoinist think the weakness of gold is that it can't be transmitted electronically whereas the fact is that state prevents it from being currency (even if it is still allowed as an investment). And I could on and on...
Really? Because whatever they're doing doesn't seem to be working very well.
BitCoin enthusiasts would be well advised to consider this as a chance to get themselves together and figure out how they're going to respond if it does come to that. You do not know when the last such opportunity will emerge. The BitCoin enthusiast community would find it incredibly ill-advised to think that they are in such a good position that they can be as smug as you sound.
This is the pot calling the kettle black.
Also, you're acting as if the bitcoin community is a single entity that could come so some kind of agreement.. it's not. Just as can be said for the "business community."
Also, the situation is a lot more complicated than you're giving it credit for.
No, it's not. I'm actually quite sympathetic to BitCoin. Skeptical, but sympathetic. I am constitutionally incapable of being "smug" about government power. It is supremely dangerous to think this is the limits of what the government can do. Assuming that I'm "one of them" and using that to discard my warning is also dangerous.
Exactly what you mean by some "complication" in relation to what I said is beyond me. I sure hope you don't think "complication" plays to anyone but the government's advantage.
This is the warning shot. They are coming. Prepare.
> This is the warning shot. They are coming. Prepare.
This is just some incompetent corruptocrats. This is not the warning shot. This is not the crackdown.
But yeah, I fully expect the US government will, more likely than not, try to shut down Bitcoin. I think most people who are not naive teenagers do.[1]
One complication is that the US government only truly controls one country, and there are 200+ countries around the world. Bitcoin is useful, and the cat's already out of the bag.
To be clear, I'm not naively saying that it's going to be a successful currency in the long run; we just don't know.
[1] I expect it to be a legally drawn-out process that does not criminalize bitcoin overnight and may not even fully succeed. Also, it's worth noting that the Feds have been insanely pro-Bitcoin so far. Rather than making it illegal overnight, all they've done so far is to release the most pro-bitcoin regulations conceivable.
PS. I hope I didn't offend anyone
On the other hand, it's way easier to fly under the radar here, if that's your thing. Austin is a hell of a lot cheaper than SV and it's surrounds, in most ways, so you'll stretch your dollars further. I'd claim we're friendlier, but that's just a guess. We can be pretty tetchy here about some things.
Silicon Valley isn't the only game in town. It's just the noisiest. And you couldn't pay me enough to put up with that.
I'll personally plug Houston here (my colleague has already done the same for Austin). If you want to do energy, manufacturing, or medicine, you basically can't beat this town. We're a port city, we've got the largest medical center in the world, we've got tons of oil & gas folks, and great schools to pull talent from. Our food is also way better and cheaper than Austin. ;)
[1] http://www.nybooks.com/articles/archives/2012/jun/21/how-tex...
Check out Yelp or Google, for example.
Is Texas as employee-friendly as California?
As an American currently in Indonesia, I can totally understand where you are coming from. The major thing America has going for it economically at the moment is not freedom but just money and the university system. However with globalization, I think there are plenty of good opportunities everywhere in the world.
Accoring to FinCEN, anyone selling units of a decentralised virtual currency to another person for real currency is a money transmitter--so, for example, if you operated a business exchanging U.S. dollars for Bitcoins, you must be licensed. I don't know if the Bitcoin Foundation did this in California; perhaps there is some other wrinkle of state law at play here.
Tradehill and Coinbase are based out of California and are following all federal and state rules.
Not sure though, seeing on the privacy page an Oregon address.
http://www.fincen.gov/financial_institutions/msb/msbstatesel...
The state of California is blanket C&D-ing all Bitcoin businesses.
Charging the Bitcoin foundations for violations against the money transmission laws would be like charging NRA for violations against firearm laws. This would be a very alarming precedent and would basically violate your rights for free speech.
Not really; the most obvious difference is that a C&D isn't equivalent to a suit.
Yes, the Bitcoin Foundation (probably--I don't know anything about them other than what I've read) isn't strictly speaking a money transmitter. Yes, the California Department of Financial Institutions--which will cease to exist in 7 days when it gets merged into the California Department of Corporations--is totally ignorant of Bitcoin. But they know the law pretty well. Especially the one that they wrote. (See the name Robert Venchiarutti on the letter? He's really the one behind it. The DFI lawyers just do what they're told. They don't even like the law. Venchiarutti actually wrote it, with the help of TMSRT's lobbyists.)
That being said, the law to worry about here isn't even the one cited. It is, as I've stated quite frequently, 18 U.S.C. § 1960 (http://www.plainsite.org/laws/index.html?id=14426). And that law says that you don't have to be a money transmitter to get a letter such as the one received by the Bitcoin Foundation (http://www.scribd.com/fullscreen/149335233?access_key=key-2l...).
"(a) Whoever knowingly conducts, controls, manages, supervises, directs, or owns all or part of an unlicensed money transmitting business..."
The question then becomes whether the Bitcoin Foundation has any "control" or "direction" over its members and/or affiliates, who are most clearly in violation of the law under section (b). These words are vague. It could be argued that it does.
There is an extremely high chance that people will go to jail over this whether people here think it's stupid or not. It's too bad no one took me seriously when I pointed out that the MTA was going to cause problems two years ago. I've been doing the industry's dirty work ever since. It would have been a lot faster and easier with some help. Now we all have to hope that my constitutional challenge (http://www.plainsite.org/flashlight/case.html?id=716056) is going to save the day. And it might, but that day may be pretty far off in the future at the current rate.
Meanwhile, everyone should really be freaking out over AB 786 (http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?...), presently before the California Senate, which makes the MTA worse than it already is by giving Robert Venchiarutti even more power. I've been successful in removing the clause that created a new thought crime, but the rest is still pretty bad--unless you're a payroll company. Amazing what lobbying can do.
If you want to help, click on the "Comments to Author" tab at the link above, register with the State of California, and tell Assemblyman Dickinson that the MTA should be repealed for all of the reasons I outline at https://s.facecash.com/legal/20130225.packetnumbered.pdf: its overly broad scope, inability to sensibly regulate mobile technology, and unconstitutional nature. Money transmission takes place over the internet, which is in the domain of the federal government, not the states. See /ALA v. Pataki/, 969 F.Supp. 160 (1997), http://scholar.google.com/scholar_case?case=1017409488915582.... Also CC: Eileen Newhall <eileen.newhall@sen.ca.gov>, Mark Farouk <mark.farouk@asm.ca.gov>, Senator Jerry Hill <jerry.hill@sen.ca.gov>, Marc Hershman <marc.hershman@sen.ca.gov>, and BCC me: Aaron Greenspan <aarong@thinkcomputer.com>. If you live in California make sure to say where. Be polite.
Reading material:
"(a) Whenever the commissioner believes from evidence satisfactory to the commissioner that any person has violated or is about to violate a provision of this division, or a provision of any order, license, decision, demand, requirement, or any regulation adopted pursuant to this division, the commissioner may, in the commissioner's discretion, bring an action, or the commissioner may request the Attorney General to bring an action in the name of the people of the State of California, against that person to enjoin that person from continuing that violation or doing any act in furtherance of the violation. Upon a proper showing, a permanent or preliminary injunction, restraining order, or writ of mandate shall be granted and other ancillary relief may be granted as appropriate."
So, all they would have needed was "evidence satisfactory to the commissioner" that you were "about to violate a provision of this division, or a provision of any order, license, decision, demand, requirement, or any regulation adopted pursuant to this division" in order to refer you to the U.S. Attorney. The California Attorney General wouldn't be involved in federal prosecution.
This section (formerly proposed Section 2155) is gone now because I threw a fit. No one else did. I find that depressing.
Seriously though, I am not a lawyer - isn't that what injunctions are for? To get a judge (or in this case, the A-G) to put the brakes on something that might cause irreparable harms, in advance of a final ruling?
But even if you think they're vague, that would still be the end of the matter as far as criminal law is concerned. Ambiguous statutes are construed in favor of the defendant.
A) He's not a lawyer;
B) He's (or at least Think Computer) is cheerfully suing a bunch of Bitcoin and Silicon Valley companies (including one I founded) over these laws, costing many startups litigation defense fees.
I do not consider him to be anything like a balanced commentator on these issues, and I also do not believe his approach to be one that is, on balance, helping California technology companies who wish to deal with payments.
Why not argue against the argument rather than the man? Or at least if we're arguing against men, follow up with "a few notes about Peter" so I can get a decent comparison of the men.
(This is assuming Mrs. Teveia believes that the bitcoin foundation runs the servers that make up the bitcoin network, which I think is what this is all about.)
You can see what she thinks here:
It would certainly end the 'bitcoin everywhere' dreams the fanatics have.
I would expect to see a lot more of this. There are a buttload of laws around money transmission and exchange, anr BTC probably breaks a lot of them.
If enough people find bitcoins useful (big if) they will somehow become normalized with respect to the law.
That sentence requires some serious mental gymnastics to agree with, which I find beyond me.
If they were a money transmitter, and operated as such in California, California's authority over them would not be affected by either the fact that they were based on Washington or the fact that they were a non-profit.
The goal isn't to convince you of the facts of your action (it may be, in part, to convince you of the impact of the relevant law), so there is no purpose to include evidence.
If they decide to file a lawsuit, then evidence will become an issue.