Additional $2.1M Seized from Mt. Gox Accounts – Now Over $5M Total
thegenesisblock.com
thegenesisblock.com
http://www.bloomberg.com/news/2013-03-31/money-laundering-ba...
http://www.globalresearch.ca/money-laundering-and-the-drug-t...
In March 2010 Wachovia cut a deal with the US government which involved the bank being given fines of $160 million under a ”deferred prosecution” agreement. This was due to Wachovia’s heavy involvement in money laundering moving up to $378.4 billion over several years. Not one banker was prosecuted for illegal involvement in the drugs trade. Meanwhile small time drug dealers and users go to prison.
That is a decent article from the Guardian concerning Wachovia's activities. In particular, it contains the statements of a highly involved whistleblower that are indicting on their own. But I find the statement of facts from the deferred prosecution agreement to be more compelling:
http://www.justice.gov/usao/fls/PressReleases/Attachments/10...
>24.) During the investigation, law enforcement reviewed the CDC banking activity that occurred at Wachovia and found readily identifiable evidence and red flags of large-scale drug money laundering....
>26.) These BSA investigations have determined that from May 2003 through at least July 2007, Wachovia violated the anti-money laundering ("AML") and suspicious activity reporting requirements of the BSA and its implementing regulations. The violations at Wachovia were serious and systemic...
>31.) ...This wire activity was principally monitored through the use of a computer system.... The actual number of alerts that the system was designed to generate per month was pre-set, based, in part, on the number of investigators available to review the alerts. In addition, AML personnel were not allowed to carry investigations into the next month.... The net result was that the understaffed AML unit in Philadelphia could not keep up with the volume of wires. The suspicious activity went effectively unmonitored.
>32.) With regard to the bulk cash business, Wachovia had no written formal AML policy or procedure for the monitoring of bulk cash to ensure that suspicious activity was reported.... As a result, at least $4,728,626,300 in bulk cash from the CDCs went through Wachovia during the period of May 1, 2004 through May 31, 2007, with essentially no AML monitoring.
>33.) Wachovia never reviewed any of the RDC deposits made from the time the product was first offered in the summer of 2005 until approximately November 2007. During this time, approximately $47 billion was deposited into Wachovia through RDC without AML monitoring.
>34.) With regard to standard pouch activity, Wachovia also failed to enforce a self-imposed policy regarding traveler's checks. In 2005, Wachovia was warned that the CDCs were sending in large quantities of sequentially numbered traveler's checks for deposit and that this was potentially suspicious activity. As a result of this warning and other internal discussions, Wachovia sent a letter to its customers noting that, "due to the strict U.S. regulatory mandates associated with anti-money laundering policies, Wachovia has decided to limit acceptance of bulk deposits of traveler's checks through our cash letter service." The letter stated that Wachovia "will require that you no longer remit deposits containing sequentially numbered USD traveler's checks where the total value of the series exceeds $10,500." Wachovia, however, failed to establish any internal policy or monitoring procedures to implement or enforce this rule. As a result, from April 2005 through May 2007, Wachovia accepted more than 1000 pouch deposits that contained thousands of sequentially numbered traveler's checks in violation of its own policy.
That's about as intentional as it gets in my book. I would argue that those above statements of fact are enough on their own to indicate intent. Particularly number 34, which makes it plain as day that they were certainly aware of the problems --and made public-facing gestures at addressing them-- but internally were more than happy to keep rolling in the drug money.
edit: found it[1].
[1]: http://www.rollingstone.com/politics/news/gangster-bankers-t...
Last month or so they've had about 20K or so daily volume. So 600K X $100/BTC X 1% = about $600K/month. Let's double that for good months. Hell, triple it. $1.8 M/mo, or $900K cash. I'd assume $100K/mo for salaries, infrastructure, etc. So about $10M/year in profit.
Half of it's frozen. Meanwhile, they have $900K/mo in BTC. That's a liability if they can't properly cash out. They'd probably have to sell about 1/2 of what's in their wallets to get to solvency as people continue to want their money. They control like 60% of the market - so what would be the effect of about 30% of all BTC hitting the other exchanges? Assuming they could handle the traffic, it would devastate prices.
Or they liquidate. 60% of all BTC flooding market.
Or they go under. It'd be good for those holding in other exchanges, but that would be an epic implosion as all those BTC's "disappear".
I can't see this scenario change, unless they can start fulfilling all wires within the next couple of weeks.
Folks will split hairs about the fact that the freezes are on their subsidiary... but how of Mt. Gox's business runs through it? Enough that the distinction is pointless.
All of these numbers are ballparked, but the deeper point: much of Bitcoin's success and attractiveness is based on the Mt. Gox exchange. Too much. It's going to destroy the market as it currently stands.
The only alternative is for everyone to pull out BTC, destroy Mt. Gox, and hold as the other exchanges stabilize.
Very good points. I hadn't considered the BTC that they keep on trades. I wonder if they sell some of this BTC at certain threshholds, such that they are constantly converting to fiat?
It's entirely possible that they're fulfilling some of the orders out of their wallet, but at a max of 0.6%, if they're never going the other way (fulfilling BTC orders with fiat), that'd get exhausted pretty quickly.
We should be outraged at the banking system and the lawmakers instead. They are the ones who are putting roadblocks on to MtGox, as these documents prove.
MtGox does not operate a MSB according to the laws in Japan, so if it has a bank account in the US, how does it make it a MSB?
Besides, the FinCEN guidelines are not clear for Bitcoin. For example, there's no clear definition for what is a "User" and what is an "Administrator".
Being P2P, users are administrators at the same time. (You don't necessarily need to mine bitcoins to be an administrator, if you're a user, then your client still needs to do administrative tasks such as relay transactions across the network)
Besides, bitcoins should be considered as virtual messaging service, rather than a currency as in the traditional sense of the word. In essence, Bitcoin is a distributed messaging network. (When bitcoins are bought, the buyer is actually paying the seller to send a message to the network).
We need better, clearer guidelines on this.
There are many good arguments against government regulation, but this is not one. It doesn't matter what something is, it matters what you do with it.
Another common mistake is to try to reduce all rights to free speech, as if conceding that other rights do not exist.
(Unless of course your money is already bitcoins.)
Wire transfers are being fulfilled in an average of 7 weeks.
This is 100% hearsay but I went and asked yesterday because this article popped up on HN and was deleted before anybody had a chance to comment, and I wondered why.
No comments about the seizures, other than "anything but business as usual".
If true they're dead. 7 weeks is unacceptable.
Consider this could happen to any Bitcoin exchange, and now the US Government has 5 million of their dollars. I would think that would put them on the road to licensed and bonded in 50 states -- they were saying before it costs about 5 million to become licensed and bonded.
Also, Mt.Gox is not a US company. SEPA/Euro transfers are being processed in a "reasonable amount of time" -- I don't know exactly what that means. I am from the US and I am becoming verified this week, since my BFL Jalapenos have just shipped it seems much more important than only a week ago.
There's always going to be a need for easy, anonymous value transfer.
It's not easy, by any means, unless you're already familiar with IRC and crypto and signing messages.
But it's basically anonymous: the actual transactions happen in emails or privmesgs and so there are zero records beyond the feedback on bitcoin-otc.com (which is optional and can be meaningless†, for example, the ratings by 'newguy' and 'AVALON' on me), and there's no way to prove or disprove that a transaction happened without full access to the internals of whatever systems one side of the transaction is on. For example, there's no way for anyone to prove that I really did sell 0.25btc for $50 on Amazon; there's plenty of 0.25btc movements on the blockchain, and all Amazon sees is that I redeemed a giftcode from somewhere. And there's even less evidence if you're willing to send or receive cash in an envelope (http://bitcoin-otc.com/vieworderbook.php?type=&nick=&thing=&...). So it's about as anonymous as you want it to be.
† Specifically, you can be fairly sure the AVALON/newguy accounts did leave that feedback on me because the site accepts commands only from IRC accounts which have cryptographically proven their ownership of the account; but there is no way to be sure that I transacted with them or scammed them. As it happens, I did not and those ratings are revenge from a scammer for not falling for his tricks. Same problem as with public keys, and why people talk about web of trusts.
I'd rather get 10% less now than possibly nothing later.
1) there is nothing to indicate that mt gox is insolvent so its not a matter of if, its a matter of when.
2) we can track their volume, its looking pretttttty good right now.
3) 10% every 7 weeks is not a bad roi. that's just shy of 100% return for a glorified short term loan.
Nah, I'm just not a gambler. I know when to get out of a deal and take a small loss instead of going broke later.
And the US government seizing funds of a company I have money parked in is a pretty strong signal to get out.
BFL: they refuse refunds. You can get them if you push PayPal a bit, but BFL's policy is that you're stuck.
Mt Gox: despite multiple failures (security breaches, closing when they couldn't handle load, wire delays, etc) they still survive because they're the biggest.
Bitcoin is run by a bunch of hobbyists cashing in. The market will mature, and in time there will be a greasy spot where companies like BFL and Mt. Gox used to be. It's much like the early days of the Internet: early ISPs were charming, but eventually the Internet service grew and required companies that could operate at that level.
I don't know the likelihood of that honestly but I would certainly be more ashamed of my own government than already this month if it was simply "appropriated" and not returned or counted.
They're surviving because they're not letting go of any of the USD they have, or at a trickle. I've heard numbers along the lines of they had $10M in April. They can't pay salaries and infrastructure costs in BTC, so they're holding on to what $ they have for as long as they can. Eventually they'll have to start releasing their BTC into the market to get $ out, but they know that will have a negative effect.
Oh, I forget. Mafia dictates what's good for your health and educates your children because it gives you a great service: protection against other mafias. And the price for that service is not fixed. You have to give up half of your income.
Anybody who trusts THOSE idiots with their money deserves to lose it.
Howabout those dorks that started out as a school project and went on to become google.
You'd be double, double stupid to work for, trust money to, advertise on that stupid dorky company that started off as a hott or not clone.
Paypal, OTOH, started out as a financial service and was designed as one from the beginning, and proven itself reliable. But even so, most people know not to leave large amounts of money in their Paypal accounts, and to make regular deposits into a proper bank account.
The site never really worked as a cards exchange.
However, I agree that given Mt. Gox record of fuck ups, I would never put any large sums there.
With Bitcoin you have no legal guarantees at all.
They actually made a deal back in 2012 to sell all their USD business to CoinLab which would have made compliance CoinLab's problem while MtGox could sit back and collect their revenue share. Maybe they're kicking themselves for not going through with the CoinLab deal.