Note that this isn't an arrest just for operating a Bitcoin exchange. It's specifically to do with Silk Road.
This is ridiculous! Please tell me how selling Bitcoin to someone is illegal? What that person does with the Bitcoin they acquire not the responsibility of the exchange. This smells like another case of gvt scare tactics to protect the bankers and their out-dated & thieving business models. Anyone remember liberty exchange ?
Does that answer your question? It's far from ridiculous.
You know that it's illegal for actual banks to assist in money laundering right?
Money has to pass through specific channels and be exposed to specific checks to be wired from country to country (in some countries even from person to person after a certain amount).
Else you're liable to be caught for assisting in money laundering.
So, yes, if you help people to move money, you can be held liable for what they're doing with it.
You know that when a bank does it though, nobody gets arrested right? They just get a small fine that is a fraction of their net profit from their illegal activities. When someone with Bitcoin is accused of money laundering, everyone involved is arrested and every asset they have is immediately frozen. It's a tremendous double standard.
http://www.rollingstone.com/politics/blogs/taibblog/outrageo...
You know that it depends, right? With some heavy big banks nobody gets arrested, with others, and especially smaller ones, people go to jail. Also the US isn't the only country with such laws -- people have gone to jail in other countries.
It's not really a double standard, though. It only appears that way if you believe our society to be founded upon the foundations of justice and law. If you believe it is founded upon the premise that the powerful cannot be wrong, it makes perfect sense.
That is to say: 'You know that one of the times a bank did this, nobody got arrested right? ...'
You can hardly generalise from the one exceptional case recently involving HSBC to the conclusion that all banks everywhere always get away with money laundering.
And a terrible legal argument.
Guess how Wachovia got out of criminal charges? They settled!
The e-mails are bad.
http://en.wikipedia.org/wiki/Accessory_(legal_term)
If you ask me to front up some money for you to buy some drugs, I'm an accessory to your drug transaction. Similarly, if I sell you some Bitcoins and I know that you're going to go and buy drugs with them...well, you get the idea.
Obviously, all transactions cannot be held to the same standards of diligence. e.g. How can a bureau de change at an airport be expected to know that it is accepting a £5 note from a pickpocket?
However some transactions are expected to attract a degree of diligence, either based on magnitude or some other circumstance.
It is clear that they appear to have been attempting to sell a large sum of bitcoins to people who are at least on the grey side of the law. In such a situation, one might expect that a quantity of the money they receive from the transaction might be dirty.
Whether the defendants are guilty of (attempted) money laundering is for a jury to decide.
If they specifically sought out the users or owners of the Silk Road and told them they could convert their bitcoin to dollars anonymously, than thats a little different than if they were just operating a regular exchange that regular investors use.
"SHREM, who personally bought drugs on Silk Road, was fully aware that Silk Road was a drug-trafficking website, and through his communications with FAIELLA, SHREM also knew that FAIELLA was operating a Bitcoin exchange service for Silk Road users. Nevertheless, SHREM knowingly facilitated FAIELLA’s business with the Company in order to maintain FAIELLA’s business as a lucrative source of Company revenue. SHREM knowingly allowed FAIELLA to use the Company’s services to buy Bitcoins for his Silk Road customers; personally processed FAIELLA’s orders; gave FAIELLA discounts on his high-volume transactions; failed to file a single suspicious activity report with the United States Treasury Department about FAIELLA’s illicit activity, as he was otherwise required to do in his role as the Company’s Compliance Officer; and deliberately helped FAIELLA circumvent the Company’s AML restrictions, even though it was SHREM’s job to enforce them and even though the Company had registered with the Treasury Department as a money services business."
http://www.businessinsider.com/report-ceo-of-major-bitcoin-e...
Anyway, the market doesn't appear to be crashing, yet.
Should the U.S. decide to "start a war" against bitcoin just like they did with Poker, we'd end up in the same situation: servers outsides of the U.S., not using .com domain names, without the reach of the U.S.
I'm pretty sure that any Bitcoin exchanges outside the U.S. (like MtGox, BTC-E, Bitstamp... which are the three biggest ones) and their employees are shielded from U.S. laws. If they can't extrade Snowden out of Russia, I don't see how the U.S. could reach the BTC-E russian Bitcoin exchange.
The U.S. have been unable to stop online poker worldwide. Should they try to stop bitcoin worldwide, they'd fail too.
Now that said I don't think the U.S. government is going to ban bitcoin or to go on a crusade against bitcoin. At least I hope not.
The major charges against Pokerstars were bank fraud and money laundering. If those crimes occur in the US, the DOJ does not care where you are based.
How? Are you saying that BTC exchanges necessarily fail to comply with money laundering laws in the way the offenders here are accused of? They weren't charged with money laundering for selling bitcoins, they were charged with money laundering for doing things that would have been money laundering if they were done with dollars, euros, or anything else.
No, but
a) a lot don't,
b) all are way smaller than banks, much less cautious with accounting practices and with much reduced legal representation (lawyers) and political pressure.
> No, but
> a) a lot don't,
Well, yeah, I would a assume a lot don't fail to comply the way that occurred here (that is, a lot don't have their official responsible for AML compliance actively conspiring with money launderers to enable violations of the exchange's own AML policy and to conceal those violations from both the government, other officials of the exchange, and business partners of the exchange.)
That's rather my point.
I personally wouldn't put it past the US government targeting honest bitcoin exchanges but that doesn't seem like the case here
Most bitcoin exchanges require proof of identity, proof of residency, only accept wire transfer coming from the same identity as the owner of the account, etc. I wouldn't be surprised if they were soon to add a token sent by snailmail to the address given (like Poker sites in Europe do).
Transaction of fiat to/from Bitcoin exchanges are basically one of the easiest thing to track.
Many honest people are using Bitcoin exchanges and doing legitimate trading. Some may be doing "money laundering" just as criminals are using $100 and 500 EUR bills and are using highways. Most people using highways and bills are still honest people...
This entire "Bitcoin is only about money laundering / selling cocaine" is getting a bit old (but maybe I misunderstood your message).
I don't think VCs (and now business angels) would all be investing in Bitcoin / cryptocurrencies startups if they thought it was mostly money laundering.