Bitcoin promoter Shrem indicted in NY for money laundering | Hacker News Reader

Bitcoin promoter Shrem indicted in NY for money laundering

reuters.com

59 pointsdownandout47 comments

Fortunately, this case is much more about Charlie Shrem and his penchant for violating laws than Bitcoin itself. I think this guy - who now refers to himself as "Charlie van Bitcoin" - just doesn't get it. There are laws out there, and he doesn't seem to want to follow them. Here's an example:

He is out on bail on this case right now. As someone out on bail for a federal felony, he is prohibited from using or possessing deadly weapons (knives, guns etc.). There are people in his position that have found themselves in trouble over kitchen knives. Yet Charlie publicly posted yesterday that he is the proud new owner of a World War II Nazi Dagger.

https://bitcointalk.org/index.php?topic=566300.msg6202174#ms...

He will eventually learn, but apparently he hasn't yet.

Many of the naïve proponents highly praise the qualities of Bitcoin which are essentially money laundering.

Turns out transferring large sums of money anonymously isn't legal in most places in the world.

Transferring large sums of money anonymously isn't actually money laundering, though it can help facilitate money laundering (so it is often banned in an effort to make money laundering harder).

Money laundering is the process of making income from criminal enterprises appear to be income from legitimate businesses, usually at a significant discount.

Speaking about that, I am wondering if there are internet businesses out there which are actually a front for money laundering. Say for example an online game or even a porn site. Seems to me like an ideal cover, because it's almost impossible to prove that it's not a real business.

There was some speculation that some high revenue/low quality Android/iPhone apps were. I would try to find the HN link/thread but my phone will die soon.

The best businesses for money laundering are those where your sales aren't directly related to the amount of stock you need to buy, and where the customers typically pay cash. Online games and porn sites fall into the first category but not the second.

Actually, banks, government agencies, and, publicly traded companies and their subsidiaries are explicitly exempted from currency transaction reporting requirements.

See: http://www.ffiec.gov/bsa_aml_infobase/pages_manual/olm_019.h...

This is a common behavior among many libertarians/ancaps (although still a minority). They tend to believe that they can live outside the law. And it's sad, because they usually don't harm anybody with their little misdemeanors. It usually looks more like a child reveling against their parent's arbitrary laws, than a crime for which they should go to jail or even prison.

Adam Kokesh would be a very good example. [1] [2]

[1] http://en.wikipedia.org/wiki/Adam_Kokesh [2] http://www.washingtonpost.com/local/activist-adam-kokesh-rep...

Although I have issues with anyone that would buy Nazi memorabilia (I am not Jewish, but I am human), I agree that his intent probably isn't to take this small sword he bought and go on a stabbing spree. That won't matter though; the moment a pre-trial services officer sees this thing in his house during routine searches that are usually a condition of federal bail, his bail will be revoked at a minimum, and he may face new charges.

He's going out of his way to thumb his nose at the Court; they tend to frown on that.

It does kinda depend on the reason for buying Nazi memorabilia. For example, if you are ever in the northwestern part of the mitt of Michigan, I highly suggest visiting the Jim Crow Museum of Racist Memorabilia: http://www.ferris.edu/jimcrow/

But I'm sure the most common reason for someone who would buy a Hitler Youth knife is to be edgy.

I have a Nazi proof-marked Mauser K98 rifle. I like it much more because it was later bought by the IDF, rebarreled to 7.62x51mm, and marked with the IDF star. There are a lot of reasons to own such things.

Wow. Any photos?

> It usually looks more like a child reveling against their parent's arbitrary laws

I have a mental image of Rik from The Young Ones.

> They tend to believe that they can live outside the law.

No, they just don't think highly of the laws we're all under today. They see that a victimless crime is not a crime at all.

> Fortunately, this case is much more about Charlie Shrem and his penchant for violating laws than Bitcoin itself. I think this guy - who now refers to himself as "Charlie van Bitcoin" - just doesn't get it. There are laws out there, and he doesn't seem to want to follow them.

I would argue that his aversion to laws was what led him to Bitcoin in the first place. Which is not to say that Bitcoin users are inherently prone to illegal activities, but it should not be surprising that those already prone to breaking the law would flock to a system designed to evade central regulation.

"There are laws out there, and he doesn't seem to want to follow them."

Would you apply this idea to 19th century when blacks and women did not have much rights? Or to 15th century Europe to those who are not following the rule of God? Or to 20th century Germany where people democratically voted for policies of you know who (hello, Godwin's law)?

By saying "there are laws out there" you implicitly declare a universal moral theory of yours which makes the laws you mention "legitimate" and "moral", meaning, whoever not following them is "immoral" and thus can be punished with violent coercion.

So as far as I understand, you are very well educated in philosophy of ethics to just say that a guy who was allegedly involved in moving some digital bits back and forth that allegedly helped some other guys to buy some vegetation, deserve violent punishment (being kidnapped, locked up and most possibly raped)?

My opinion is most of the finance-related laws are "thoughtcrime" laws that have no legitimacy at all. Heck, almost every law has no legitimacy because even democracy is not proven as a valid moral basis for human behavior. And so I do not advocate violence towards anyone. Instead, I suggest people use tools to protect themselves against each other (locks, insurance, alarms, crypto, bitcoin, private protection services etc.), instead of trying to retaliate after something bad happens.

Your philosophy is flawed and before you realize it you may be actively advocating for huge evil without knowing it. Like it always happened in the any country where people cheer for their rulers until the rulers come after them. Absolutely in line with the law, after all.

According to 31 CFR 1022.320 [1], your bank is legally required to report on any transaction that it "knows, suspects, or has reason to suspect ... involves funds derived from illegal activity"

I don't know how the Treasury Department expects my bank to know if transactions involve funds derived from illegal activity, but damn is that creepy.

[1] http://www.law.cornell.edu/cfr/text/31/1022.320

I'm curiously why you think that's creepy. If you suddenly deposit $5 million, but your salary is $100k / year, that's pretty suspicious and report-able.

What's really creepy is the fact that the big bankers can get away with laundering billions in drug cartel profits, yet not a single person has yet to answer for these crimes.

http://www.theguardian.com/world/2011/apr/03/us-bank-mexico-...

http://www.bloomberg.com/news/2010-06-29/banks-financing-mex...

Setting aside the fact that allegedly he was doing illegal things, it's interesting to note that PGP didn't protect him.

(I'm basing this on two assumptions: SR encourages its users to use PGP, so therefore unless he was blindingly stupid, he, too, was using PGP; and that he never slipped up once. The second assumption is probably invalid.)

Anyone have details as to how these charges came about?

How did you determine that?

Eh, I deserve to be downvoted. It's unsubstantiated speculation. I didn't think before I spoke.

It's been on my mind a lot lately that we don't have tools to remain private. The only evidence of this is when criminals are caught, because it's rare for evidence of that fact to surface when people aren't doing criminal things, so I pay attention when it happens. I've just been thinking about what it takes to interact with other people while remaining truly private, and it's daunting.

I would think that it was traced via bitcoin, not pgp.

Its worth noting there was no indication that BTCKing and Mr. Shrem used PGP to encrypt their communication.

From the original arrest it said he was using his work email @bitinstant to communicate with BTCKing and I don't remember anything about PGP being used.

Shrem is screwed, because all those emails are highly incriminating with him actively helping BTCKing avoid being flagged in the system for laundering checks. BTCKing was originally caught because he's a drug addict supporting his habit by exchanging coins and was completely sloppy and careless with everything.

The blockchain was not even mentioned in the original FBI document. Everything was based on email/SR logs. Bitcoin makes it very difficult to associate transactions with people and I haven't yet heard of a case where the blockchain was successfully used to track down someone.

Indeed, not a lot of ways to associate an address with somebody unless:

- seize drives or papers with private keys

- extract printer memory if they printed a private key

- subpoena exchanges to hand over records to tie them to identities they have on file

- search if somebody put the address in a forum sig or on IRC/elsewhere and admitted it was their address

- check IP if they generated the address with an online wallet, brainwallet or some other discoverable method (not behind Tor)

Otherwise all you are looking at is a big chain with coins going from address to address and no way to prove somebody is the definitive owner of it.

Almost all business transactions are between people that know at least a little bit about each other. If Silk Road User A sends Silk Road Merchant B BTC for drugs, A has to give B a postal address to mail the drugs to.

There is almost no such thing as two completely anonymous people in a financial transaction. There's always an email address, user name, a third party, or postal address to tie them.

The only thing that I can think of is some type of charitable/political donation that is anonymous.

For 100% certainty yes, but like a murder (or any other crime) no one witnesses, a circumstantial tie to a bitcoin address is theoretically possible. Though that doesn't seem to be the case here.

It would be much easier to trace him via the blockchain than break PGP.

Bitcoin is pseduoanonymous, it is possible to track coins.

This complete traceability of BTC is why i don't touch it. I just don't want to happen to be in possession of a BTC that 2-3 hops back was used in a transaction that FBI/etc.. is happily looking at now.

He was arrested by admitting to the crime. Anyone could have done that accidentally, here is the source: http://www.cryptocoinsnews.com/news/charlie-shrem-did-nothin...

I think he was selling btc for other very traceable and identity-linked forms of digital money (paypal, liberty reserve, western union, something like that). The issue was that he was operating as a money processor without following the mandatory guidelines that try to prevent laundering, etc. You can google the earlier arrest for more information on it, there are some juicy transcripts.

I don't know anything about the charges, but I have read from sellers that PGP turned out to be an insurmountable hurdle for Silk Road buyers, and so many, many people did not use it.

Shrem himself didn't use Silk Road; he bypassed his own company's AML process to help a known SR user exchange BTC.

Here's the criminal complaint: http://www.wired.com/images_blogs/threatlevel/2014/01/Faiell... There may be more detail in the indictment but I haven't seen it.

Here's the indictment:

http://www.scribd.com/doc/218320971/Charlie-Shrem-Indictment

I'm getting tired already of all this noise around Bitcoin. It's a nice technology, okay, terribly wasteful in terms of resources, but regardless - it won't help us colonize the space, it won't help us reach Singularity sooner, it won't help extend lifespan and do other meaningful things - it could potentially (although very unlikely) make some lazy hoarders rich and that's it. Bitcoin really turned into a scum of the Earth magnet - just reading the comments under any negative article makes you realize the kind of human waste that's behind the bubble!

> it won't help us colonize the space, it won't help us reach Singularity sooner, it won't help extend lifespan and do other meaningful things

Would you have said the same about Paypal? Because if you did, you'd have been wrong. Plus, among the set of technologies/companies that are discussed on HN, not that many are directly related to the goals you mentioned.

Perhaps Bitcoin is wasteful due to its Proof-of-Work system but you have to consider how wasteful the alternative is. How much human capital is wasted in operating the deposit banking and payments industry? How much land and resources are wasted to physically secure cash in bank vaults and move it around? How much efficiency is lost to high transaction fees or lack of access to the banking system? How many services which haven't yet been invented would be enabled by a distributed ledger? I'm not saying Bitcoin would wipe out those industries completely but it could certainly make parts of them obsolete.

I think it's wrong to dismiss the technology just because you dislike its community. The web was once a wild west as well.

PayPal never had the speculation appeal! PayPal, Venmo, Dwolla, Stripe, Balanced, Ribbon, Square, and others are all great services. They change the world in different ways - I buy with credit cards at Farmers Markets now, Stripe saved endless developer hours simplifying integration, Dwolla offers even lower than Bitcoin cost for accepting payments, etc. Bitcoin fans should learn from Elon Musk - the guy is a genius and, yet, he is a lot more humble than the average satoshi hoarder with a quarter of a Bitcoin waiting for the price to hit $1M apiece!

The technology never matters as much as the community! The Internet was created by nerds, not speculators!

Your comment is obviously emotionally charged. I agree that the satoshi hoarders can be extremely annoying at times but I maintain that you should distance your opinion of the technology from the community. In fact, the Bitcoin community has been dilluting over time as it gains in popularity and it's getting harder and harder to meaningfuly talk of a Bitcoin community.

Ripple is a better piece of technology, but because it lacks the "get rich quick" appeal, it's not nearly as popular. Dogecoin has a much more positive community than Bitcoin!

The other problem with Ripple is that it is set up as a "get rich quick" scheme, but only for the founders. In order to carry out transactions you need XRP, they're the only ones who can sell you more XRP, and they have the ability to change how much XRP every transaction costs at any time.

I'm not sure whether it's too far a stretch but don't all your arguments also apply to standard currency? Just consider the costs of running a central bank.

IMO, every contribution to economy is a contribution to the future.

And (at least up to now) the market has the opinion that your "being wasteful in terms of resources" is still of some economic value, otherwise the price would be far lower (~ zero)

Economy and the advancement of the civilization are rarely looking into the same direction. I'm not saying the status quo is more efficient than Bitcoin, but Bitcoin isn't the best solution either. This is a good article that sums things up: http://www.coindesk.com/bitcoin-fated-boom-bust/

>it won't help extend lifespan and do other meaningful things

I think that's taking a short view of things. There is no way to know who or what will be enabled by access to a powerful monetary instrument where financial tools are absent or severely handicapped (heavy inflation).

Short view? "Powerful" in terms of wasted CPU cycles? M-Pesa is powerful, Bitcoin is just a bubble.

> it won't help us colonize the space, it won't help us reach Singularity sooner

If that's the standard a new technology has to be at in order to interest you, well, forget about it, man.

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