This Sunday, BitInstant CEO Charlie Shrem was arrested at JFK airport for money laundering. Allegedly, he has sold $1M worth of bitcoin, which has later been used to buy illegal drugs. But that’s not what money laundering is. Not at all. This can only be described as a harassment arrest.
It becomes increasingly clear that the arrest of BitInstant CEO Charlie Shrem is a harassment arrest, intended to spread chilling effects, an arrest that has no judicial basis whatsoever but to demonstrate wielding of power by a repressive police system.
Business Insider writes;
“Charlie Shrem has been arrested at JFK airport and charged with money laundering. …accused of selling over $1 million in bitcoins to Silk Road users, who would then use them to buy drugs and other illicit items.”
So what?
That’s not money laundering. That’s the exact opposite of money laundering. Money laundering is a well-defined concept; it’s when you take money that has been achieved through illegal means and give them a legitimate source, concealing the past of that particular piece of wealth.
What allegedly happened here was that Shrem sold one million USD worth of bitcoin to one or more individuals, and these means were later used in turn to purchase contraband from Silk Road, obviously without Shrem having any say about it. That’s neither criminal nor money laundering – when you sell an asset, whether a car, a house, or bitcoin, you’re not liable in the slightest if that asset is later exchanged for contraband by its new rightful owner. Nor are you in any way, shape or form required to act even if you know it’s been later exchanged for contraband by its new owner, and in particular, you’re not guilty of money laundering.
Money laundering is specifically when you take actions to turn black money into white, and not when you sell white money to somebody else and they turn it black without your consent. There’s so much wrong with this bullshit arrest on every conceivable level.
This is a harassment arrest apparently intended to intimidate and associate “bitcoin”, “silk road”, “drugs”, and “money laundering” with each other, and the community should take exactly none of this nonsense and this repression. At this point, it’s important to stand up for the bitcoin community and for Shrem against a harassment arrest.
Unfortunately, the plea bargain system of the United States may cause Shrem to confess to the crime just to not risk 25 years of jail. A system where you get the choice of 15 days in jail and guilty confession, scoring career points for the prosecutor, or risk 25 years but take your chances of an acquittal, is a system that has absolutely nothing to do with justice nor with law enforcement. There is supposed to be a conceptual difference between being charged with a felony and playing “Take the money, or open the box?”.
Note that I write “police system”, not “justice system”. The police system of the United States, from a due process perspective, is just barely qualified to issue parking tickets. And yet, it issues the death penalty. That causes hairs to rise on my arms.
Sooo … I imagine the next person to be arrested would be Ms. Rios, the Treasurer of the United States, as she is supplying the currency that *will* be used in a plethora of crimes committed in the next week.
Absolutely! and the currency *is* already used in crimes!
He’ll get off with a piddling fine. After all, HSBC did when they channelled money to Hezbollah…
“accused of selling over $1 million in bitcoins to Silk Road users, who would then use them to buy drugs and other illicit items”
That’s not actually what he’s accused of. At all. (Don’t believe everything you read in the mainstream media.) He is actually accused of deliberately assisting his customer in structuring his transactions and hiding their true origin to avoid raising red flags with the exchange’s payment processor while keeping the rest of the exchange’s employees out of the loop (in fact, he allegedly told the co-founder that the customer would be banned from the exchange due to the illegal nature of his business (which he knew about), but secretly allowed the customer to continue using the exchange despite the “ban”). This is indeed money laundering. Though whether money laundering should be a crime and whether he’s actually guilty and the state can prove that is another matter altogether.
Is this what the arrest warrant and the judicial process say (providing the police gave a shit to due process and got one)?
Yes. Specifically, he is charged with one count of operating an unlicensed money transmitting business (in connection with his customer’s Silk Road business, which he allegedly assisted in running, though he didn’t actually own it), one count of money laundering conspiracy (the conspiracy I just described), and one count of willful failure to file suspicious activity report (as the exchange’s AML compliance officer, he was legally required to report his customer’s illegal activity, instead of actively assisting in it and covering it up, which is exactly the opposite of what an AML compliance officer is supposed to do).
To be clear, I’m not saying that any or all of these things should be illegal, but it’s impossible to have a meaning debate on the subject without getting the facts straight as to what the alleged crime actually is. In particular, he was *not* arrested for merely selling bitcoins to Silk Road users, which is not money laundering and not even illegal (if it were, probably every bitcoin exchange in the country would be raided).
As I understand, Bitcoin was not considered money until March 2013 when FinCEN issued its guidance. Up until then, no Bitcoin company had done any AML or even registered with FinCEN. BitInstant was the only company that did, since 2011.
As a former customer, they did identity checks on every customer over a certain amount, when legally they only needed to do checks on customers doing over $10,000 per day.
At the same time, BTCKing did not deposit the cash HIMSELF, rather he allegedly advertised his services on Silk Road, had his indivoidual customers deposit a few hundred dollars into their own MtGox accounts, after that a customer would buy BTC on the exchange and then after that allegadly use those coins to buy goods on Silk Road. How many degrees of separation is Charlie? BitInstant DID NOT sell Bitcoin at this time, rather it allowed customers to deposit USD into their trading account on exchanges.
Please do your research before commenting.
Massive slander and false allegations is common practice when the militarized fascist police state attacks a victim. I don’t believe this unless corroborated by dissident news sources.
Falkvinge is spreading lies and half truths – as usual…
I used to use BitInstant. The allegations match up exactly with how the site operated, from a users perspective, and Charlie Shrem is far from a class-act businessman. He’s a 23/24 year old kid who saw a lot of money and grabbed for it.
The site said “only 2k allowed per day in transfers per account” and then did ZERO identity checking when allowing new accounts. That lone was a blatant crime and after such a setup I’m not surprised to hear Charlie was using the site to make even more money by helping guide people through what should have been an obviously simple way to launder cash.
Do you have proof of this or are you just spreading FUD? Have you even tried reaching out to them? Charlie has been refunding people out of his own pocket, including myself.
So, Rick. Have you nothing to say about this? Not “I checked it somehow and this guy is lying” or “I just trust the mainstream media in this instance”? Nothing? Come on…
Seems the US is on course, full speed towards totalitarianism. There’s no justice system in the US unless you got the money and power. There’s no democracy there (unless you consider a bipartisan system where everybody does exactly the same does anything serious to its people).
R.I.P. USA. Americans should be up in arms.
Unless you are very wealthy or are lucky enough to have a position of power one day, you will never experience true freedom in the USA. The average person doesn’t have the time to constantly fight the people in power that are intent on exploiting every loophole in the constitution to do an end-run around it. Remember how politicians talked non-stop about freedom? It was a turn of the knife to hear it. They seem to clue into how disingenuous it was and stopped doing it as much.
Man, if only you had read the actual complaint instead of spouting off about whatever you assume to be the reasoning behind the arrest.
The emotional response I have is to have little sympathy for Shrem, but the analytical part of my mind agrees with you. If what you say is true (posts above say maybe not), then this definitely a bullshit charge. Tangentially, I would be curious to see a post from you outlining the specific injustices regarding the US legal system. I have done some research on the subject, but always find your opinion and writing style to be very helpful in understanding various subjects.
Yes, if the comments are correct, that would probably qualify for money laundering. Legally and morally correct are two different things here, of course.
Until further facts arrive in the case (I only have what has been reported), I have to mark things with a [citation needed].
Also, thanks for the kind words!
Rick
The unsealed complaint is available here: http://www.justice.gov/usao/nys/pressreleases/January14/SchremFaiellaChargesPR/Faiella,%20Robert%20M.%20and%20Charlie%20Shrem%20Complaint.pdf
As is so often the case, the facts are very different from what is being reported in the media.
Here you go
http://www.scribd.com/doc/202553294/Robert-Faiella-and-Charlie-Shrem-Criminal-Complaint
Maybe it would be a good idea, to look into the official release from the DA and not base an argument on the BI article alone. You are making a valid point, but you are not looking at the full picture: He has been charged with “money laundering” in the sense that he was the responsible Compliance Officer. As such he intentionally facilitated narcotics related transaction by not doing his job, which is to KYC your client and report suspicious activity. If he would have done this as a private person, your argument might be solid and the allegation might not stick. In this case it fully sticks, because he broke pretty much every rule of AML procedures and regulation I can think of.
Disclaimer: I am not saying AML regulation make any sense. I am just saying how it works.
Didn’t you get the memo? Now everything is money laundering. If you have *any* cash whatsoever and you can’t prove where you got it and what you are doing with it you are automatically guilty of money laundering. This is the world we live in now.
Well, the trial against The Pirate Bay tought us that even here in Sweden you can be convicted on a secondary or third level for assisting a crime even if no primary criminal has been found – so it’s probably only a matter of time until they use the same tactics on someone with Bitcoin – you’re probably safe until after the September election Rick, after that, if the Swedish Pirate Party is succesfully marginalized by old media and does not enter parliamen, I wouldn’t be so sure.
You might wanna start mapping low profile routes to friendly embassies…
Who ever has the most gold makes the golden rules.
I’m guessing, who ever is in the top spot didn’t get there by being nice.
Pirates be warned! Arrrr.
Rick, here you go again.
Stating something as a fact allthough it’s not.
How is the case relating to the ACTA poster working for you?
That time you stated:
“That poster has now been discovered to be a copyright monopoly violation committed by the pro-ACTA camp.”
Have I missed the conclusion of this copyright monopoly violation case?
[…] the prosecution and the arrest itself reminded me of what has been done to countless others such as Aaron Swartz and Barrett Brown, to name a […]
[…] prosecution and the arrest itself reminded me of what has been done to countless others such as Aaron Swartz and Barrett Brown, to name a […]
>What allegedly happened here was that Shrem sold one million USD worth of bitcoin to one or more individuals, and these means were later used in turn to purchase contraband from Silk Road
Its actually more retarded than that.
He sold coins to someone (not via SR), who then sold the coins on SR onwards to other people (who may or may not have brought illegal/legal (depending on locality) goods).
By that logic, anyone who ever sells coins are money launderers because the coins at some point in the future might be sold to someone else who might sell them to someone else, who ‘might’ buy illegal goods.
Totally agreed that its harassment and scare tactics.
And anyone who touches USD are money launderers, seeing as USD are the prime choice for buying illegal things.
[…] members of the Bitcoin community believe that the prosecutor’s aggressiveness stems from the government’s animosity toward the virtual […]
[…] members of the Bitcoin community believe that the prosecutor’s aggressiveness stems from the government’s animosity toward the virtual […]
[…] “This is a harassment arrest apparently intended to intimidate and associate ‘bitcoin’, ‘silk road’, ‘drugs’, and ‘money laundering’ with each other,” Falkvingewrites on his website. […]
[…] Harassment Arrest Of Charlie Shrem Shows Dangerously Repressive U.S. Police […]
http://www.irs.gov/Individuals/International-Taxpayers/Offshore-Voluntary-Disclosure-Program-Frequently-Asked-Questions-and-Answers
FAQ 52.2 Regards the plea bargain required of a Swedish citizen living in Sweden who did not know that she is a US person, to the USA. 27.5% of everything she owns, but she might qualify for only 5% of everything she owns.
“2.Taxpayers who are foreign residents and who were unaware they were U.S. citizens.
Example 1: The taxpayer was born in the U.S. to parents of foreign citizenship. She grew up in a foreign jurisdiction, unaware that she had been born in the U.S. She has a $60,000 account in the foreign jurisdiction. She has never filed U.S. returns or FBARs. She became aware she was a U.S. citizen when she had to get a birth certificate in order to obtain a passport from the foreign jurisdiction where she resides. Unless she decides to opt out, she is entitled to the reduced 5% offshore penalty (of everything she owns). Subsequent to learning of her U.S. citizenship, taxpayer took no action with respect to her foreign accounts that would disqualify a U.S. taxpayer from the 5 percent penalty under paragraph 1, above (back to 27.5% of everything she owns).
WHen FATCA comes into force July 1, 2014, and with the aid of riksdag and their FATCA IGA, the Swedish government will force all financial institutions to comply with this US law and set up Swedish citizens living in Sweden to be taxed and penalized by the USA.
Welcome to the USA! Sweden is annexing itself to USA!!! Implementing US tax law in Sweden upon Swedish citizens, and breaking the Swedish grundlag to do it!!!