Bitcoin’s not money, judge rules as she tosses money-laundering charge
washingtonpost.com
washingtonpost.com
I don't know the law in this case, but does this mean that money laundering is ok as long as it's done through something that isn't cash? For example, bearer bonds aren't universally accepted so I could launder my money using them? Gold certainly isn't universally accepted and its value fluctuates compared to the US Dollar so laundering with gold wouldn't be illegal? If there's a currency from a foreign country that's less accepted than Bitcoin, can I wash my money though that legally? The ruling in the case just doesn't pass a logic test. If something has to pass a two-pronged test of near-universal acceptance and stable value compared to the USD, then it's going to make money laundering trivially legal.
Now, this case seems kinda bad from the gov't side. I mean, imagine someone wants to buy some bitcoin from you and then casually drops, "yea, I'm gonna do somethin' illegal with it" at the last minute. What are you supposed to do in that situation? I wouldn't say no simply because, well, do these people have a gun and are going to get shooty if I don't go through with it?
In fact, the judge said, "This court is unwilling to punish a man for selling his property to another, when his actions fall under a statute that is so vaguely written that even legal professionals have difficulty finding a singular meaning." Which really says that the judge was struggling to find a way to let someone off that was captured by a law written so vague as to capture everyone. I mean, if the law criminalizes all financial transactions that might promote some illegal activity, that's a crappy law.
I can see not wanting to punish some random person that got caught in this police action. That still doesn't (shouldn't) mean that Bitcoin can't be considered money laundering.
The point that was being made, if I am correct, is that you can't convict someone of money laundering if it doesn't involve money, not that the transaction these people hypothetically would've had was OK. If the accused had been trading in, for example, sheep (which also do not constitute money in the United States) the ruling would probably have been the same.
Take a tenant in a secured tenancy, for example. They try to pay their rent, but the landlord won't accept payment, because they want an excuse to evict them (non-payment of rent being one of the few acceptable reasons for evicting a secured tenant). But if (being in Scotland) the tenant dumps a bag of coins on the counter, they are obliged to accept that to settle the debt.
http://www.royalmint.com/aboutus/policies-and-guidelines/leg...
For example, you can only use up to £10 worth of 50p pieces. Any more and the coin is no longer legal tender. The only coins that have no limits are £1 and £2.
The much rarer £5+ coins are even more bizarre. According to the Royal Mint, they are legal tender but at the same time, shops and banks do not have to accept them!
And while you might expect shops and banks to accept any coins and notes in general circulation, they aren't obliged to at all (except the issuing bank for any notes you might have, which must exchange notes they have issued -- although since we moved off the gold standard, they'll just give you another note of the same denomination).
Funny story. I've actually had US$2 bills declined because the cashier never knew they existed.
In fact, the US used to print $3 bills as well, but those fell out of favor and eventually removed because of disuse.
The federal government never did, but some states and private banks printed $3 bills back when they had their own currencies.
And apparently, another guy during the same operation was charged and sentenced to five years probation for unlicensed money transmission: http://www.coindesk.com/judge-orders-localbitcoins-user-to-e...
That his buddy had to cop to a plea deal with overzealous prosecutors is unfortunate, but in no way changes Espinoza's case.
I happen to know what money laundering is, being a certified money laundering specialist (CAMS) and all, and what he allegedly engaged in was money laundering. However, the judge was being completely fair in her statement as the prosecution did a lot of flippity flop and kept switching back the defendant's position from what is a business and a payment instrument seller. This was a relatively easy case to win for the prosecution, but pretty astounding as to how a very ill prepared prosecution and well prepared defense can go a long way.
One would hope that you are, in fact, a Certified Anti-Money Laundering Specialist, since what you initially labeled yourself as implies that you routinely engage in illegal activites.
Let's say person X has lots of bitcoins (potentially mined from the early days, when it was very easy to obtain). They go and sell it for $30,000, in cash. Let's assume X has the intention to declare the gains in their upcoming tax returns.
Why this would be money laundering?
Basically X is selling a property in the form of a mathematical equation, that was obtained legally. Of course they'll have to pay taxes like in any other profit-generating transaction, but other than that I'm failing in seeing the issue.
ps: it seems that in this case they were trying to entice the guy with stolen credit cards. As that didn't work, they tried switching to money laundering.
it's not what's happening here. i haven't seen where that was implied either.
>it seems that in this case they were trying to entice the guy with stolen credit cards. As that didn't work, they tried switching to money laundering.
no, they didn't entice him stolen credit cards, they, undercover, purported the sale of bitcoins/cash to him for the purpose of laundering the proceeds of the crime ( stolen credit card). Therefore, if he engaged in that sale knowingly, he willingly engaged in the laundering of proceeds of crime, i.e: money laundering. What they were weak or unable to demonstrate substantially was that his transactions thus far before the sting, were largely derived in the operations of aiding and abetting the laundering of the proceeds of crime.
They did try to entice with him with bullshit stolen credit cards. If you read carefully the first two pages, nothing was technically illegal, other than the fishy part where the defendant said he would "think about it" when offered to be paid with stolen credit cards. Had he said "No way Jose", it would have been a perfectly clean transaction, that could have happened to anyone on HN.
Still, he allegedly didn't accept the credit cards, and the detective tried to proceed with counterfeit money. In the end the defendant was charged with money laundering simply because he was selling bitcoins, which is utterly absurd. The judge was spot on to throw the case out.
I have no sympathy for crooks using bitcoins to cover their illicit actions, but I have equally no sympathy for law enforcement burning taxpayer dollars to chase ghosts.
[1] http://www.miamiherald.com/latest-news/article91701087.ece/B...(.PDF)
It's not easy to understand the vague and imprecise world of money laundering because the laws were written to be broad.
This is not the first time stings are carried out, this is also not the first time a prosecution fails at a case that by all indications of the allegation should have been easy to close.
Florida's money laundering statute wasn't any where as clear cut, and the judge recognized that and dismissed the case.
Honestly the part about bitcoin itself is a red herring.
Bitcoin is not money: it is not M0/M1. It can be traded for money or for other assets - barter. It may be treated as money, but it is not money.
It may overtake money as a unit of exchange, at some point, IMHO probably never (central banks will come up with equivalent functioning if and only if block chains stop taking days/weeks/months to implement on clients), but it is not money, now.
Any token that can be used to exchange goods and services can be considered "money". Some money is better (read: better store of value, widely accepted, used as legal tender to pay taxes) than others, depending on the specifics of the transaction it is used for.
These tokens can be physical placeholders (dollar bills) or virtual placeholders (debits and credits in a bank account, bitcoin).
M0/M1 is a grouping of extremely liquid forms of money. Bitcoin is also relatively liquid, so it wouldn't be too far-fetched to include it in M1 if it were more stable (read: if it had a government or large corporation backing it).
Florida's money laundering statute has no relation to any other state's money laundering statutes or to the Federal statute, aside from the use of the word money laundering.
Florida law enforcement tried to prosecute someone under an ambiguous statute, as even they were likely vexed by the name of the statute and a Hollywood interpretation of the supposed action. Florida law enforcement failed as the case under that Florida law really did rely on the definition of money as well as non-vagueness of the statute itself.
I'm reminded of a comedian saying "Drugs are illegal but ATM machines are open 24 hours a day".
I'm just surprised the effort that agents go through to prosecute seemingly marginal activities. Unless the authorities knew this guy was involved in something more nefarious, I imagine there would be more pressing cases for them to pursue.
Within limits. If you sell Bitcoin to someone who tells you they're going to fund a hit on someone or blow up a building, I think it is a concern, both morally and legally.
Would a needle exchange program also qualify as providing support for an illegal activity?
The case turned on a Florida law which defines includes in the definition of money laundering "money services businesses" that knowingly facilitate illegal activity [1].
[1] https://www.scribd.com/mobile/document/319270874/Order-Grant...
>For that $30,000, Espinoza had agreed to sell a slew of bitcoins, the almost unregulated virtual currency, which Arias’s character said he would exchange for stolen Russian credit-card numbers.
My old roommate and I used to use the Memo line on checks to imply that the money exchanged was for "sexual favors" or "drugs" or "illegal weapons" (yes, I'm aware that lots of people do this and we weren't very clever), when it was really one person paying their share of utilities to the other. As far as I know, BofA and PNC never reported us to the feds.
1) This is an elected state court judge, anecdotally one of the worst states for high quality judges. So, this is not a considered opinion from a federal judge. It is unlikely to have long term impact.
2) It looks like the purpose of this sting was to get someone on state Money Transmittal laws, levered up with some sort of racketeering type charges.
When it comes to opining on whether something is money for the purpose of Money Transmittal, it makes a lot of sense to be conservative about the definitions, and this is the angle I would expect a good defense attorney to take -- prove the state has the right to enforce this law in this circumstance..
All that said, this isn't the first attempt Florida law enforcement has made at turning a bitcoin exchange into a crime. Hopefully a ruling like this will put them on to more useful activities.
Just because they treat Bitcoin as a commodity does not mean you can somehow avoid paying taxes on it. Compensation does not have to come in the form of cash to count as income (just look at stock allocations).
The IRS has said that it is currently treating Bitcoin as property for tax purposes.
The document has some interesting bits to it. If you mine bitcoin, you're likely liable for self-employment taxes. When you use bitcoin to pay for things, you might create a gain or loss compared to your basis (even though you aren't exchanging for cash). Wages received in bitcoin still have taxes due on the US Dollar value of the bitcoin received (and payable in USD).
I'm a little surprised that the IRS didn't treat it as a foreign currency with the Section 1256 60/40% split long-term/short-term gain tax treatment.
Anyway, this case doesn't change anything from a tax standpoint. The IRS has already clarified all of that for your federal taxes.
If you hide a murder victim's body, you have satisfied the elements of money laundering.
Obviously, this literal interpretation of the statute's wording is eschewed in favor of a more restrictive interpretation, so this bizarre outcome does not follow, but this example is actually mentioned in the legal literature.
"anklage geldwäsche leiche verstecken jura theoretisch"
didn't do the trick.
Do you have a link?
"Tatbestand", "Auslegung", ("Leiche"|"Mordopfer") are my best guesses for search terms.
And I haven't looked, but I'd almost wager that Fischer wouldn't keep that tidbit out of his famous commentary.
First hit was this book: https://books.google.de/books?id=CqVLvTSOwpsC
Looks like hiding anything of value that has been acquired by a criminal act counts towards money laundering if you follow the words of the law too literally.
The definition of "money" in that article is simply "any object" :).
At least a human is "unantastbar" (inviolable, literally untouchable, in the sense of objectivity not tangable) by law. We grant dead body's almost the same respect and I wouldn't contest it, although I find that dead living being is an oxymoron.
I have no idea what you are talking about. What's more or less restrictive, can you explain?
> this example is actually mentioned in the legal literature.
I have no idea what legal literature you are talking about.
Medium of Exchange
Unit of Account
Store of Value
Standard of Deferred Payment - eh?
That can't be the deciding factor.
Salespeople in the precious-metals industry try to pitch "currency" as paper money and "money" as a store of value, e.g. the commodity they're hocking. This isn't an accepted financial or economic construct as much as a marketing one.
So this is the basis behind my Dale Gribble coworker insisting that "the dollar isn't money" because we're no longer on the gold standard. I'd always wondered about that.
At the end of 20 years go see what you can purchase.
You will see what stores value.
A Ferrari is an incredible car, in terms of certain aspects of performance. But a BMW owner might point out that certain vintages of Ferraris come with a dismal maintenance record. That doesn't make it any less of a car. BMWs and Ferraris are just optimised for different requirements.
Money is classically defined with four characteristics: a medium of exchange, a measure of value, a standard of deferred payment and a store of value. Depending on the economy, different blends of these characteristics may be desired. For example, given developed capital markets and high money velocity, medium of exchange is more important than store of value - there are other safe things (e.g. Treasuries) in which to store one's capital.
Saying a dollar isn't money because it doesn't store value as well as gold is akin to saying Ferraris aren't cars because they cost too much to maintain.
Dollars are designed to store value. Without that value being assigned that paper is valueless
Gold has historically been a store of value. Gold is a tangible item whose value cannot ever be valueless. ( especially now that there is TiAu )
(-) Scarcity: finite number of the symbols (fiat currency breaks this in batches, BTC are finite, gold can be considered ~finite until you mine it in other planets or use a star trek replicator)
(-) Fungibility: all symbols are interchangeable, commodity like. Symbol A is identical to symbol B, and vice versa.
(-) Divisibility: the symbols are easily divisible, so you can divide them to smaller and smaller portions (you can't do this with houses or Ferraris)
(-) Durability: the symbols can survive the test of time and weahther and won’t be worn out or disappear
(-) Transferability: the symbols can be easily transferred between owners (can't do with houses or Ferrari's)
In fact, this will probably be the dominant use-case in a few years, as more and more non-financial applications use Bitcoin OP_RETURNs to host replicated state machine inputs [1].
[1 shameless plug] https://blog.blockstack.org/blockchains-for-distributed-syst...
I have rules set on my home machine, but my work machine does not and I still am able to view Washington Post Articles.
Bitcoin Privacy Howto
=====================
How to take control over your digital financial freedom.
macOS:
<?xml version="1.0" encoding="UTF-8"?>
<!DOCTYPE plist PUBLIC "-//Apple//DTD PLIST 1.0//EN" "http://www.apple.com/DTDs/PropertyList-1.0.dtd">
<plist version="1.0">
<dict>
<key>Label</key>
<string>org.torproject.tor</string>
<key>ProgramArguments</key>
<array>
<string>/usr/local/bin/tor</string>
</array>
<key>RunAtLoad</key>
<true/>
</dict>
</plist>
Debian or other Linuxes (or systems) I don't know - would love to read in child comments.
Set your bitcoin client (I know Electrum and Bitcoin-QT at least can, probably others as well) to connect via a Socks-5 proxy to localhost:9050.
In Electrum I set it to connect to a .onion server as well.
Keep the wallets that you spend on things that can be tied to you (like whatever business replaces amazon shopping) separate from the wallets you spend from in privacy.