Bitcoin promoter Shrem indicted in NY for money laundering

http://www.reuters.com/article/2014/04/14/us-usa-crime-bitcoin-idUSBREA3D1RU20140414

by downandout • 12 years ago

59 47 12 years ago

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?

uncoder0• 12 years ago

How did you determine that?

sillysaurus32• 12 years ago

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.

veemjeem• 12 years ago

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

jordanbaucke• 12 years ago

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

olalonde4• 12 years ago

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.

Igglyboo• 12 years ago

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

Bitcoin is pseduoanonymous, it is possible to track coins.

trhway• 12 years ago

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.

melvinng• 12 years ago

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...

awda• 12 years ago

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.

A_COMPUTER• 12 years ago

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.

wmf• 12 years ago

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.

downandout3• 12 years ago

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.

colechristensen• 12 years ago

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.

caf2• 12 years ago

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.

patrickg_zill• 12 years ago

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...

josu• 12 years ago

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...

downandout3• 12 years ago

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.

rodgerd• 12 years ago

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.

whatevsbro• 12 years ago

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.

mpyne• 12 years ago

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.

oleganza• 12 years ago

"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.

kolev5• 12 years ago

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!

olalonde4• 12 years ago

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.

kolev5• 12 years ago

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!

terranstyler• 12 years ago

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)

kolev5• 12 years ago

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/

jedunnigan• 12 years ago

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).

kolev5• 12 years ago

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

haakon• 12 years ago

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.

downandout3• 12 years ago

Here's the indictment:

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

jluxenberg• 12 years ago

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

xux• 12 years ago

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.

D9u• 12 years ago

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...

Bitcoin promoter Shrem indicted in NY for money laundering

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