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California Based P2P Trader Convicted of Illegal Money Transmission

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Re: California Based P2P Trader Convicted of Illegal Money Transmission

#31

Post by scott00 »

xrd wrote: post #11

Is this something she could have registered as a business properly to avoid this fate?

To do this type of business legally, you have to comply with both federal laws and state laws. The federal laws basically say you have to register with FinCEN and comply with anti-money laundering laws, which mostly means you have a duty to know who your customers are and why they're transacting with you, to refuse to do business with people who are obviously laundering money, and to report suspicious activity to FinCEN. It's reasonably doable to comply with federal law as an small operator. However, this person didn't just fail to register, she also knowingly facilitated money laundering, which is illegal even if you're registered.

What exactly you have to do to comply with state law varies dramatically. In some states buying and selling bitcoin is basically unregulated, and in others there are onerous registration/licensing and financial requirements that are basically impossible to fulfill as an individual. Off the top of my head I'm not sure where California falls on the spectrum.

Re: California Based P2P Trader Convicted of Illegal Money Transmission

#32

Post by dannyw »

ve55 wrote: post #4

The part about these convictions that bugs me is that some of the people getting in trouble were definitely not aware that they were breaking the law. It surprises a lot of people when they find out it's illegal to buy and sell bitcoin for cash to strangers in the US like this (that is, with no license or reporting or discrimination). I hope most of those convicted don't get jail time unless they truly knew that it m…

This is a very old article published recently. She was sentenced to one year in prison, in July.

Re: California Based P2P Trader Convicted of Illegal Money Transmission

#33

Post by closeparen »

scott00 wrote: post #31
xrd wrote: post #11

Is this something she could have registered as a business properly to avoid this fate?

To do this type of business legally, you have to comply with both federal laws and state laws. The federal laws basically say you have to register with FinCEN and comply with anti-money laundering laws, which mostly means you have a duty to know who your customers are and why they're transacting with you, to refuse to do business with people who are obviously laundering money, and to report suspicious activity to Fin…

Anonymity is the purpose of LocalBitocins. There is no reason to use it with licensed services; just transact with a regular exchange.

Re: California Based P2P Trader Convicted of Illegal Money Transmission

#34

Post by closeparen »

corey_moncure wrote: post #21
SubiculumCode wrote: post #14

IMO Bitcoin is a commodity, not a currency. (Please do not downvote me for the opinion). Regulators and at least some judges have called it a commodity. e.g. https://www.cnbc.com/2018/03/07/cryptocurrencies-like-bitcoi... The charge shouldn't be related to currency trading, but something related to failure to pay taxes on buying and selling commodities. [edit: As usual, comments on bitcoin expressing a non-evangelist…

Tax it like property, enforce other laws like it's currency... they get to have their cake and eat it too. It's all for your protection, of course, don't you know.

What do you mean “tax it like property”? Property taxes are only for real estate. Income earned in USD is subject to income tax; capital gains earned speculating on the forex market are subject to capital gains taxes.

Both money transmitter and securities broker businesses require licensing. You can’t sell AAPL to someone in a park for a duffel bag full of cash. They could have gotten her under either theory (currency or investment).

Re: California Based P2P Trader Convicted of Illegal Money Transmission

#35

Post by yason »

Not sure how the bitcoin part is relevant. AFAIK it's not a currency even if it wants to be. So same problems and rules should apply to other trading as well.

What if he had been dealing cars instead of bitcoin? A guy comes in, buys a car in cash, drives away. You use the cash to buy more cars, wait for the next guy. You pocket the diff between how much you pay and how much you ask. How do you know the money isn't from a drug dealer? How do you know you're not engaging in illegal money transmission or receiving money from drug traficking?

I'd even say cars are more widely accepted than bitcoin are.

Maybe bitcoin wasn't relevant but the article just failed to emphasize that point.

Re: California Based P2P Trader Convicted of Illegal Money Transmission

#36

Post by j1vms »

jstanley wrote: post #25
xrd wrote: post #11

Is this something she could have registered as a business properly to avoid this fate?

The best way to avoid this sort of trouble seems to be "be a large enough company that your internal operations make it too confusing to work out who to prosecute".

> ... be a large enough company that your internal operations make it too confusing to work out who to prosecute

But as illustrated in Breaking Bad season 5 (the Madrigal situation for those who have watched it), things don't necessarily work out going that way either.

Re: California Based P2P Trader Convicted of Illegal Money Transmission

#37

Post by JumpCrisscross »

yason wrote: post #35

Not sure how the bitcoin part is relevant. AFAIK it's not a currency even if it wants to be. So same problems and rules should apply to other trading as well. What if he had been dealing cars instead of bitcoin? A guy comes in, buys a car in cash, drives away. You use the cash to buy more cars, wait for the next guy. You pocket the diff between how much you pay and how much you ask. How do you know the money isn't fr…

> What if he had been dealing cars instead of bitcoin?

If you sell a car to someone knowing they paid with cash earned from dealing drugs, and then you proceed to not report that income, yes, it would be illegal.

The unique role of Bitcoin appears to be sociological. The case with cars is highly infrequent. Swap cars with Bitcoin, however, and people seem to think it’s okay.

Re: California Based P2P Trader Convicted of Illegal Money Transmission

#38

Post by seibelj »

yason wrote: post #35

Not sure how the bitcoin part is relevant. AFAIK it's not a currency even if it wants to be. So same problems and rules should apply to other trading as well. What if he had been dealing cars instead of bitcoin? A guy comes in, buys a car in cash, drives away. You use the cash to buy more cars, wait for the next guy. You pocket the diff between how much you pay and how much you ask. How do you know the money isn't fr…

There exists a cottage industry of individuals acting as money changers for bitcoin and other cryptocurrencies. It can be quite lucrative. This is (was?) a gray market, but judgements like this show the government considers it a black market.

What’s interesting to me is that they didn’t simply nail her for buying and selling bitcoin without a money transmitters license. They also used the undercover agent to explicitly say it was drug money, ensuring worse penalties.

Re: California Based P2P Trader Convicted of Illegal Money Transmission

#39

Post by CryptoPunk »

Cajoling people to follow particular money handling standards and banking practices is an inappropriate use of the power to imprison people.

Anything short of outright fraud should be permitted in a free society. People shouldn't be expected to question their customers to find out where their funds came from, or be prosecuted because unbeknownst to them, a criminal used their services.

The modern regulatory system is draconian and unjust.

Re: California Based P2P Trader Convicted of Illegal Money Transmission

#40

Post by xkcd-sucks »

GenerationRous wrote: post #16
jtbayly wrote: post #3

You can run to anarcho-libertarian-utopian ideals, but you can’t hide from the fact you still live under actual laws against such things, whether or not such laws are just.

If they really believe in their ideals, they should do the hard work to change the laws in their favor, or cleverly use already existing ones, instead of childishly isolating themselves from society and the government as outlaws. There is a precedent for this: the 18th and 19th century religious communes -- some of them anarchist -- had popular support and were able to change US laws so that they could avoid taxes an…

Utopian societies in pre-20th century USA were typically located in isolated settlements. Armed conflict was typical unless it was a group specifically dedicated to nonviolent ideals. Cf. the "Mormon wars" and pro/anti abolitionist movements in Western territories
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