
SEC Files Fraud Charges in Bitcoin and Office Space Investment Schemes - mikehotel
https://www.sec.gov/litigation/litreleases/2017/lr23870.htm
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sillysaurus3
This is unrelated to the article, but I'm interested to hear thoughts on this:

As bitcoin becomes more valuable and ransomware / money laundering becomes
more prevalent, why not blacklist coins that have been through a mixer? If you
can't mix the coins, you can't launder them. It won't be possible to use
Bitcoin for these activities anymore.

Here's what I mean by "blacklist": If an exchange detects that your account
has received more than N bitcoins that have been through a mixer, your account
is closed and your coins are refunded. It's easy to check whether a coin has
been through e.g. bitcoinfog, for example, so this is easy to implement.

I think a lot of the resistance to this idea comes from people who use Silk
Road clones, most of which force you to use a mixer. And while there's a
strong ethical argument to be made that Silk Road ought to exist and that it's
made the world safer, there are other types of activities that have been
growing with concerning frequency in the Bitcoin world.

The sole reason that Bitcoin is untraceable is because of mixers. Is it time
to eliminate them? What are some consequences of pursuing this strategy?

There's nothing stopping it from happening. As soon as a few exchanges become
so large that they're the "gatekeepers" for BTC -> USD conversion, it will be
difficult to get dollars out. And if other countries follow suit for euros and
yen, then mixed Bitcoins won't be worth much.

As far as I can tell, this is a very real possibility for the future, so if it
has consequences then we should discuss them now. The era of "pay for
everything in bitcoin" is sufficiently far away that we should probably talk
about the implications of banning mixed coins.

EDIT: Ok, I've exhausted my self-control for complaining about downvotes. This
is a genuine, good-faith question that I spent time crafting. If you don't
come to HN to have your preconceptions challenged, then what are we doing
here?

And no, people can't troll others by sending them mixed coins. It's no
different than the fraud detection that exists today. You'd need tens of
thousands of USD to even put a dent in a business account, for example, and
exchanges will just forgive it.

I think people don't like the future I've painted, and hence the downvotes. It
doesn't bother me much, but it's an interesting phenomenon to see unfold.

~~~
deweller
Fungibility of the coins is a differentiating competitive advantage of bitcoin
over, say, PayPal.

Blacklisting coins leads to regulation, which leads to government control,
etc. Soon I can't send money to someone in China because the Chinese
government blocks coins that were used for something that they don't like.

The system quickly falls apart and becomes much less useful.

~~~
peoplewindow
Regulation and government control is what sillysaurus3 is after: he
specifically mentioned ransomware and money laundering as the goal.

If Bitcoin's advantage over PayPal is ransomware, that isn't an advantage
governments will tolerate for very long, and why should they? Bans would be
popular with the voters.

~~~
Frogolocalypse
They might be popular. Just completely ineffective.

~~~
peoplewindow
To ban Bitcoin you just have to ban fiat transfers to exchanges, something
banks can easily do.

~~~
Frogolocalypse
And that would take the banning of any instrument like a gift card. How
exactly do you think you could do that?

~~~
peoplewindow
They don't need to ban all Bitcoin trading to effectively wipe it out as a
significant source of money laundering. Gift cards are not what money
launderers want because they are hard work to turn back into real cash. What
are you expecting people to do - post giant packages of iTunes gift cards to
China in order to buy BTC?

I think a lot of bitcoiners are in denial about how reliant the system is on
tolerance by the authorities. If you can't move money in any significant
quantity to exchanges then ransomware usages will go away (along with other
usages). Even if residual trading by hard-core users continues it won't be at
a scale that is large enough to care about.

------
brianbreslin
We had one of the bar works locations here in miami suddenly shut down last
week. Few tenants ever signed up, and the staff weren't even informed the
place was shutting down.

~~~
aphextron
>We had one of the bar works locations here in miami suddenly shut down last
week. Few tenants ever signed up, and the staff weren't even informed the
place was shutting down.

This is the number one reason I want nothing to do with Bitcoin. The
technology is new and amazing and incredibly exciting, but people are awful as
ever. The industry is full of shady characters looking to make a buck any way
possible. And anything that touches it tends to fall into the same category.

I'm certain it will be successful in the long run though. There will always be
those willing to take the risk.

~~~
beager
The fact that cryptocurrency keeps showing up alongside scams certainly does
not bode well for the legitimacy of cryptocurrency, and by extension it does
not bode well for the stability or overall value.

One of the biggest flaws with cryptocurrency is that for all its mathematical
and structural elegance, it rolls back almost all of the features that
mitigate fraudulent human behaviors.

~~~
bsder
> One of the biggest flaws with cryptocurrency is that for all its
> mathematical and structural elegance, it rolls back almost all of the
> features that mitigate fraudulent human behaviors.

Those aren't flaws; those are _features_.

Bitcoin was meant to serve a very small number of people attempting to evade
the laws surrounding currency exchange.

The fact that it could be propagated as a pyramid scheme (mining gets vastly
more expensive the later you "buy in") was marketing genius.

~~~
Frogolocalypse
Err no. Bitcoin was invented as a hedge against inflation. It is delivering on
exactly this promise in spades.

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binarymax
I don't get it. The alleged Haddow is intelligent and capable enough to raise
37 million, yet chooses to do it illegally? Why not just use your talents and
be legit? Human behavior baffles me sometimes.

~~~
chc
I don't know why you assume those tasks are similar in difficulty. In general,
if you don't factor in the chance of getting caught, it's easier to make money
with a an illegal scheme than a legal one. Nobody would break the law if it
weren't so.

~~~
binarymax
I can't reply to all comments, so since you posted first I'm replying here...

It's a minor thing to learn a criminal skill that lets you con your way into a
couple thousand dollars. The combination of knowledge, connections, moxie, and
motivation to raise an ill gotten _37 million dollars_ are another thing
entirely. Not anyone can just say "oh sure I'll lie my way to 37 million".
Given the skills, time, and dedication it must have taken to get this far by a
person with these talents, could have been used to be reasonably successful in
a whole host of careers or ventures. Perhaps not 37 million effective, but
enough to live comfortably and happy for sure, without the constant fear of
the long arm of the law creeping up behind you at any moment.

------
Animats
It seems that Renwick Haddow is well known for previous scams.[1][2]

[1] [http://www.redd-monitor.org/2017/01/17/bar-works-the-
return-...](http://www.redd-monitor.org/2017/01/17/bar-works-the-return-of-
renwick-haddow/) [2] [http://www.worldpolicy.org/journal/spring2015/catch-and-
rele...](http://www.worldpolicy.org/journal/spring2015/catch-and-release)

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LAMike
One of many SEC rulings to come for the crypto space.

~~~
bookmarkacc
Seems less related to crypto and more related to good old scamming. The only
thing crypto is the company pitch which is not where the SEC had a problem.

~~~
rch
I'd change the title to 'SEC Files Fraud Charges Against Renwick Haddow'.

~~~
deweller
The SEC is clearly trying to send a message that is watching the crypto space
by titling the press release as such.

~~~
Frogolocalypse
The only thing related to crypto was the use of a crypto name.

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EGreg
Bitcoin can be easily tracked. If they make the exchanges refuse to accept
coins that have been through a mixer / laundered then everything is trivially
trackable.

Even dollar bills can in theory be marked and tracked. Each one has its own
number, it's just that they aren't registered on a global ledger. The real
advantage of bitcoin was that no one can block your payment or confiscate your
money.

But once it's trackable, they can keep a list of "blacklisted" coins which
regulated exchanges will refuse to cash out for things. And which will make it
hard to pay for actual stuff (eg expedia via BitPay) with them.

------
DiMiTri101
Monero is the answer to this problem

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Frogolocalypse
Pretty sure the only relationship that scam had to do with bitcoin is that the
name was used in order to bamboozle investors.

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Animats
_Bar Works primarily sold leases coupled with sub-leases that together
functioned like investment notes. The company also allegedly sold leases for
more workspaces than actually existed in at least two locations._

Classic non-Bitcoin type of scam. The SEC sends people to jail for that sort
of thing regularly.

~~~
downandout
_> The SEC sends people to jail for that sort of thing regularly._

Not being pedantic here, just a side note. The SEC actually doesn't have the
power to send people to jail. They can only file civil actions. In this case,
a parallel (but separate) criminal action was filed by the US Attorney's
office, which is the only entity that can bring federal criminal charges.

This is an important distinction, because the standard of proof is lower in
civil cases, and there are SEC violations that simply aren't criminal in
nature. Accordingly, most conduct that draws the ire of the SEC doesn't
actually get criminally prosecuted, nor does all such conduct necessarily
deserve it. There are many arcane securities laws (some dating back to the
1920's) that are easy to unintentionally violate.

------
pizza
Anybody know if the SEC has looked into last week's Ethereum flash crash?

~~~
pmalynin
Why would they? It's not a "security".

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idibidiart
ICO is the new IPO. ICOs will ultimately replace IPOs. Bitcoin is the perfect
medium for speculative value. LOL. Enough said.

