

Additional $2.1M Seized from Mt. Gox Accounts – Now Over $5M Total - cgi_man
http://thegenesisblock.com/warrant-for-mt-gox-wells-fargo-accounts-shows-additional-2-1m-seized/

======
D9u
Interestingly, when the big banks were caught laundering drug cartel money
they only had to pay fines a fraction of the amount laundered.

[http://www.bloomberg.com/news/2013-03-31/money-laundering-
ba...](http://www.bloomberg.com/news/2013-03-31/money-laundering-banks-still-
get-a-pass-from-u-s-.html)

[http://www.globalresearch.ca/money-laundering-and-the-
drug-t...](http://www.globalresearch.ca/money-laundering-and-the-drug-trade-
the-role-of-the-banks/5334205)

 _In March 2010 Wachovia cut a deal with the US government which involved the
bank being given fines of $160 million under a ”deferred prosecution”
agreement. This was due to Wachovia’s heavy involvement in money laundering
moving up to $378.4 billion over several years. Not one banker was prosecuted
for illegal involvement in the drugs trade. Meanwhile small time drug dealers
and users go to prison._

~~~
wahnfrieden
What was the intentional extent of their involvement?

~~~
aspensmonster
[http://www.theguardian.com/world/2011/apr/03/us-bank-
mexico-...](http://www.theguardian.com/world/2011/apr/03/us-bank-mexico-drug-
gangs)

That is a decent article from the Guardian concerning Wachovia's activities.
In particular, it contains the statements of a highly involved whistleblower
that are indicting on their own. But I find the statement of facts from the
deferred prosecution agreement to be more compelling:

[http://www.justice.gov/usao/fls/PressReleases/Attachments/10...](http://www.justice.gov/usao/fls/PressReleases/Attachments/100317-02.Statement.pdf)

>24.) During the investigation, law enforcement reviewed the CDC banking
activity that occurred at Wachovia and found readily identifiable evidence and
red flags of large-scale drug money laundering....

>26.) These BSA investigations have determined that from May 2003 through at
least July 2007, Wachovia violated the anti-money laundering ("AML") and
suspicious activity reporting requirements of the BSA and its implementing
regulations. _The violations at Wachovia were serious and systemic..._

>31.) ...This wire activity was principally monitored through the use of a
computer system.... The actual number of alerts that the system was designed
to generate per month was pre-set, based, in part, on the number of
investigators available to review the alerts. In addition, AML personnel were
not allowed to carry investigations into the next month.... The net result was
that the understaffed AML unit in Philadelphia could not keep up with the
volume of wires. _The suspicious activity went effectively unmonitored._

>32.) With regard to the bulk cash business, Wachovia had no written formal
AML policy or procedure for the monitoring of bulk cash to ensure that
suspicious activity was reported.... _As a result, at least $4,728,626,300 in
bulk cash_ from the CDCs went through Wachovia during the period of May 1,
2004 through May 31, 2007, _with essentially no AML monitoring._

>33.) Wachovia never reviewed any of the RDC deposits made from the time the
product was first offered in the summer of 2005 until approximately November
2007. _During this time, approximately $47 billion was deposited into Wachovia
through RDC without AML monitoring._

>34.) With regard to standard pouch activity, Wachovia also failed to enforce
a self-imposed policy regarding traveler's checks. In 2005, Wachovia was
warned that the CDCs were sending in large quantities of sequentially numbered
traveler's checks for deposit and that this was potentially suspicious
activity. As a result of this warning and other internal discussions, Wachovia
sent a letter to its customers noting that, "due to the strict U.S. regulatory
mandates associated with anti-money laundering policies, Wachovia has decided
to limit acceptance of bulk deposits of traveler's checks through our cash
letter service." The letter stated that Wachovia "will require that you no
longer remit deposits containing sequentially numbered USD traveler's checks
where the total value of the series exceeds $10,500." _Wachovia, however,
failed to establish any internal policy or monitoring procedures to implement
or enforce this rule._ As a result, from April 2005 through May 2007, Wachovia
accepted more than 1000 pouch deposits that contained thousands of
sequentially numbered traveler's checks in violation of its own policy.

That's about as intentional as it gets in my book. I would argue that those
above statements of fact are enough on their own to indicate intent.
Particularly number 34, which makes it plain as day that they were certainly
aware of the problems --and made public-facing gestures at addressing them--
but internally were more than happy to keep rolling in the drug money.

------
bdcravens
Keep in mind that half of Mt. Gox's value is in BTC. They tend to receive
about 1% of volume (average 0.5% commission on both sides of trade - half of
which is fiat, other half BTC)

Last month or so they've had about 20K or so daily volume. So 600K X $100/BTC
X 1% = about $600K/month. Let's double that for good months. Hell, triple it.
$1.8 M/mo, or $900K cash. I'd assume $100K/mo for salaries, infrastructure,
etc. So about $10M/year in profit.

Half of it's frozen. Meanwhile, they have $900K/mo in BTC. That's a liability
if they can't properly cash out. They'd probably have to sell about 1/2 of
what's in their wallets to get to solvency as people continue to want their
money. They control like 60% of the market - so what would be the effect of
about 30% of all BTC hitting the other exchanges? Assuming they could handle
the traffic, it would devastate prices.

Or they liquidate. 60% of all BTC flooding market.

Or they go under. It'd be good for those holding in other exchanges, but that
would be an epic implosion as all those BTC's "disappear".

I can't see this scenario change, unless they can start fulfilling all wires
within the next couple of weeks.

Folks will split hairs about the fact that the freezes are on their
subsidiary... but how of Mt. Gox's business runs through it? Enough that the
distinction is pointless.

All of these numbers are ballparked, but the deeper point: much of Bitcoin's
success and attractiveness is based on the Mt. Gox exchange. Too much. It's
going to destroy the market as it currently stands.

The only alternative is for everyone to pull out BTC, destroy Mt. Gox, and
hold as the other exchanges stabilize.

~~~
unclebucknasty
So, Mt. Gox is _too big to fail_.

Very good points. I hadn't considered the BTC that they keep on trades. I
wonder if they sell some of this BTC at certain threshholds, such that they
are constantly converting to fiat?

~~~
bdcravens
Not too big to fail in the US banking sense, where it would tumble a house of
cards with global repercussions. However, I think it would do a lot of damage
to the Bitcoin economy: other exchanges, Silk Road, Bitcoin gambling sites,
various Bitcoin startups, those with serious money tied up in BTC.

It's entirely possible that they're fulfilling some of the orders out of their
wallet, but at a max of 0.6%, if they're never going the other way (fulfilling
BTC orders with fiat), that'd get exhausted pretty quickly.

------
coinman
For anyone who's directing their rage at MtGox for this, that should not be
the target.

We should be outraged at the banking system and the lawmakers instead. They
are the ones who are putting roadblocks on to MtGox, as these documents prove.

MtGox does not operate a MSB according to the laws in Japan, so if it has a
bank account in the US, how does it make it a MSB?

Besides, the FinCEN guidelines are not clear for Bitcoin. For example, there's
no clear definition for what is a "User" and what is an "Administrator".

Being P2P, users are administrators at the same time. (You don't necessarily
need to mine bitcoins to be an administrator, if you're a user, then your
client still needs to do administrative tasks such as relay transactions
across the network)

Besides, bitcoins should be considered as virtual messaging service, rather
than a currency as in the traditional sense of the word. In essence, Bitcoin
is a distributed messaging network. (When bitcoins are bought, the buyer is
actually paying the seller to send a message to the network).

We need better, clearer guidelines on this.

~~~
cgi_man
The accounts seized were for Mutum Sigillum, their US subsidiary. The claim is
that MS transferred funds from Mt Gox's Dwalla account to Mt. Gox's overseas
account, which fits under the definition of a MSB in the US.

------
yebyen
Report from #mtgox when I asked, the deposits and withdrawals in USD are still
flowing, but it's so slow they might as well not be. You can move your money
out of Mt.Gox as bitcoins but you take a "9% haircut" because the Mt.Gox USD
are undervalued.

(Unless of course your money is already bitcoins.)

Wire transfers are being fulfilled in an average of 7 weeks.

This is 100% hearsay but I went and asked yesterday because this article
popped up on HN and was deleted before anybody had a chance to comment, and I
wondered why.

No comments about the seizures, other than "anything but business as usual".

~~~
jacquesm
> Wire transfers are being fulfilled in an average of 7 weeks.

If true they're dead. 7 weeks is unacceptable.

~~~
yebyen
Even if you get 9% extra for waiting?

Consider this could happen to any Bitcoin exchange, and now the US Government
has 5 million of their dollars. I would think that would put them on the road
to licensed and bonded in 50 states -- they were saying before it costs about
5 million to become licensed and bonded.

Also, Mt.Gox is not a US company. SEPA/Euro transfers are being processed in a
"reasonable amount of time" \-- I don't know exactly what that means. I am
from the US and I am becoming verified this week, since my BFL Jalapenos have
just shipped it seems much more important than only a week ago.

~~~
kybernetyk
> Even if you get 9% extra for waiting?

I'd rather get 10% less now than possibly nothing later.

~~~
wheelerwj
then you have a poor understanding of money.

1) there is nothing to indicate that mt gox is insolvent so its not a matter
of if, its a matter of when.

2) we can track their volume, its looking pretttttty good right now.

3) 10% every 7 weeks is not a bad roi. that's just shy of 100% return for a
glorified short term loan.

~~~
kybernetyk
> then you have a poor understanding of money.

Nah, I'm just not a gambler. I know when to get out of a deal and take a small
loss instead of going broke later.

And the US government seizing funds of a company I have money parked in is a
pretty strong signal to get out.

------
ar4s
AFAIK Mt. Gox doesn't have any license(s) in any of the markets they serve.
Afraid it's just going to get worse for them.

~~~
makomk
That reminds me, I wonder how the CoinLab vs Mt Gox lawsuit is getting along.
As I understand it, Mt. Gox entered into a contract with CoinLab to do the US
transaction processing that was previously being done by their subsidary, in
part because CoinLab were able to follow the various legal requirements, then
breached that contract. Mt. Gox then had the sheer balls to argue that they
weren't getting anything worthwhile from the contract in question.

~~~
thinkcomp
[http://www.plainsite.org/flashlight/case.html?id=2433935](http://www.plainsite.org/flashlight/case.html?id=2433935)

------
ballard
How is Mt. Gox on the legal and lobbyist front? They might be able to go hard
on this with USV and others to back off the pressure and cut a deal that
preserves BTC without onerous regs. (It might be expensive.)

------
Cyph0n
My brother has been waiting for his withdrawal of $700 for over 4 weeks. This
isn't good news. I hope Mt.Gox takes care of things soon.

------
ebbv
If you trusted a company that started out trading Magic: the Gathering cards
with a significant amount of your money, you probably need the lesson you are
going to learn from this.

~~~
blhack
Yeah, like those idiots at ebay who started out as a pez dispenser collection.

Anybody who trusts THOSE idiots with their money deserves to lose it.

Howabout those dorks that started out as a school project and went on to
become google.

You'd be double, double stupid to work for, trust money to, advertise on that
stupid dorky company that started off as a hott or not clone.

~~~
nether
> The frequently repeated story that eBay was founded to help Omidyar's
> fiancée trade Pez candy dispensers was fabricated by a public relations
> manager in 1997 to interest the media

[https://en.wikipedia.org/wiki/Ebay#History](https://en.wikipedia.org/wiki/Ebay#History)

------
patmcguire
So are they seizing Mt. Gox's money, or the money of account holders forfeit
for being used in an unlicensed service?

~~~
cgi_man
As far as I've seen no account holder's money has been forfeited... however
they're clearly having withdrawal issues which may be related.

------
MrBlue
At this point MtGox must really be kicking themselves for moving from Japan.

~~~
wmf
They never moved per se, but apparently they have some kind of US subsidiary.

They actually made a deal back in 2012 to sell all their USD business to
CoinLab which would have made compliance CoinLab's problem while MtGox could
sit back and collect their revenue share. Maybe they're kicking themselves for
not going through with the CoinLab deal.

