
US regulators charge three Bitcoin operators with fraud - spacemanspiffy
https://www.engadget.com/2018/01/19/cftc-charges-three-cryptocurrency-operators/
======
thisisit
CFTC complain links:

[http://www.cftc.gov/PressRoom/PressReleases/pr7675-18#PrRoWM...](http://www.cftc.gov/PressRoom/PressReleases/pr7675-18#PrRoWMBL)

[http://www.cftc.gov/PressRoom/PressReleases/pr7674-18#PrRoWM...](http://www.cftc.gov/PressRoom/PressReleases/pr7674-18#PrRoWMBL)

Second fraud is very common on bitcointalk. Many people who have gotten rich
off bitcoin or other cryptocurrencies don't know how to spread their risk.
They are not exactly investment savvy. So they routinely fall for fraudsters
claiming to be expert investors. These fraudsters solicit coins to be
converted to fiat and then invested in real estate or some other commodity.

This obviously is a bad idea because if you give say 1 BTC @ 10k USD, two
things can happen:

a. BTC price increases to 15k USD. Now the fraudster needs to pay back 50%
more in USD. So, the fraudsters routinely come back claiming the investment
was a bust or they got hacked.

b. BTC price decreases to 8k USD. Now fraudsters need to pay 20% less. So they
will come back claiming some family emergency and paying back all outstanding
BTC obligations.

And I have tried explaining it to people on the forum only to be drowned with
"This is FUD" posts.

~~~
IIAOPSW
I know saying this makes me unpopular, but I think maybe the best solution is
to just leave things unregulated and let dumb money get burnt. The "this is
FUD" crowd will never learn their lesson if the people teaching them get
prosecuted. If someone wants to loose money on blatant scams with many warning
signs, I say let them. If I want to take my life savings and put it all on
red, that's my prerogative.

~~~
buahahaha
It is theft. It's not a scheme, or a game, or a trick. They are stealing
money. It needs to be made punishable.

As these frauds get more sophisticated, it won't just be "dumb" money getting
burnt. The answer to "someone stole this from me" isn't "well you shouldn't
have been so dumb" \- whether it is your wallet, a package from your doorstep,
or a bit. Theft is theft.

~~~
Retric
If someone takes a pallet of hundreds sitting in the open on the back of a
truck. It's reasonable to say: _" Take reasonable precautions, temping targets
promote crime."_

Bitcoin forums are filled with people that are both incompetent and well off,
that's going to attract sharks. For similar reasons Google brought in
investment advisers pre IPO to educate staff that where about to become
targets.

PS: That's not to say any form of theft is ok. Just locked doors keep people
honest and let police focus on more important things.

~~~
candu
If someone takes a pallet of hundreds sitting in the open on the back of the
truck, and it doesn't belong to them, it still meets the legal definition of
theft. It might not be the best idea to leave it there, but that doesn't
magically absolve the thief of legal responsibility.

This example isn't even one of those murky ethical grey areas around property
(see: copyright law extensions, squatters' rights, medieval concepts of
hunting rights, privatization of public resources, farmers' rights to re-grow
seeds, etc.) - it's out-and-out theft.

~~~
Retric
I completely agree. However, a large chunk of society would take it even if
they had never stolen anything before and did not intend to commit a crime
that day.

PS: Look up _Duty of Care,_ people can share responsibility even if a third
party is commuting a crime. Placing a 10 lb solid gold statue on your roof and
advertising this is is not just negligent, but flat out dangerous.

~~~
TeMPOraL
What you say shows the exact same mistake (but in opposite direction) as the
"victim-blaming" crowd - conflating moral responsibility with practical
wisdom. Yes, putting that gold statue on your roof is _just stupid_ , because
of the world we live in. No, that doesn't make the burglars less responsible,
morally and legally, for robbing you. Those two statements are true at the
same time.

~~~
Retric
What makes you think I disagree with that idea?

If everyone walked around holding a loaded gun, you would see far more gun
violence. That has nothing to do with morality, just impulse control.

I am not saying people are not responsible for their own actions. Just that
forms of crime prevention do actually work.

~~~
TeMPOraL
> _What makes you think I disagree with that idea?_

The whole subthread kind of looks like you're disagreeing with the idea that
theft is theft.

> _I am not saying people are not responsible for their own actions. Just that
> forms of crime prevention do actually work._

So we agree on that. My point is that it's not either-or - effective crime
prevention doesn't make a crime not a crime.

~~~
Retric
> looks like you're disagreeing with the idea that theft is theft

I don't. If you're reading that into what I said that's on you.

A mass murder will commit fewer crimes in solitary confinement. That does not
mean solitary confinement makes them a better person, or not a murder. It
simply prevents future murders. So, the concepts are independent.

------
ordinaryradical
Those who’ve been drawn into this craze don’t seem to realize the risks
involved. I’ve had several people with barely any technical literacy who’ve
“invested” or asked about what it is. None of them understood the purpose,
mechanisms of transfer, or risks.

When your your dry cleaner is telling you about a sure thing, you know the
bubble is already over.

Once cryptos are roped off from money laundering, we’ll see the prices fall
back down to Silk Road levels because black markets were and seem likely to
remain their sole utility for some time.

Blockchain tech is really interesting. I think there’s some amazing stuff that
could come out of the space. But anyone watching this closely should realize
that there is a lot of magical thinking going on, largely because of the
deflationary nature of many of the coins.

~~~
frgtpsswrdlame
>Once cryptos are roped off from money laundering, we’ll see the prices fall
back down to Silk Road levels because black markets were and seem likely to
remain their sole utility for some time.

Hmm, I think you might doubt the amount of true believers out there. Many
bitcoin investors seem to be in a mindset where anything that happens is 'good
for bitcoin.' Dips are good, high prices are good, volatility is good, lack of
regulation is good, no wait regulation is happening? Actually regulation _is_
good. Since bitcoin requires you to up the stakes and put money in the pot but
also has no fundamentals there is a kind of concentrated effect we see on
facebook and other social networks where you're massively incentivized to
enter a thought bubble and only read good news about bitcoin.

~~~
JumpCrisscross
> _I think you might doubt the amount of true believers out there_

If you've experienced a proper run on an illiquid asset, you'll remember that
the true believers never stop believing. People just stop lending to them.

------
actsasbuffoon
The article itself isn't particularly useful, but I'm pleasantly surprised by
how well the CFTC has done with their press releases. They clearly explain the
nature of the alleged crimes without any legalese.

One of the companies is accused of being an outright Ponzi scheme. They took
money and promised to invest it, but just paid off other customers with the
money instead. The second company took money, then vanished into the night
without providing services.

As someone who is developing a business that involves Ethereum smart
contracts, I'm pleased to see that the regulators seem well versed in crypto
currencies, and they have a nuanced view of the subject.

------
cal5k
This is appropriate. You don't need cryptocurrency to engage in a ponzi scheme
- they've been going on since time immemorial.

I'm a pretty hard-headed realist, but I find it irritating that every price
movement, every regulatory action, every rumour of new legislation is parroted
about as proof of the broader illegitimacy of cryptocurrency as a medium of
exchange.

Maybe the corollary to the rule of bubbles is - if everybody and their dog
agrees that something is a bubble, but the price doesn't correct itself, maybe
there are other factors at play beyond the simplistic media narrative?

~~~
dmix
Indeed, additionally it's a myth that libertarians and advocates of
decentralized markets in general are against all government or law enforcement
intervention as well. Enforcement of fraud and theft are exactly the type of
stuff they view as a critical and necessary role of a centralized government.

The Bitcoin community should openly support this type of stuff which would
help legitimize their industry, assuming the charges are credible I haven't
yet checked. Only the tiny group of the most extreme (crypto) anarchists
believe in some sort of total private/self-regulation in some idealized
future.

I've never been convinced that Bitcoin will allow thieves and pedophiles and
all the worst things the media talk about being able to operate without fear.
It's extremely difficult to be a criminal in 2018 even with a decentralized
pseudonymous currency, even assuming the police follow constitutional,
targeted, and warrant-based approach to law enforcement (which would obviously
should be the implied limits of community support for law enforcement action).

~~~
cal5k
Ironically the best way to be a successful criminal in 2018 is probably to be
as low-tech as possible. Bitcoin transactions are trivially easy to track, and
the exchanges are an obvious place to apply regulatory pressure.

------
aviv
Tip of the iceberg... building up public opinion going after low hanging fruit
first, then raiding the big US exchangers.

[https://news.ycombinator.com/item?id=16183454](https://news.ycombinator.com/item?id=16183454)

------
philipov
I wonder who the third case is. Bitfinex, perhaps?

~~~
rebuilder
Bitfinex isn't in USA and doesn't service US customers AFAIK. Not that it's
not possible they're being charged with something, but it seems like a stab in
the dark to guess it's them.

~~~
pera
AFAIK they used to have some form of presence in the US until last year.

