

US Secret Service rumbles into action against Bitcoin facilitators - clamprecht
http://www.wired.com/beyond_the_beyond/2013/05/us-secret-service-rumbles-into-action-against-bitcoin-facilitators/

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pfortuny
Amazingly daring:

55 million transactions _virtually all of which were illegal_

And then all the keywords:

 _credit card fraud, identity theft, investment fraud, computer hacking, child
pornography, and narcotics trafficking_

How on earth can you honestly claim that fifty-five million transactions were
illegal and at the same time not having acted before? I mean: it is not 'we
are at war and we have to let some people die in order to win the great
battle'.

But then again, the US is at war, is it not?

So complicated...

~~~
beedogs
> But then again, the US is at war, is it not?

Against its citizens, lately.

~~~
gonzo
"lately"?

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bachback
Are we talking about BTC or liberty reserve? The content and format of the
article are very confusing. I find people are to not aware about what the
possibility of anon tx entails when they argue the counterpoint. Of course the
first people who are going to use it are criminals. One opportunity missed
here to reflect on the issue.

~~~
mpclark
I think the page is seriously broken -- the "article" as currently presented
is incoherent. Maybe it is the author's notes?

~~~
yk
The article is, IMHO, a press release from the secret service with annotations
by the author.

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smutticus
As we learn more about Liberty Reserve and their alleged facilitations of
money laundering the question I'll be asking myself is; Were the alleged
actions of Liberty Reserve worse than the alleged actions of HSBC? HSBC got
off with a fine by the US DOJ. So this question helps me to understand the
real motivations behind the indictment of Liberty Reserve. Was the DOJ's
motivation to actually thwart monet laundering, or was it motivated by
something else like shutting down something outside of their regulatory
control?

~~~
JackFr
Well the settlement with HSBC was to pay a $1.9 billion fine -- it's unlikely
that Liberty Reserve would be able to come up with something of that order of
magnitude. Additionally, I think the prosecutors would make the case that
Liberty Reserve was _primarily_ a criminal money laundering operation while
HSBC was a large, multi-faceted organization which engaged in certain criminal
acts.

And anyway, they still may face criminal prosecution -- the judge has yet to
sign off on the deal: [http://www.guardian.co.uk/business/2013/may/23/hsbc-
court-th...](http://www.guardian.co.uk/business/2013/may/23/hsbc-court-threat-
money-laundering-charges)

~~~
Comeingro
"HSBC was to pay a $1.9 billion fine -- it's unlikely that Liberty Reserve
would be able to come up with something of that order of magnitude"

That was for $60 Trillion in un-monitored transactions. The fine is very
roughly ~ 1/32,000th of the total transaction dollars. Perhaps rather than
shutting them down, the feds could fine them 1/32,000th of all of LR's un-
monitored transaction?

This "break the law to make money and pay the fine later on" is just part of
the revenue model now. Fines are not a deterrent (in fact I think they are
more appropriately called "bribes"), they are considered like insurance, or
rent, or banking fees. All just part of the cost of making the most profit
possible.

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Udo
I think it's amazing, given the feds' apparent belief that the system was used
to transmit illegal money only, they shut it down instead of just working with
the owners to record all the transactions. Seems to me, this would have
delivered some pretty easy law enforcement home runs for (almost) free.

~~~
makomk
After what happened to e-gold, there's fuck all chance anyone running a
similar service would want to work with the feds.

~~~
tzs
LR and e-gold are the same people, in fact.

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JulianMorrison
Stupid article is a press release about liberty reserve, and comments about
bitcoin.

Bitcoin is about as related to Liberty Reserve as it is to Mastercard. Namely
not at all.

~~~
analyst74
It is related as in the same case can be brought upon bitcoin facilitators.

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scotty79
It's like killing Napster but only after bittorrent was invented. They could
not bother themselves and just wait till liberty dollars are obsoleted by
bitcoins. And then just accept that from now on transactions are semianonymous
and irrevokable and they can forget the whole antimoneylaundering crazy
efforts. They might actually focus on better laws and preventing crimes that
now they are just trying to disincentivise by going after criminals money.

For example credit card fraud is possible mostly thanks to stupid rules and
even dumber application of technology.

~~~
knowaveragejoe
Except in this case, shutting down the exchanges is all that needs to be done
to discourage the vast, vast majority of digital currency use. That would
pretty much quash them entirely.

~~~
scotty79
Everybody can work as an exchange. You have to be very dedicated to shut down
all the people that become exchange. Same way shutting bittorrent is possible
but you have to be very dedicated. Far above the point where lots of people
are gonna say "come on, you can't hide behind the claim that such measures are
for our greater good"

~~~
knowaveragejoe
Erm, how does everyone agree on an exchange rate? They would all have
incentive to manipulate their exchange rate for arbitrage. That alone means
that not everyone or even any meaningful number of people can become
exchanges.

~~~
scotty79
What's wrong with arbitrage? Arbitrage keeps exchanges in sync. You don't need
single rate everyody agrees on. If you can successfully manipulate price at
one exchange to gain more than usual from arbitrage and more then you spend on
trying to swing the exchange then I congratulate you and wish you best of
luck. Somehow this sounds like a perpetum mobile for me or at least some
serious gambling. Investors know more then one exchange an check prices on all
of them when deciding whether to place or cancel an order.

~~~
knowaveragejoe
Okay, but that doesn't hold up at all when _everyone_ is an exchange...

~~~
scotty79
I'm not sure what you have in mind. Not everyone has to be an exchange. But
everyone can. All you need is ability to take and give bitcoins and
traditional currency and bit of honesty and trust. Traders can deal with many
such exchanges keeping them in sync by arbitrage and doing the usual trades.

------
androidb
This article is just a draft, it cannot be the final version. It's basically a
press release on the crackdown over Liberty Reserve plus a quote by someone
(not mentioned!) about Bitcoin - that's it. So the title is either a work-in-
progress or a click-trap.

Bitcoins are steadily trading at $129 now, if the article was true there would
be important fluctuations.

~~~
ihsw
> Bitcoins are steadily trading at $129 now, if the article was true there
> would be important fluctuations.

MtGox's BTC-USD exchange rate is currently trading at that price, and the
price of BTC itself cannot be measured. The distinction is important, and
hopefully in the future fiat currencies will be valued against BTC instead of
the other way around.

~~~
CJefferson
Why is the distinction important?

In practice, a currency's only purpose (as far as I know) is using it to buy
things. Calibrating against USD, or GBP, or JPY, or gold value, or any other
major stable currency, is equally good and gives a way of understanding the
current value of BTC. How would you suggest we currently understand the value
of a single BTC?

Certainly BTC have been, and continue to be, much more unstable than any of
these metrics.

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gridmaths
"Global Illicit Financial Team" ie. GIFT wow, cool, these must be the good
guys.

Thus begins the FUD storm to discredit BitCoin :

Implication : "if your using Bitcoin rather than a 'legitimate' currency, you
must have something to hide. you must be an evil
pederast/blackmarketeer/hacker/terrorist"

------
akama
I am not quite sure what is happening here. There are two different ways to
look at this, the first being that the federal government knew about the
illegal transactions happening at LR, and was unable though incompetence to
stop them. The second being that the government didn't have the technical or
legal ability to stop them. Either way it does not paint the government in a
good light.

~~~
dragonwriter
> There are two different ways to look at this, the first being that the
> federal government knew about the illegal transactions happening at LR, and
> was unable though incompetence to stop them. The second being that the
> government didn't have the technical or legal ability to stop them. Either
> way it does not paint the government in a good light.

Due process protections in the US generally mean that there tends to be a gap
between "government has a pretty good idea that something illegal is being
done and a fairly specific idea of what it is" and "government has its ducks
in a row regarding proof that will stand up in court to begin legal action
with a reasonable probability of success".

I actually think this is the core of one of the _best_ features of our
government, so I don't think it paints the government in a bad light at all
that it often knows about bad things happening considerably sooner that it has
the practical legal ability to stop them (or, at least, before exercising that
ability will jeopardize the ability to hold wrongdoers accountable under the
law.)

------
beat
Sooner or later, the federal government (and foreign governments as well) will
attempt to crack down on Bitcoin, simply because they need to protect their
monopoly on currency. Has nothing to do with right or wrong, or crimes that
may be committed using Bitcoins. Hell, crimes are committed with cash all the
time, but they aren't gonna crack down on THAT.

Yet.

------
LekkoscPiwa
Here is the problem guys: The FED has money issuance monopoly. And on the top
of that it can manipulate interest rates (legally). It can also legally
counterfeit money (because that's what money printing... sorry quantitive
easing really means).

BitCoin is basically threatning that monopoly. It doesn't help when you want
to 'revive' the world economy by scheduled printing from USA, through EU, to
China -- when citizens can exit your inflation by going to assets like gold.

Or - even better - BitCoin. I have a few coins, it's difficult to shop around
you know. It maintains the value, true. But it's cumbersome to oww, store,
risky to exchange for cash, etc. BitCoin - this is XXI century folks!

So you have the biggest and most dangerous lie on the face of the planet where
banks literally are in bed with governments - currency monopolies all over the
world. Everything tied back to the USD. And then you have some smarta$$es
right at your nose in Manhattan showing you big finger with their virtual
currency.

There is no competition with currencies. It's not like before central banks
were forced upon people's throats that you can choose currency to pay with or
create your own. 300, 400 years ago, a prince, or just a merchant or a city
could have issued their own currency. Have their own banks issuing it. That's
competition folks. That's not why real powers running this world established
central banks ages ago. They did it to have a total control over currencies,
interes rates and economies.

You know how easy is to manufacture a crisis like the one we have had since
2007?

As easy as keeping interest rates artificially low for 15 years by a central
bank issuing world reserve currency. Crisis, great money are made. War - even
better. And then with war you get rid of all these issues like overpopulation,
water shortages, other natural resources shortages.

In communist states the government regulates prices of everything. From a
piece of bread to a car. At the end this causes the economy to suffer to much
that there is no bread and no cars. Because by ignoring supply-demand curve
for the products and just enforcing a price that seems 'fair' to the
government, you make it too cheap for a producer to care to produce, or too
expensive for folks to buy it. Pretty obvious, basic economics.

Ever wondered why somehow they never acknowledge this to work the same way for
the most important price an economy has - the price of credit? It's not like
the market forces, supply&demand, decide what the price of credit is (interest
rates). This is decided by the Government - FED - Ben Bernanke decides what
the price of credit should be. A buerocrat. Are you surprised there is a
crisis? What type of capitalism is it anyway which has the most important
price on the market - the price of credit - decided and manipulated by the
Government?

BitCoin, gold, silver, all take it away from them. Hence they hatred.

Another example: if a bank wants to lend USD it has to adhere to the rate set
by Mr. Bernanke.

But if I want to lend BitCoin, I can do it at whatever %/apr.

That's their monopoly broken right there.

If they print too much to 'help the economy' (their friends in big banks) it
won't work if guys will start using BitCoin. to trade and do other
transactions.

~~~
Codhisattva
BitCoin isn't a "threat" to the money issuance monopoly any more than a ton of
bricks at the bottom of the ocean is a threat.

What gives money value is demand for the money. Government primes demand by
requiring that all payments to the government be made with that money. That is
the root of value.

Everything else isn't currency - it's either a barter, a commodity, a ponzi
scheme or a scam.

~~~
fianchetto
> BitCoin isn't a "threat" to the money issuance monopoly

You are mistaken. Look at what was done to Liberty Dollar.

~~~
knowaveragejoe
Which had nothing to do with it being a real threat to the USD - firstly
because it was never a real threat to the dollar, and secondly because it was
demonstrably used for criminal transactions.

~~~
fianchetto
> it was demonstrably used for criminal transactions.

I'm sure you have proof of this.

~~~
knowaveragejoe
Right, everyone using LR was using it for 100% legit transactions, no money
laundering of any sort. Mhmm.

~~~
fianchetto
We had a mistake in communication. I thought you were referencing the Liberty
Dollar topic I had raised.

I have no issues with people moving their money around as they see fit. Why
not outlaw cash if "money laundering" is a concern?

