
California Based P2P Trader Convicted of Illegal Money Transmission - SpiryBTC
https://247cryptonews.com/california-based-p2p-trader-convicted-of-illegal-money-transmission/
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ve55
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 may have been coming.

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toomuchtodo
Ignorance of the law is not a defense, and this person had the resources to
engage an attorney (at $300k/year of income).

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andrewprock
I don't think they made that much. At 6-9 million in transfers, that would be
a 10-15% commission, which feels quite high.

But maybe that is typical when doing illegal transactions.

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gst
10-15% sounds reasonable. For example currently Bitcoin trades at $6325 on
Coinbase, while cash offers on LocalBitcoins are at around $7000 per BTC.

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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.

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seibelj
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.

~~~
dsfyu404ed
>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.

Creating crime to catch crime is pretty par for the course in federal
investigations. The FBI is pretty well known to do it in terrorism cases. The
ATF runs their botched illegal gun buying operations that create local crime.

~~~
Nasrudith
I wonder how often the cops get called on the FBI. I know that there was the
post 9-11 clownish thing with an FBI informant in a mosque who got banned and
reported to the FBI because he was a frothing radical that they wanted
absolutely nothing to do with.

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SubiculumCode
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...](https://www.cnbc.com/2018/03/07/cryptocurrencies-like-bitcoin-are-
commodities-us-judge-rules.html)

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 point of view
get downvoted.]

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corey_moncure
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.

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closeparen
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).

~~~
corey_moncure
[https://www.irs.gov/newsroom/irs-virtual-currency-
guidance](https://www.irs.gov/newsroom/irs-virtual-currency-guidance)

"IRS Virtual Currency Guidance: Virtual Currency Is Treated as Property for
U.S. Federal Tax Purposes; General Rules for Property Transactions Apply"

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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.

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thinkcomp
Court docket here: [https://www.plainsite.org/dockets/38v97us7k/california-
centr...](https://www.plainsite.org/dockets/38v97us7k/california-central-
district-court/usa-v-tetley/)

~~~
cft
Interestingly, most documents are sealed by the court.

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

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scott00
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.

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

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jtbayly
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.

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GenerationRous
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 and live in peace as gated utopias in the way
they wanted -- because they didn't antagonize the rest of society or the US
government.

Or, put another way, they were anarchists that did politics maturely and
succeeded (even though their utopias didn't).

~~~
xkcd-sucks
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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milk_wolf_honey
localbitcoins.com has been on the radar of federal law enforcement for years.
They routinely did (and maybe do) stings off the site to catch unlicensed
traders. If I were the site's operators I'd be extremely wary of ever
traveling to the United States.

