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Main => Money & Markets => Topic started by: Rudi Jan on May 15, 2013, 07:43:25 PM

Title: US seizes top Bitcoin exchange as crackdown begins
Post by: Rudi Jan on May 15, 2013, 07:43:25 PM
US seizes top Bitcoin exchange as crackdown begins

Published time: May 15, 2013 22:25
source: (

AFP Photo / George Frey

The US Department of Homeland Security seized a payment processing account Tuesday belonging to Mt. Gox, the largest international Bitcoin trader, claiming the monetary exchange service falsified financial documents.

The American government has previously made it clear that officials are watching Bitcoin, a decentralized economic currency that international regulators have not yet been able to control. Many of those who favor Bitcoin use Dwolla, an Iowa-based startup that allows customers to transfer their dollars into Bitcoins.

Unfortunately for those consumers, the Department of Homeland Security issued a warrant Tuesday effectively shutting down Dwolla’s ability to process Bitcoin payments, as reported by CNET. Whether because of the DHS’ charge of operating an “unlicensed money transmitting business,” the sudden timing of the allegations, or another reason, Dwolla and Mt. Gox officials have been reluctant to comment.

“In order not to compromise this ongoing investigation being conducted by ICE Homeland Security Investigations Baltimore, we cannot comment beyond the information in warrant, which was filed in the District of Maryland [Tuesday],” said Nicole Navas, a representative for US Immigration and Customs Enforcement.

The warrant claims Mt. Gox CEO Mark Karpeles did not disclose he operated a financial transfer site when he opened a new bank account for the business. Money transmitting services, according to Gawker, are required to register with the Department of Treasury’s Financial Crimes Enforcement Network (FinCen). Mt. Gox, which is involved in roughly 63 per cent of all Bitcoin purchases, has not done so.

AFP Photo / George Frey

Despite the technicalities skeptics are wondering if Bitcoin’s friction with the Treasury department is the cause of this recent scrutiny. Senator Chuck Schumer (D-New York) said the anonymity afforded by the service provided an “online form of money laundering” and campaigned for its downfall.

“Literally, it allows buyers and users to sell illegal drugs online, including heroin, cocaine, and meth, and users do sell by hiding their identity through a program that makes them virtually untraceable,” Schumer said during a 2011 news conference. “It’s a certifiable one-stop shop for illegal drugs that represents the most brazen attempt to peddle drugs online that we have ever seen. It’s more brazen than anything else by light years.”

Most notably, proponents have asserted that Bitcoin would be impermeable in instances where WikiLeaks, for example, saw its funding evaporate as the federal government pressured PayPal to cut off the whistleblower site’s support network. Bitcoin would be more resistant to a crackdown of that nature.

Jerry Brito, a scholar at the libertarian Mercatus Center at George Mason University, told the Washington Post Bitcoin could reduce the cost of financial services by pioneering new business formats.

“Bitcoin has the potential to be a boon to the economy and a boon to merchants,” he said, adding that it could “disrupt traditional payment networks that have not been innovative for a very long time.”

A blind governmental crackdown would only serve to push Bitcoin further underground, Brito argued.

“You can’t put the genie back into the bottle,” he continued. “I hate to say it, but the Bitcoin community needs to start lobbying. It needs to start educating policymakers, lobbyists and influencers about the pros of Bitcoin and the impossibility or the difficulty in getting rid of all the bad uses.”

RW - How would Schumer know that "it allows buyers and users to sell illegal drugs online...". Of course that's not possible using federal reserve notes on street corners. If anything the label 'brazen' is writ large on his forehead.

The federal reserve mafia hates competition.

All the peoples rights, on every front, are under full scale attack. Glory days are here today.
Title: - US seizes top Bitcoin exchange as crackdown begins
Post by: jacob gold on May 16, 2013, 09:36:27 AM

These are a front for gambling and drugs - money laundering


Lone Wolf makes a bet through a bahamas company, and the internet cafe issues him coins
Title: - US seizes top Bitcoin exchange as crackdown begins
Post by: OldTimes on May 17, 2013, 03:45:22 PM
If you witness bitcoin going from $5 to $250 per coin, then back down to sub-$100.  It gives the feds an excuse to finally crack down on their competition because that's what it is when it becomes so wildly popular as a store of value when nothing else is.  They put so much into manipulating gold, but this one blind-sighted them.

A bitcoin is simply a number that, after put thru a 1-way cryptographic hash function, begins with zeros.   People have independently decided to use these numbers as money.  The fed would love to crack down but the truth is they cannot do anything but try to scare people away.

Another thing is, bitcoin's strength is in barter and store-of-value, not in anonymity or privacy.
Title: SEC brings charges as first-ever Bitcoin Ponzi scheme unravels
Post by: Rudi Jan on July 24, 2013, 08:38:04 AM
SEC brings charges as first-ever Bitcoin Ponzi scheme unravels

Published time: July 23, 2013 23:36
source: (

Software engineer Mike Caldwell shows the front and back of a physical Bitcoin he minted in his shop in Sandy, Utah. (AFP Photo / George Frey)

Bitcoin, the virtual currency that has been gaining momentum in recent years, now seems to have reached the dubious milestone of its first Ponzi scheme, following charges filed by the US Securities and Exchange Commission in Texas.

On Tuesday the SEC announced it was charging Trendon Shavers of McKinney, Texas for allegedly defrauding investors he had lured into the Bitcoin market with promises of up to 7% interest per week.

Shavers was able to raise over 700,000 bitcoins in the period between September 2011 and September 2012, a sum worth some $4.6 million based on the digital currency’s value at the time.

According to the SEC complaint, Shavers was actually using funds from new investors to pay out promised returns to those already lured into what became a classic Ponzi scheme.

SEC spokesman Andrew Calamari said the charges mark the first time the US agency has handled a case that involves Bitcoin.

"Fraudsters are not beyond the reach of the SEC just because they use Bitcoin or another virtual currency to mislead investors and violate the federal securities laws," Calamari, director of the SEC's New York office, said in a statement.

“Shavers preyed on investors in an online forum by claiming his investments carried no risk and huge profits for them while his true intentions were rooted in nothing more than personal greed,” he added.

In addition to failing to invest funds as promised, Shavers is also accused of retaining $147,000 worth of Bitcoin to cover his own personal expenses, which included rent, food and gambling.

The agency said in its complaint that Shavers, using the online name 'pirateat40,' began advertising his Bitcoin Savings and Trust via online forums in 2011.

The biggest irony of the unprecedented case is that had investors simply bought Bitcoin directly during the same period as the Ponzi scheme they would have seen significant returns.

RT Photo

As CNNMoney points out, one bitcoin was valued at about $6.56 on average between September 2011 and September 2012, and the value has since then skyrocketed to $95.30 each as of Tuesday. Today, the value of the 700,000 bitcoins Shavers is alleged to have swindled exceeds $60 million, according to the SEC.

In announcing the Ponzi allegations the SEC also took the opportunity to remind the public that all securities investments within the US fall under its jurisdiction, regardless of whether these are made using US dollars or virtual currency.

Along with a public announcement of the SEC’s charges against Shavers, the agency also issued an investor alert, warning that investors should "be wary of so-called investment opportunities that promise high rates of return with little or no risk, especially when dealing with unregistered, Internet-based investments sold by unlicensed promoters.”

Bitcoin, the anonymous online currency launched by computer programmers in 2009, owes most of its popularity to investors’ distrust of traditional or fiat money in light of high-profile financial crises, such as the massive financial bailout of Cyprus following its government’s raid on bank deposits in excess of 100,000 euro.

Along with alternative investment options, such as gold, Bitcoin has emerged as another option for those distrustful of government-issued currencies and securities.

The online currency’s anonymity has also garnered it a faithful following from online consumers that are wary of creating easily-traced paper trails for their currencies, giving Bitcoin something of a reputation as the currency of choice for underground transactions.

In June the US Drug Enforcement Administration (DEA) raided a user of the “deep web” Silk Road online market, which can be accessed only through the anonymous Tor network. According to the DEA, a user named Eric Daniels Hughes, aka Casey Jones, was charged with intent to distribute drugs purchased from Silk Road using Bitcoin, which is often the only currency accepted for transactions on the deep web.

Also in June, Bitcoin’s largest currency exchange, Mt. Gox, was forced to halt withdrawals in US dollars after federal agents seized its account with Wells Fargo in May. The loss of relations with payment processors meant that only wire transfers were available to transfer US dollars into and out of the exchange, which meant a steep increase in fees.

Since then, Mt Gox has opted to register as a money services business with the US Treasury Department, which means that the exchange handling over 60% of all Bitcoin trading volume worldwide must now follow stricter accounting procedures and log transactions in excess of $10,000.

RW - I'll be honest here and admit I know very little about bitcoin and how it all works. I am not fond of complex systems in finance having worked in the 'industry' and seeing how complex deals provide far more opportunity for disaster than do simple, straightforward arrangements. I cannot say one way or the other whether bitcoin is a 'ponzi' scheme as claimed by the USG. They are hardly in a position to condemn considering that the federal reserve is the biggest ponzi scheme going. Forcing the bitcoin exchanges to log transactions over $10,000 logs suspiciously like regulations already in effect in the faux-money world. It could be that all this is designed to allow the fed into the scheme and neutralize the competition.
Title: - US seizes top Bitcoin exchange as crackdown begins
Post by: Rudi Jan on August 08, 2013, 09:07:59 AM
Court officially declares Bitcoin a real currency

Published time: August 08, 2013 15:54
source: (

Image from user@zcopley

A federal judge has for the first time ruled that Bitcoin is a legitimate currency, opening up the possibility for the digital crypto-cash to soon be regulated by governmental overseers.

United States Magistrate Judge Amos Mazzant for the Eastern District of Texas ruled Tuesday that the US Securities and Exchange Commission can proceed with a lawsuit against the operator of a Bitcoin-based hedge fund because, despite existing only on the digital realm, “Bitcoin is a currency or form of money.”

Trendon Shavers of Bitcoin Savings & Trust (BTCST) was accused last year of scamming customers out of roughly $4.5 million worth of the cryptocurrency through his online hedge-fund. Shavers promised investors a weekly return of 7 percent, according to the federal complaint, but shut-down his site after collecting upwards of 700,000 bitcoins. When the SEC charged Shavers last month with operating a Ponzi scheme, he fought back by saying Bitcoin is not actual currency and can’t be regulated.

“The SEC asserts that Shavers made a number of misrepresentations to investors regarding the nature of the investments and that he defrauded investors. However, the question currently before the Court is whether the BTCST investments in this case are securities as defined by Federal Securities Laws,” Judge Mazzant wrote this week. “Shavers argues that the BTCST investments are not securities because Bitcoin is not money, and is not part of anything regulated by the United States. Shavers also contends that his transactions were all Bitcoin transactions and that no money ever exchanged hands. The SEC argues that the BTCST investments are both investment contracts and notes, and, thus, are securities.”

Despite Shavers’ argument, Mazzant weighed in this week with an opinion that’s not only quite the contrary, but could have widespread repercussions in the world of Bitcoin.

“It is clear that Bitcoin can be used as money,” Mazzant wrote. “It can be used to purchase goods or services, and as Shavers stated, used to pay for individual living expenses. The only limitation of Bitcoin is that it is limited to those places that accept it as currency. However, it can also be exchanged for conventional currencies, such as the US dollar, Euro, Yen and Yuan. Therefore, Bitcoin is a currency or form of money, and investors wishing to invest in BTCST provided an investment of money.”

Bitcoin investments "meet the definition of investment contract, and as such, are securities,” the judge added.

Now with the magistrate’s blessing, the SEC can continue with its case against Shavers and his site. With that same ruling, though, the government is for now getting the go ahead for what could lead to the rampant regulation of Bitcoin.

“The ruling, while certainly a victory for the Commission, is also likely to have farther-reaching ramifications as federal regulators increasingly encounter investment fraud based on non-traditional investment vehicles,” securities and business law attorney Jordan Maglich wrote in a Forbes op-ed this week.

“The case is notable in several aspects. First, it is the first known enforcement action predicated on a Bitcoin-based investment scheme, and comes at a time when US and foreign governments are devoting increasing scrutiny to the unregulated nature of the Bitcoin currency structure. In addition to these issues, the case may also have deeper ramifications going forward. Indeed, the case comes as federal regulators are increasingly tasked with policing non-traditional investments that share few characteristics with traditional investment vehicles such as stocks and notes,” Maglich wrote.

Even if this week’s ruling is a landmark decision with regards to Bitcoin, it certainly isn’t the first time as of late Uncle Sam intervened in the digital marketplace. In May, the US Department of Homeland Security seized a payment processing account Tuesday belonging to the largest international Bitcoin trader, claiming the monetary exchange service falsified financial documents.
Title: - US seizes top Bitcoin exchange as crackdown begins
Post by: OldTimes on August 08, 2013, 06:54:34 PM
A federal judge has for the first time ruled that Bitcoin is a legitimate currency, opening up the possibility for the digital crypto-cash to soon be regulated by governmental overseers.

LOL, sounds like they acknowledge they can't win on this, all they can do is scare people away, or try to regulate it.
Title: - US seizes top Bitcoin exchange as crackdown begins
Post by: pope daniel on August 09, 2013, 07:12:45 AM
I've been making loot on , it's pretty good at weeding out the defaulters in advance now.
Title: FBI makes record $28 million Bitcoin bust
Post by: Rudi Jan on October 26, 2013, 09:02:17 AM
FBI makes record $28 million Bitcoin bust

Published time: October 26, 2013 08:57
source: (

Reuters/Jim Urquhart

US authorities have reported their largest-ever Bitcoin bust amounting to $28 million of the digital currency. It was seized from the owner of the controversial Silk Road website, which was shut down three weeks ago.

A Friday statement by federal prosecutors in New York details the seizure of 144,336 bitcoins, which were discovered on the computer belonging to Silk Road founder Ross William Ulbricht, alias “Dread Pirate Roberts,” Reuters reports. Ulbricht was arrested Oct. 1 in San Francisco on several charges of conspiracy.

Ulbricht’s lawyer could not be reached for comment, but the accused earlier denied all the allegations.

Since its inception in 2011, the now closed website was an anonymous hub for anything from drug deals to weapons and computer hacking programs – even hiring assassins, the Justice Department said.

The digital currency itself has been around since 2008, but it was not until 2011 that authorities showed greater interest in it, following the discovery of the connection to Silk Road and the near to 1 million registered users regularly engaging in illegal activities.

The current bust was part of a joint civil action against Ulbricht and his website. He is expected to appear in court in a matter of weeks to face charges of conspiring to traffic narcotics, launder money and hack computer networks.

Ulbricht’s arrest and the bitcoin seizure followed a string of international arrests of Silk Road users by Swedish, British and US authorities, a testament to the scale of the international crackdown on the website. The director of Britain’s newly-founded National Crime Agency (NCA), Keith Bristow, warned Oct. 9 that the “latest arrests are just the start” and “there are many more to come."

Bristow added that bitcoin will also now be closely watched, after his agency seized millions of pounds of the electronic currency.

Together with the previous figure of 30,000 bitcoins, the new FBI bust puts the current value of seized currency at $33 million, the US Attorney General’s Office said. In the two years Ulbricht’s website was in operation, about $1.2 billion in bitcoins were traded. Silk Road charged between 8 and 15 percent in commissions.

George Frey/Getty Images/AFP

Following Ulbricht’s arrest and the seizure of 26,000 bitcoins from a public wallet, an FBI-linked public wallet was discovered by Reddit users the next day. The owner could not be identified for certain, but bitcoin users quickly seized the opportunity to use it as a platform for voicing their opinions about the FBI.

They made tiny donations to the wallet, dubbed ‘Silkroad Seized Coins’ on another website –, which allowed them to post comments – the majority of them bashing the FBI for trying to “control” the bitcoin business instead of seeking justice.

But even now, weeks after Ulbricht’s arrest, it remains unclear what the FBI have actually “seized.” To use bitcoins someone must have a private password corresponding to each wallet.

The previous public wallet seizure was carried out easily because those bitcoins were at the less-protected escrow account of the website, Extreme Tech wrote at the time of Ulbricht’s arrest. Ulbricht’s estimated $80 million personal wealth in bitcoins has remained inaccessible to the FBI, and it also remains unclear what the FBI would do with the bitcoins if they did have access to them – as the US government refuses to recognize the currency as legal tender.

The authorities may be able to prevent Ulbricht from transferring the money, but without having the ability to access the bitcoins, seizing them is not much more than simply confiscating a computer.

The success of the Silk Road website was attributed to its operating on the encrypted Tor network, which made its dealings nearly impossible to trace. One transaction would also generate a vast number of fake ones with the purpose of masking the original buyer and seller – another effect of Bitcoin’s anonymous and decentralized nature.

RW - I suppose they'll take rubber hoses to Ulbricht. How is it that the USG became the sole arbitrator of what we can and cannot use for currency? Even more incredible is that those who choose to use their own private currency are labeled criminals? Let's face it, this is about criminals all right - and they are known as the FBI.