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U.S. Charges Bitcoin Exchangers Linked to Silk Road Drug Bazaar

Bama Diva
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Post by Bama Diva on Mon 27 Jan 2014, 5:36 pm

First topic message reminder :

U.S. Charges Bitcoin Exchangers Linked to Silk Road Drug Bazaar

By Matt Egan  

Published January 27, 2014 

FOXBusiness

Federal prosecutors unsealed criminal charges on Monday against a pair of individuals who they say sold Bitcoins that were later used to buy and sell drugs on Silk Road, signaling a desire by law enforcement to target those who use crypto currencies to facilitate shady activities.

The complaint marks the latest fallout from Silk Road, the online drug bazaar that U.S. authorities shut down last year and later seized millions of dollars worth of Bitcoin from. It also highlights a concerted effort to crack down on those who use Bitcoin to enable illicit activities.

“When Bitcoins, like any traditional currency, are laundered and used to fuel criminal activity, law enforcement has no choice but to act,” Manhattan U.S. Attorney Preet Bharara said in a statement. “We will aggressively pursue those who would coopt new forms of currency for illicit purposes.”

This isn’t the first time Bharara’s office has gone after a digital currency. Last year, the U.S. successfully shut down Liberty Reserve, which it accused of handling $6 billion worth of illicit transactions.

“Basically, the government is putting the industry on notice. Either you do what we’re asking for or we’re going to put you out of business,” said Annemarie McAvoy, a former federal prosecutor who is now a professor at Fordham Law School. “They’ve brought two (cases), and I’m sure this is not the last.”

The two individuals named in the charges are Robert Faiella, who prosecutors say was an underground Bitcoin exchanger, and Charlie Shrem, CEO and compliance officer of a Bitcoin exchange company.

Federal prosecutors charged Faiella, 52, and Shrem, 24, with engaging in a scheme to sell more than $1 million of Bitcoins to users of Silk Road. Each defendant was charged with conspiring to commit money laundering, which carries a maximum prison sentence of 20 years. They are additionally charged with operating an unlicensed money transmitting business, which has a max sentence of five years in prison.

The U.S. also charged Shrem with violating the Bank Secrecy Act by “willfully failing” to file suspicious activity reports on Faiella’s questionable transactions. This charge carries a maximum sentence of five years in prison.

The charges highlight how one of the characteristics that makes Bitcoin appealing -- its privacy -- has put the currency in the crosshairs of law enforcement. Last year, a division of the Treasury Department issued new legal guidelines saying exchangers of digital currencies must register as money services businesses and comply with anti-money laundering regulations. “Law enforcement wants to be able to maintain control. They want to be able to follow the money. Here, you can’t – and that’s worrying them,” said McAvoy. In addition to the Manhattan U.S. Attorney, the charges were announced by the Drug Enforcement Agency and the criminal investigation division of the Internal Revenue Service.

“Hiding behind their computers, both defendants are charged with knowingly contributing to and facilitating anonymous drug sales, earning substantial profits along the way,” said DEA acting special-agent-in-charge James Hunt.
Schrem was apprehended by authorities at JFK International Airport in New York on Sunday and is set to appear in federal court in Manhattan later on Monday. Faiella was arrested at his Cape Coral, Fla., home on Monday and is expected to appear in federal court in the Middle District of Florida.

The court documents allege Faiella operated an underground Bitcoin exchange on the Silk Road website between December 2011 and October 2013 that sold the crypto currency to users who wanted to buy illegal drugs on the site. After receiving orders, he filled them through a New York company designed to enable customers to exchange cash for Bitcoins anonymously, the U.S. alleges.

Shrem served as the New York Bitcoin company’s CEO during much of that timeframe and was “fully aware that Silk Road was a drug-trafficking website” and that Faiella was operating an exchange service for Silk Road users, the documents say.

Prosecutors say Shrem still did business with Faiella to maintain a “lucrative source” of revenue. He personally processed Faiella’s orders, gave him discounts on high-volume transactions, failed to file a single suspicious activity report and even helped Faiella “circumvent” the company’s anti-money laundering policies, the documents allege.

Bharara said the investigation remains ongoing.

The value of Bitcoin tumbled in October  following the FBI raid of Silk Road, which resulted in the forfeiture of about 29,655 Bitcoins. The action underscored the legal and regulatory concerns that continue to dog Bitcoin  even as its value has surged over the past two years

http://www.foxbusiness.com/technology/2014/01/27/us-charges-bitcoin-exchangers-linked-to-silk-road-drug-bazaar/
Franky
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Post by Franky on Thu 30 Jan 2014, 5:51 pm

You'll miss every shot you never take--Wayne Gretzsky
Diamond
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Post by Diamond on Fri 31 Jan 2014, 4:55 am

Never take a shot unless your sure of a kill... L/cpl runnels vietnam
Franky
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Post by Franky on Fri 31 Jan 2014, 6:52 am

No one is perfect no not one!!!! Hate to break it to you all but if L/CPL Runnels isn't Dead yet!!! Sooner or later he's going to be deader then a door nail!! No matter HOW
Many shots he Took or Didn't take!!   Lol.  " Live like your going to die tomorrow"
Diamond
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Post by Diamond on Fri 31 Jan 2014, 7:12 am

He took a lot of sots but never matter to the stay at home warriors, an facin AK47s every day he live like he was gonna die
Franky
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Post by Franky on Fri 31 Jan 2014, 7:38 am

Thank God he did I am
Greatfull for people like him! Our freedom today took many lives and many people don't stop and think about that!!! It's people like him is why people can
Buy BItccoins and Dinar !  FREEDOM! One day we
Might not have that freedom!! But I'm not giving up on LOOKING
For new way To enjoy it while I still have it you can COUNT ON THAT!!!!!
Franky
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Post by Franky on Fri 31 Jan 2014, 7:42 am

"Keep doing what you been doing and .... You'll keep getting what you been getting"
Diamond
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Post by Diamond on Fri 31 Jan 2014, 8:03 am

lol! What a joke  lol!
Franky
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Post by Franky on Fri 31 Jan 2014, 8:16 am

Ok YOU WIN!!! Lol
Franky
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Post by Franky on Fri 31 Jan 2014, 8:29 am

Keep me posted on the RV... I wanna cash in in June
mbryan
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Post by mbryan on Fri 31 Jan 2014, 1:34 pm

http://www.coindesk.com/fincen-bitcoin-miners-investors-money-transmitters/?utm_source=CoinDesk+subscribers&utm_campaign=19b5583ccb-EMAIL_RSS_CAMPAIGN&utm_medium=email&utm_term=0_74abb9e6ab-19b5583ccb-78883521
The US Financial Crimes Enforcement Network (FinCEN) published two new rulings on 30th January that aim to bring clarity as to which players in the virtual currency space will fall under the Bank Secrecy Act’s (BSA) definition of a money transmitter.
FinCEN said that miners who mine virtual currency for their own use, as well as companies that purchase and sell convertible virtual currency solely as an investment aren’t subject to this law.
“The first ruling states that, to the extent a user creates or “mines” a convertible virtual currency solely for a user’s own purposes, the user is not a money transmitter under the BSA. The second states that a company purchasing and selling convertible virtual currency as an investment exclusively for the company’s benefit is not a money transmitter,” the release states.
The announcement sought to bring clarity to the organization’s March 2013 announcement that money services businesses were responsible for complying with anti-money laundering, recordkeeping and reporting requirements under FinCEN regulation .
Initial reaction
Reddit commentators greeted the news positively, with some going so far as to call the announcement “a huge victory ” for the virtual currency community, removing a potentially large burdens from the mining and investment communities.
U.S. Charges Bitcoin Exchangers Linked to Silk Road Drug Bazaar - Page 2 Screen-Shot-2014-01-30-at-7.33.54-PM
Members of the mining business community also greeted the news with favor:
“We’re happy that FinCEN has clarified what we believe was their intention all along and that Bitcoin miners can now continue mining confidently,” Jeff Ownby, vice president of marketing at Butterfly Labs , told CoinDesk.
However, while some were optimistic, others implied that this is just the latest development in legal grounds that are likely to shift as more government bodies seek to clarity on the matter, and await guidance from higher authorities.
U.S. Charges Bitcoin Exchangers Linked to Silk Road Drug Bazaar - Page 2 Screen-Shot-2014-01-30-at-7.35.18-PM
Impact on mining
While FinCEN’s declaration will be welcomed by bitcoiners, it may be of little importance to individual miners who never viewed themselves as money transmitters in the first place. However, the statements may not be the last word on how bitcoin miners are regulated.
Bitcoin mining is becoming an increasingly institutionalized pursuit that takes places in Hong Kong  shipping containers and geothermal-powered Icelandic  caves, driven by multimillion-dollar mining businesses. Such operations are definitely not mining for their own personal use.
Because of these changes, bitcoin developer Jeff Garzik suggested that more clarity will be needed from FinCEN:
“I hope to see future additional clarity from FinCEN and IRS vis-a-vis mining pools vs. miners. Most ‘miners’ today do not have any power to select or validate bitcoin transactions. Miners today provide a computing service to the mining pools, in exchange for a difficulty-based revenue stream.”
Impact on regulation
Notably, the FinCEN guidance will prevent regulations in states such as New York from implementing strong oversight on the mining community. At this week’s New York Department of Financial Services (NYDFS) hearings , general counsel Daniel Alter seemed to express the most interest in putting controls on this sector of the industry, as he suggested miners may have the ability to “destabilize” bitcoin.
“Mining strikes me as a systemic threat. I think from our perspective we are concerned about systemic issues,” Alter said.
Judith Rinearson , partner at Bryan Cave, argued against these suggestions and for a measure most like the one FinCEN provided.
“Unless a miner is actually mining and selling or exchanging, I wouldn’t require anything, especially those who are mining for their own use,” Rinearson said.
Jeremy Liew , of Lightspeed Venture Partners, expressed satisfaction with the ruling. The investor directed many of his comments at the NYDFS hearings to attempting to limit regulation on the virtual currency industry.
“These are good common sense clarifications that reflect FinCEN’s growing understanding of the way that digital currencies work,” Liew said.
To read the full release, click here .

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