Feds take down BTC-e (Bitcoin's largest exchange)

[ionbasa]

 

Quote

This week, one of Bitcoin’s largest and most notorious coin exchanges was brought down by law enforcement — and police and prosecutors are now beginning to explain why. On Thursday, the Department of Justice unsealed an indictment against Alexander Vinnik — thought to be the operator, or one of the operators of Bitcoin exchange BTC-e — charging him with 21 counts of money laundering and other related financial crimes. The counts range from operating an unlicensed money transmittal business to a variety of money laundering charges, including laundering associated with ransomware payouts and a theft from the now-defunct Mt Gox exchange. More generally, the indictment paints BTC-e as a hub of criminal activity, laundering the proceeds of everything from drug trafficking to ransomware attacks.

https://www.theverge.com/2017/7/29/16060344/btce-bitcoin-exchange-takedown-mt-gox-theft-law-enforcement

 

Quote

The charges against Vinnik also accuse him of helping to orchestrate the hack of Mt. Gox, which was once the most popular digital currency exchange, but shut down in 2014 following a after a massive series of mysterious robberies.

http://fortune.com/2017/07/27/btc-e-digital-currency/

 

Interesting, just a few days ago the Feds took down and seized BTC-e. It seems there's evidence that the theft of BTC from MT. Gox in 2014 is linked to BTC-e founder. 530,000 stolen bitcoins from Mt. Gox personally passed through BTC-e founder's wallet. There's other charges, such as money laundering stemming from this. Personally, I think this is real bad. and on top of that, it wasn't just stolen BTC from Mt. Gox, but rather: "WizSec also claims that the wallets that laundered Mt. Gox coins also handled “coins stolen from Bitcoinica, Bitfloor and several other thefts from back in 2011 and 2012.”"

 

Thoughts and comments? 

[Haaselh0ff]

e-Laundering?

[mr moose]

Just another case of the world going pear shaped because technology is advancing faster than society can evolve to properly implement. 

[Mira Yurizaki]

I'm curious how the government will treat this since officially any virtual currency is considered property by the IRS.

 

EDIT: https://www.irs.gov/uac/newsroom/irs-virtual-currency-guidance

 

How the IRS treats virtual currency if anyone's curious.

[ionbasa]

2 minutes ago, Haaselh0ff said:

e-Laundering?

I suppose you can call it that. This case is more complicated since there is stolen funds, not just laundering. In the US at least BTC is defined as legal convertible currency by the treasury department, hence, it's also taxable.

Quote

"Bitcoins can be accepted as a payment for goods and services or bought directly from an exchange with a bank account. They therefore function as pecuniary resources and are used as a medium of exchange and a means of payment."

See: https://www.reuters.com/article/us-jpmorgan-cyber-bitcoin-idUSKCN11P2DE

[Haaselh0ff]

2 minutes ago, ionbasa said:

I suppose you can call it that. This case is more complicated since there is stolen funds, not just laundering. In the US at least BTC is defined as legal convertible currency by the treasury department, hence, it's also taxable.

See: https://www.reuters.com/article/us-jpmorgan-cyber-bitcoin-idUSKCN11P2DE

Interesting! I'm not too knowledgeable about Bitcoin or any of the other online currencies and I did not know it was taxable.

[Zando_]

2 minutes ago, Haaselh0ff said:

Interesting! I'm not too knowledgeable about Bitcoin or any of the other online currencies and I did not know it was taxable.

Well, it’s currency, the government loves money, so..... makes sense. 

 

 

I’m in the same boat, IDK much about currencies like this. 

[ionbasa]

1 minute ago, Haaselh0ff said:

Interesting! I'm not too knowledgeable about Bitcoin or any of the other online currencies but I did not know it was taxable.

Depends on what you mean by "taxable".  If you get paid in BTC, for a job you do, automatically taxable. Buy or sell a service or good with BTC, taxable. If it's considered stock or an investment, then it follows other rules.

[Haaselh0ff]

Just now, Zando Bob said:

Well, it’s currency, the government loves money, so.....

I know the Government loves money, I just had no idea of how far they truly recognized it. I know a large number of places accept Bitcoins as currency so I guess it should've been easy to assume the US Government had accepted it as well.

[Trik'Stari]

That is literally the entire dick of the Federal government, minus the balls (CIA and NSA)

[AnonymousGuy]

 

14 minutes ago, mr moose said:

Just another case of the world going pear shaped because technology is advancing faster than society can evolve to properly implement. 

It's pretty straightforward, dude was running an operation that converts money gained from illegal activities into clean cash from normal people.  The tech doesn't even matter in this case.

 

You get ass fucked when you run a service that takes a blind eye to everything happening in it.

[ionbasa]

Just now, AnonymousGuy said:

 

It's pretty straightforward, dude was running an operation that converts money gained from illegal activities into clean cash from normal people.  The tech doesn't even matter in this case.

 

You get ass fucked when you run a service that takes a blind eye to everything happening in it.

Well not just that, but he was found to be involved in the stolen BTC from Mt. Gox too. Tech wise, you're right, it doesn't matter. But doing shady business is inexcusable (in the eyes of the law), so he's fucked. 

[AnonymousGuy]

1 minute ago, ionbasa said:

Well not just that, but he was found to be involved in the stolen BTC from Mt. Gox too. Tech wise, you're right, it doesn't matter. But doing shady business is inexcusable (in the eyes of the law), so he's fucked. 

Yeah he's going to get 5+ years just from the laundering alone.  The other stuff is probably more difficult to explain to a jury but still will pile on.

 

Then wait for the civil penalties for not paying taxes on any of the money.

[mr moose]

34 minutes ago, AnonymousGuy said:

 

It's pretty straightforward, dude was running an operation that converts money gained from illegal activities into clean cash from normal people.  The tech doesn't even matter in this case.

 

You get ass fucked when you run a service that takes a blind eye to everything happening in it.

You missed my point, had he tried to do this 20 years ago it would have been duffle bags of cash and robbing an exchange wasn't quite so easy.  I think anyone would have to be pretty naive to think that the introduction of untraceable digital currency, which has allowed a whole new way of criminals to conduct business, has had little to no effect on human society.

[Bcat00]

Why am i not surprised that the guy got arrested, in fact im surprised it took so long for the feds to act.

 

everyone knows digital currency is nothing more than a black market for criminals to launder their money.

[Mornincupofhate]

So, if this isn't allowed, what's stopping them from breaking into Coinbase's datacenter and taking down their servers?

[Delicieuxz]

What's happening to the funds in various digital currencies that people have stored in BTC-e accounts?

[ionbasa]

3 minutes ago, Mornincupofhate said:

So, if this isn't allowed, what's stopping them from breaking into Coinebase's datacenter and taking down their servers?

Coinbase in my eyes is as legitimate as legitimate can be:

See: https://support.coinbase.com/customer/portal/articles/1662379-how-is-coinbase-insured-

Customer cash is deposited in FDIC insured accounts. They're also based in California, so as long as they follow the law, they should be fine. 

[ionbasa]

4 hours ago, Delicieuxz said:

What's happening to the funds in various digital currencies that people have stored in BTC-e accounts?

Hard to know for sure, but BTC-e made an announcement that people will get their coins back:

Quote

 

Roughly five hours ago, however, in a statement on the Bitcoin Talk forum (that was tweeted out via its official account), representatives for the exchange issued new comments, including a pledge to return users' funds.

The statement read:

"For all those who buried us, I will remind you that the service has always worked on trust and we are ready to answer for it. The funds will be returned to everyone!"

The message also confirmed that BTC-e's data center had been raided by the U.S. Federal Bureau of Investigation on July 25, during which time the agency "seized all equipment, the servers contained databases and purses of our service."

https://www.coindesk.com/btc-e-pledges-to-return-customer-bitcoin-days-after-police-seize-domain/

 

I think this means there was an offsite backup in 1 (or more) locations of the various wallets that stored the coins. Hard to know for sure though...

[Dr. KEK]

8 hours ago, ionbasa said:

Depends on what you mean by "taxable".  If you get paid in BTC, for a job you do, automatically taxable. Buy or sell a service or good with BTC, taxable. If it's considered stock or an investment, then it follows other rules.

if you perform work for btc it is bartering

[ionbasa]

5 minutes ago, Dr. KEK said:

if you perform work for btc it is bartering

Not in the eyes of the government. Good luck getting away with that, for petty payments here and there, then sure, bartering applies. But if you are doing work or running a business and use bitcoins, its taxable (in the US at least). Coffee shop near downtown where I live takes BTC, you think its not taxed? When I sold off my all my BTC when it hit $500 I declared it as capital gain on my tax returns. 

 

Two things in life are certain: Death and Taxes, and trust me, if the IRS is persistent enough, they will track you down.

 

EDIT: Brush up , this page has a lot of useful info: https://en.bitcoin.it/wiki/Tax_compliance

[Dr. KEK]

4 minutes ago, ionbasa said:

Not in the eyes of the government. Good luck getting away with that, for petty payments here and there, then sure, bartering applies. But if you are doing work or running a business and use bitcoins, its taxable (in the US at least). Coffee shop near downtown where I live takes BTC, you think its not taxed? When I sold off my all my BTC when it hit $500 I declared it as capital gain on my tax returns. 

 

Two things in life are certain: Death and Taxes, and trust me, if the IRS is persistent enough, they will track you down.

 

EDIT: Brush up , this page has a lot of useful info: https://en.bitcoin.it/wiki/Tax_compliance

1) IRS says btc = property

2) barter = trade property

3)???

4) profit

[suicidalfranco]

7 hours ago, mr moose said:

untraceable digital currency

 

The Bitcoin cryptocurrency maintains a current, completely transparent ledger (log of transactions). While it is true that the coin owners are not identified by any immediately identifiable ID, payments using Bitcoins are not anonymous by design, and leak information.

A quick analogy: suppose a large number of people in a large room wanted to exchange money while remaining anonymous. They do so by all wearing masks! Are the participants anonymous? Sort of: no one can immediately tell who any individual is, but this arrangement allows anyone to observe how money changes hands. If anonymous Eve gave Alice a coin, Eve can monitor the blockchain (the transparent ledger of transactions) to trace the coin for its entire life span. Is this system anonymous? Only in a very limited sense.

[ionbasa]

3 minutes ago, Dr. KEK said:

1) IRS says btc = property

2) barter = trade property

3)???

4) profit

https://www.irs.gov/uac/newsroom/irs-virtual-currency-guidance

Quote

• Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes.
• Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply.  Normally, payers must issue Form 1099.
• The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
• A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property. 

Just an FYI: Property is taxable.

[mr moose]

2 minutes ago, suicidalfranco said:

 

The Bitcoin cryptocurrency maintains a current, completely transparent ledger (log of transactions). While it is true that the coin owners are not identified by any immediately identifiable ID, payments using Bitcoins are not anonymous by design, and leak information.

A quick analogy: suppose a large number of people in a large room wanted to exchange money while remaining anonymous. They do so by all wearing masks! Are the participants anonymous? Sort of: no one can immediately tell who any individual is, but this arrangement allows anyone to observe how money changes hands. If anonymous Eve gave Alice a coin, Eve can monitor the blockchain (the transparent ledger of transactions) to trace the coin for its entire life span. Is this system anonymous? Only in a very limited sense.

 

So finding the culprits behind wannacry won't be a problem then?

 

EDIT: and all the sellers on silkroad?